You think online bookkeeping is very boring.
And you might be right.
However, do you know what’s worse than something boring?
It is to go bankrupt because of something boring. Because you weren’t on top of your finances. Or worse yet, losing money because you just haven’t followed your budget.
It happened to Ben Brown.
After starting his Shopify online store, Ben received loads of orders: “ It was starting out fine, at least that’s what I thought until I sent out all the orders and saw my order. error: I had miscalculated the shipping costs.“
He worried that customers might abandon their cart after seeing the shipping cost and packaging costs. He, therefore, offered them free delivery of all his products.
“ Once I paid my delivery person, I started to lose money. “
Fortunately, Ben recovered. But you would probably prefer to avoid this kind of dire situation.
With some basic knowledge of online accounting, you can easily control the development of your business, avoid mistakes, and make informed changes to improve your performance.
In this article, you will learn everything there is to know about online accounting and its tools.
What is bookkeeping?
Accounting is about tracking and organizing financial data on a regular basis. It applies to a private person, a company or any type of organization. It makes financial information understandable, up-to-date and accessible.
Accounting activities include:
- Recording sales and tracking invoices
- Management of amounts due
- Invoicing customers for products or services sold
- Payment of invoices from suppliers
- Preparing salaries and rendering reports to the state
- Depreciation monitoring
- Producing reliable financial reports
Today, most accountants use online accounting software. But the discipline still requires a basic understanding of finance.
Why is accounting important?
Does this remind you of something?
“ Yet, whatever type of business you are in, the ability to understand your journal entries is essential. ” Says Lita Epstein, the author of the English version of “ Accounting for Dummies ”. Laurence Le Gallo is the author of the French version, “ Accounting for Dummies ”.
Small entrepreneurs are often very good at attracting new customers or creating new products or services, but many of them fail to follow the fundamentals of their finance.
And this is where the problems start.
Companies that lack financial transparency will often have cash flow problems, run the risk of accumulating debt, forgetting to bill customers or paying late bills and collecting fines.
Scott Scharf, founder of Catching Clouds, an accounting service for e-commerce businesses, says most of his clients don’t even know if they’re profitable.
“ They’re not sure and there’s a big difference between the money in your bank and whether your business is working or not. They just don’t know where they are , which causes a lot of stress. “
Managing your finances properly is crucial for long-term business success.
“ If you take the time to learn to read and understand your accounts, you will have a good idea of your chances of success. » Says Lita Epstein.
It also provides you with a lot of information throughout the year, which allows you to test the financial success of your development strategy. You can adjust it as you go to meet your financial goals at the end of the year.
What exactly do accountants do?
Accountants collect, organize and track receipts, invoices, and other transaction details.
Today, most accountants use accounting software to track and organize numbers. Focus on learning about three of the best accounting software online.
But they don’t just do that. Accountants are also responsible for many other tasks besides just entering data. They are fully conversant with financial accounting software and should be able to:
- Train your team members in the use of these online accounting softwares, to ensure that every transaction is properly accounted for.
- Resolve problems, mistakes, and confusions that may appear in your business finances.
- Improve the financial health of your business by adding, for example, a point of sale terminal.
- Streamline your payment services to improve the way you pay your employees.
- Monitor interest, investments, and depreciation of depreciation.
- Reserve the share of taxes.
- Track invoices and chase bad debts.
- Prepare financial reports for the accountant when tax season comes.
And much more.
In short, accountants allow you to smoothly manage your business finances, leaving you with the energy to focus on your clients and growing your business.
Accountant or chartered accountant?
If you are a small business, you might be wondering if you need an accountant, an accountant, or both.
And now that you understand your need for an accountant, you might be wondering what the difference is with an accountant.
The words accountants and accountants are often used indiscriminately. However, there are major differences in determining the main responsibilities of each role.
Accounting is a subcategory of accounting expertise.
An accountant or an employee of your company can handle the accounting.
If you’ve just started a business, there’s a good chance you’ll take care of it yourself.
It is not a bad thing when you are starting a new business, it is crucial to know how to do your accounting to have an accurate view of your financial situation.
In short, accountants take care of the daily financial work.
They keep detailed and reliable reports and this transparency helps you make informed decisions.
Accountants are financial experts
Chartered accountants hold a bac +8 diploma recognized by the state and the tax administration. As a bonus, they can hold certifications, such as CMA (Certified Management Accountant), CIA (Certified Internal Editor) or CPA (Certified Public Accountant).
This is why their services are more expensive.
These experts will use the reports provided by the accountant. They focus on transaction analysis to provide financial advice.
They will also use account information to complete tax refunds and other reports.
While the accountant manages the day-to-day financial tasks, financial experts usually step in quarterly to provide advice and make adjustments.
8 essential accounting accounts
Now that you understand a little better what accounting is, let’s see which are the different accounts that the accountant must follow.
Each of the accounts in accounting corresponds to a function, but all accounts are not created in the same way. For most businesses, some accounts are more important than others.
To have a solid understanding of your financial situation, it is important to understand the functions of the various books that your accountant will be using. This will allow you to make better decisions and optimize the profitability of your business.
Here is a summary of the 8 most important books, as featured in Epstein’s Accounting for Dummies.
All business transactions should go through the treasury. It’s even so important that accountants will often use two books to track activity (cash receipts and disbursement receipts).
All incoming and outgoing liquidity must be strictly recorded in the liquidity ledger.
Ah sales, everyone’s favorite book. This book is the one in which you will keep track of all income from sales of products or services. Epstein notes that “Recording sales the right way and at the right rate is essential, otherwise you cannot know how much you are making daily.”
- Customer account
This is the account that monitors the money owed by customers. “Keeping the accounts receivable up to date is necessary to send consistent and on-time invoices to your customers,” Epstein writes. This is especially important if you are selling products or services on credit.
To avoid cash flow problems, you need to know when you will receive the money owed to you. Not to mention the fact that you don’t want to forget to collect the earned money.
If you don’t know the status of your stocks, you have a big problem my friend. This aspect must be followed rigorously. “ Your accountant contributes to this process by keeping a reliable inventory, in the corresponding book,” writes Epstein. “The figures in this account are regularly checked by counting your stock manually. “
- Payments account
This account tracks the bills you need to pay. Epstein notes that “you want to pay your bills on time, so you don’t put yourself in a bad spot. “
“Suppliers regularly penalize bad payers. They either get rid of them or transfer them to cash-only accounts. Also, if you pay your bills on time, you will get discounts and save money from your suppliers. “
- Professional expenses
“These expenses can explode if they are not followed carefully in the corresponding book. “
As Benjamin Franklin says, “Beware of little expenses a small leak will sink a great ship”
Depending on the type of business you run, this could include bills for materials or rents, travel, or event expenses.
Employee salaries are usually the biggest expense in a business. In addition, there is no question of paying them late or less than the negotiated amount.
According to Epstein: “Keeping this account up to date is vital since it allows you to verify that all declarations to the state are completed and payroll taxes paid. And if you don’t fulfill these responsibilities to the government, you will have serious problems. “
Use this account to control the profits reinvested in your business. ” This account is cumulative, which means it recaps the total profit since the start of the business,” notes Epstein.
This account is especially important for investors and lenders who need to verify the performance of the business.
Other accounting books used
There are many other accounting books available depending on individual or professional needs. They understand :
- The credits
- Capital accounts
- Special drawing accounts
How to do your accounting online: 3 tips to remember
For easy counting, follow the guide:
1. Record absolutely everything
I really insist everything.
Remember that all transactions allow you to keep accounts understandable and in order, which gives you that essential financial vision. This is what helps you make effective strategic decisions.
In addition, this rigor will save you the cost in the event of a tax audit or legal action. In France, the Ministry of the Economy indicates that companies must keep their accounting documentation and supporting documents for 10 years.
2. All money must go through the company’s bank account or caisse.
If you don’t do this, things will get complicated very quickly. V ou may forget to record the received or spent. Or you simply won’t have proof of the transaction in case you need it.
Both cases are to be avoided.
Transfer all the money you receive directly to your business or treasury account before spending it.
- Always keep your business and personal finances separate.
It’s obvious, but it’s easier said than done for small businesses or freelancers . If you use only one bank account for your business and personal use, you might be tempted to spend the money you need later. In addition, personal purchases can disrupt the perception of business expenses.
The best thing to do is to have two completely separate bank accounts. Then just transfer the money from your business account to your personal account as a salary for personal shopping.
This will allow you to keep your trading account tidy and easy to understand. Now let’s find out about some interesting online accounting services.
3 great digital online accounting tools
There are a lot of online accounting tools. While free accounting software is scarce, most online accounting sites offer different packages, the first of which is sometimes free. It’s up to you to explore the possibilities according to your needs.
These tools make it easier to manage and organize your finances, giving you very useful visibility in just a few clicks.
Let’s discover together 3 of the leading software in the online accounting tools market.
Recommended for: Small, established businesses with specific needs.
Price : 30 days free trial then between 5 € and 17 € per month.
This online accounting software is one of the most popular, with nearly 2.2 million users.
Quickbooks provides an incredible array of features. It includes double-entry bookkeeping, abundant reporting options, customizable invoices, a salary system, multiple currencies and more.
In addition, Quickbooks integrates more than 200 services such as Shopify and Paypal.
Several plans are offered with optional features, making it easy to choose and pay according to your needs. It is not free accounting software but a 30 day trial period is offered and the company regularly offers great discounts. The first package currently at € 5 per month is perfect for self-employed bookkeeping.
Quickbooks also provides two handy mobile apps.
This accounting software also allows you to connect directly to your bank account. Your account activity is automatically transferred to your QuickBooks account. Quickbooks is perfect for freelancers and established small businesses who want an accounting tool that is intuitive and complex at the same time.
Recommended for: Very small businesses
Price: several plans available depending on the software, starting at € 12 per month and a 30-day free trial.
Itool was launched by a publisher in 2000 and became the country’s first online accounting software. The publisher offers several accounting services, all accessible in Saas.
The accounting service is simple and intuitive, communication with your accountant is simplified and your data stored in a server is backed up daily. You can choose from three offers, depending on your needs, two of which offer a free trial period.
The commercial publishing software allows you to send your invoices and quotes very easily and to follow your turnover in real time.
The tax package software (the declaration of results and the elements of the exercise) finally allows you to declare the results of your company. It includes automatic calculation and inconsistency search functions.
More specialized, Itool also offers online accounting software entirely dedicated to works councils.
Recommended for: Established businesses that want to keep things simple
Price: 30 days free trial, then between $ 9 to $ 70 per month.
Xero is another great online accounting tool. It is not a free accounting tool, but it is affordable.
In 10 years, the company has opened offices all over the world and brings together more than 1 million users in 180 countries.
In addition, Xero was voted Best Innovative Growth Company. Twice.
If the software does not offer as many features as Quickbooks, it is still very intuitive and embodies its slogan: a beautiful accounting software.
It includes all the basic functions and offers over 160 currencies.
The inventory tracking function and the editing of purchase orders make it a good self-employed accounting software.
Xero integrates directly with Shopify , as well as tons of other apps, like PayPal and Stripe. A mobile application allows you to record your expenses as you go.
This online accounting software is perfect for established businesses looking for easy-to-use software.
Accounting is crucial for long-term healthy finances. Without it, you would make silly mistakes that could end your business.
Staying on top of your finances will give you an in-depth view of your business. You will therefore be able to make smart decisions on this basis and increase your turnover.
Who manages the accounting in your company? Yourself? An employee or a subcontractor? Do you find counting easy? Tell us in the comments.