I find that successful Irish small business owners view bookkeeping as a core part of their business and not a boring task that’s put off until a tax return is due. Business owners no longer have the luxury of analysing their financials once a year when they meet their accountant, it is essential to have up to date figures so problems are spotted in time and successful parts of the business are nurtured. My experience of Irish SME owners is that at least half of them rely on their bank account balance to tell them how healthy their business is, this is simply not good enough in a competitive market where businesses need to catch profitability issues early and address them before the bank overdraft is maxed. If you are using the right software you won’t believe how easy it is to keep your books up to date and you will be able to make more informed business decisions, keep track of costs and stay on top of your debtors. 2-3 hours bookkeeping per week should be plenty for most businesses with a turnover of less than €500k, if you work a 40 hour week that’s not even 10% of your time!
Before we look at the systems available I feel it is important to focus on the output you want first. The minimum information a business owner needs at the end of each month is as follows:
List of creditors (people you owe), sorted by due date
List of debtors (people who owe you), sorted by due date
Current account bank balance
Aprox value of any re-sale stock on hand
Last months sales, purchases, wage costs and gross profit
Some businesses use a manual paper based system to record sales / purchases but this is both time-consuming and error prone. Computerised accounts packages like Sage Line 50 and Big Red Book are much better than a manual system but these packages have been around for decades, they are very dated and do not take advantage of the connectivity that the Internet brings to our lives. Online accounting packages have revolutionised the way SME’s keep their books, they are commonplace in the UK, US and Australia and are finally finding popularity in Ireland. Apart from doing the basics like issuing high quality pdf invoices to customers tracking debtors, calculating VAT etc. they do a lot more.
The most popular packages are Xero, Kashflow, FreeAgent and SortMyBooks (the latter being an Irish company). Other systems include Twinfield and AccountsIQ but these are recommended for larger organisations. Sage have recently launched Sage One but I feel that this product is way too new and needs a few years development to match the main four packages mentioned above. The packages I recommend above are pretty similar but Xero is my personal favourite for its ease of use and beautiful User Interface, in particular the bank reconciliation feature is far superior. I do also recommend SortMyBooks to clients as it is the only package that is 100% tailored to the Irish market and can easily handle things like RCT registered contractors. All packages offer 30 day free trials so its not hard to test drive each package before you buy, also the beauty of online packages is that you only pay a monthly fee so if it’s not working out you can always cancel the subscription and there is no large up-front software purchase fee. Many of the packages have extra features like budgeting so you can set monthly sales targets and they even produce a cashflow forecast at the touch of a button so you can see when money is due in / out of your bank account.
Taking a step back from each specific package I just want to list the main advantages of having an online accounts system.
1. No software to install or upgrade, ever – all you need is internet access. You also don’t need to worry about backing up your data as it is automatically backed up online. The software providers are constantly updating and adding new features to their packages and you receive these free of charge and automatically.
2. Access from anywhere, work PC, home laptop, smartphone and iPad (my personal favourite). We self-employed people are always thinking about our business so if you need to log-in from home in the evening to catch up on some invoicing you can. Many of these packages also have a Smartphone App so that you can quickly check up on your debtors and even issue invoices when you are out and about, very handy for businesses who don’t operate from a fixed location like electrician’s or plumbers.
3.You pay a fixed monthly fee for the service and customer support. This means there is no large upfront cost of buying the software and if it’s not working out you can easily cancel.
4. You can assign multiple users to each package each with different user level access. This means that you, your bookkeeper, your accountant and staff members can all log into the same set of data. This is a huge advantage as your accountant no longer needs to wait for that memory stick with a back-up to arrive to check out a problem. Your bookkeeper can beaver away during the week processing the invoices and bank transactions and when you log in from your sofa at night using your iPad you are looking at the up to date picture of your Debtors, Creditors etc. It brings your accountant much closer to your business, if you need help he/she can simply log in, review the figures and give advise when it’s needed, waiting until the year end accounts are done is always too late.
5. Because these packages are online they can “talk” to other online packages and interchange data using their API. For example I use Receipt Bank to process my purchase invoices, I take a picture with my iPhone and it reads the data. The killer feature of this is that Receipt Bank “talks” to my Xero or SortMyBooks software so that it automatically sends the data (including a picture of the invoice) to the Accounts Payable’s in Xero. Better still, Receipt Bank is linked to my Dropbox account so that when my Vodafone bill arrives by e-mail, I simply drag the attachment into my Dropbox folder. A few days later it appears in my accounts payable in Xero with a due date and a picture of the invoice, magic! This saves me endless time. You can also link CRM packages like Capsule, Point of Sale systems like Vend, your Paypal Account, your online banking account, timesheet systems like WorkFlowMax….the list is endless. Probably the best integration feature is with online banking whereby your banking transactions are imported to your bookkeeping package overnight, gone are the days when you have to type in all those lodgement and payments. Unfortunately this feature is not in Ireland yet, most UK banks are compatible and I’m told that Xero is working with AIB, Bank of Ireland and Ulster Bank on integration. Eventually this will happen though and when it does I would say at least 25% of the bookkeeping workload will disappear overnight.
Knowing what your sales, costs and margins were last month allows you to make faster and better business decisions. You can only do this by using an accounts package and the most effective account’s packages on the market are the online ones. You can sign up to a 30 day free trial and begin using them in minutes. They will bring a huge amount of organisation to your business, save you time and give you a detailed view of your business finances with very little effort required.
What you need:
A computer with internet access
An account with one of the software providers mentioned above
An Accountant / Bookkeeper who is aware of the latest accounting systems or willing to learn.
Where to get it:
Just click on the links I’ve posted above or do a web search.