What every founder needs to know when outgrowing basic accounting software

Basic accounting software will get you started, but as a business grows, you'll eventually need better financial visibility and more sophisticated reporting. You need to be aware of when your current tools are actually creating more work for you, slowing down your decision-making and making it difficult to get a clear picture of where the business stands financially.

It's Friday afternoon, and a founder has just secured the company's biggest client. Big news, until you do a quick cash flow check and spend the next two hours poring through the spreadsheets. Sales are up, but you can't quite work out how much money is actually there to fund the next stage of growth.

Sounds like a familiar growing pain, doesn't it? The accounting software that was absolutely perfect for a 5-person startup can quite easily fall down when your business starts to grow. Knowing when to move on from basic accounting software can help you avoid a nasty financial surprise and set yourself up for better growth.

Why Does Financial Reporting Become More Important as a Business Grows?

When you're a small business, the owner can often get a good handle on financial performance without digging through all the reports. That gets harder as you grow and your revenues and operating costs both rise. You may be selling more than ever, but you could be making less profit as costs rise even faster.

Detailed financial reporting helps founders understand what's actually happening with their money. Instead of relying on overall revenue figures, they can examine:

• Profit margins
• Cash flow patterns
• Outstanding liabilities
• Spending across different departments

This information makes it easier to spot financial problems and determine which parts of the business are performing well.

Basic accounting software will have very limited reporting capabilities, and you're going to end up with people manually pulling the numbers together from a number of disparate sources.

More sophisticated software can provide the kind of custom reporting that will actually help the founder to make decisions about who to hire, whether to expand, or whether to make an investment in the future. The quicker you can get the right information, the easier it is to react to the world around you.

What Accounting Features Should Founders Prioritize?

Not every growing business needs an expensive accounting platform full of bells and whistles. The right platform for a business is one that addresses its key financial pain points and supports the way the business actually operates.

A business that's struggling with late payments is probably going to be far better off with an automated invoicing solution than one with a complex inventory module.

Useful features include:

• Expense approval workflows
• Cash flow forecasting
• Real-time financial dashboards
• Payroll system integration
• Multi-currency transaction support
• Budget tracking and variance analysis

Founders working with outside financial professionals should also pay attention to collaboration features. Businesses using fractional CFO services may benefit from platforms that give financial experts secure access to detailed reports without handing over unrestricted account permissions.

Cross-Platform Integration For Executive Financial Analysis

A growing business may be using disparate platforms for sales, payroll, inventory, and customer management. If those systems don't talk to each other, the founder will be in a difficult position to get a full picture of the company's finances. Staff will spend hours moving data from one system to another, which will lead to errors and out-of-date reports.

Accounting software that can integrate across platforms can bring financial information together in one place. A good example is integrating sales and accounting systems, which lets the executive team compare incoming revenue against operating expenses without requesting multiple reports. Payroll data can also be integrated to give a much clearer picture of labor costs as the business grows.

Protecting Financial Data

A growing business has more people handling sensitive financial information. That creates new security risks.

Look for features like:

• Multifactor authentication
• Data encryption
• User access controls
• Detailed audit trails
• Automatic data backups
• Suspicious activity alerts
• Secure data transfer protocols

Not everyone needs access to everything. Staff should only be given the level of access that is appropriate to their role.

Switching accounting platforms is another area of concern for data loss. Before you switch, you should back up your existing records and make sure all your transactions transferred over.

Frequently Asked Questions

When Is the Worst Time of Year to Migrate to a New Accounting System?

The worst time to switch accounting systems is during your peak season or right before a major financial reporting deadline. Year-end closing and tax season in particular can be a nightmare. Your staff is likely already stretched to the limit.

A hurried migration increases the risk of missing records and accounting errors. You need enough time to test the new system and iron out issues before you go live.

Can Founders Run Multiple Businesses Through One Accounting Platform?

Some accounting platforms will allow you to have multiple businesses in one account. Each business should have its own set of accounts so you don't mix the books up.

Some platforms also provide consolidated reporting and financial forecasting so you can get a view of the overall performance of your business without having to switch between accounts.

What Financial Information Should Founders Be Able to Access From Their Phones?

Founders should be able to check their:

• Current cash balance
• Outstanding invoices
• Upcoming payments
• Recent expenses
• Cash flow
• Accounts payable and receivable
• Financial forecasts
• Recurring subscription costs
• Pending expense approvals

Mobile access makes it easier to monitor business finances when traveling or working away from the office. However, financial apps should have strong security features to protect sensitive company information.

Know How to Transition From Basic Accounting

Moving on from basic accounting software can go a long way to giving founders greater control over their finances and putting them in a position to grow their business in the future.

Explore more of our business guides for practical tips on managing your company and planning for future growth.

This article was prepared by an independent contributor and helps us continue to deliver quality news and information.

This article was prepared by an independent contributor which helps us continue delivering quality content to our audiences.