More and more, small and mid-sized businesses are upping their spend on accounting technology as a proven way to streamline their bookkeeping process.
In 2017, for example, an annual benchmarking survey found that 67% of Canadian businesses used some or only cloud technology within their finance function (a 20% increase over the previous year). By 2018, almost 75% had moved to the cloud in some capacity. Today, most accounting firms view cloud computing as the gold standard in technology trends for running a more successful business.
So what’s fueling the ongoing drive toward cloud-based accounting apps, document management software, and payment processing platforms?
Accounting technology provides a number of valuable benefits.
- Automated bookkeeping workflows reduce the need for manual data entry
- Software integrations make it easy to sync accounting data across multiple platforms
- Real-time visibility into accounting today means greater control over financial management and decision-making tomorrow
Unlike investments in marketing, however, which can be budgeted as a percentage of revenue, figuring out what your business needs and how much you should be spending on accounting technology can be challenging. Especially since investment costs tend to vary with the preferences, accounting needs, and priorities of individual small businesses.
To help you develop a better understanding of how much you can expect to spend on accounting technology, let’s consider 2 points that are likely to play a pivotal role in any budgeting decisions you make.
Point #1: What do your accounting requirements look like?
To nail down your accounting technology requirements, the first thing you’ll need to do is sit down and list out your company’s key bookkeeping activities.
These may include:
- Generating customer invoices and collecting payments (accounts receivable)
- Paying suppliers and other vendors (accounts payable)
- Recording the financial transactions around your payments and billings
- Reconciling bank and credit card statements
- Managing your inventory
- Paying employees and managing their payroll deductions
Once you have these activities mapped out, the next step is to identify areas where delays or bottlenecks typically happen – or are likely to happen - and where you’d ideally like to see some improvements.
Here are a couple of examples.
You’ve discovered that you spend a lot of time entering and coding expense receipts. To speed up this process, you might consider investing in receipt management software like Dext Prepare (formerly Receipt Bank) or Hubdoc.
You’ve noticed that you charge a lot of payments to your business credit card. To make statement reconciliations more efficient, you might consider opting for accounting software like QuickBooks Online that syncs seamlessly with your bank account.
Remember: As the volume of your transactions increases, so will the time you spend managing the financial information and bookkeeping activities required to stay up to date.
Growing companies need scalable accounting systems. So make sure the bookkeeping tools you choose are designed to grow with your business at a reasonable cost.
Point #2: What business needs or priorities should you be taking into account?
Take a moment to think about the ideal state of your business from an accounting and finance perspective.
- How much time would you like to be spending on bookkeeping?
- Is there a better way to maximize efficiency?
- How can you structure your accounting workflow to provide the greatest benefit to your business?
To help answer these questions, let’s consider a couple of simple scenarios.
You’d like to decrease the amount of time you spend doing your bookkeeping by 10 hours each month.
In this case, you should be looking for ways to increase efficiency within your current accounting practices. You could, for example, implement accounting tools that reduce data entry redundancies and allow you to spend less time correcting mistakes. While these tools will still require human supervision, because they leverage artificial intelligence in many cases, they can manage a good portion of your bookkeeping processes for you.
You have the available headcount and would like to hire one or two qualified accounting professionals to take care of your bookkeeping work.
In this case, a technology-driven solution might not be your first choice since you’ll have the human resources necessary to keep bookkeeping tasks up to date. Your business can still benefit, however, from using accounting software, apps, and other technology to support the in-house staff that you’ve hired.
How much you spend on accounting technology will often be a matter of accommodating your organization’s priorities.
For example, if your goal is to streamline your accounting processes from end to end, in addition to accounting and payroll software you might also need to invest in:
- Receipt management software like Dext Prepare or Hubdoc
- A payables and receivables management platform like Plooto or Rotessa
- Time tracking software like QuickBooks Time (formerly TSheets) or Harvest
Although this will mean a greater investment in cloud technology, you can expect a greater return from that investment in terms of time and cost savings.
Whatever you decide, it’s important to recognize that when it comes to the accounting industry, there’s no such thing as a one-size-fits-all technology investment solution. How much you spend on accounting technology will ultimately be driven by your specific business and bookkeeping needs - and which tools are most likely to meet them.
How We Select and Evaluate Our Software Recommendations
We thoroughly research and test the apps we include in our regular workflow for Client bookkeeping services. After deciding on criteria for evaluating the software and then researching the app itself, we tested the app, noting its strengths and weaknesses. We then work with the app for at least a few weeks before deciding whether to recommend it to our readers. We use the software as it was designed for its intended tasks. For a detailed walk-through of how we select and evaluate software, please see the details of our process.