Updated: Aug 10, 2020
No matter the size of your business, it is important to track your business finances. This information is crucial for making key business decisions such as borrowing money to fund expansion of your business or even determining the overall health of your business. Financial statements that assists business owners in understanding the health of their business would be the Profit and Loss Statement and the Balance Sheet. The Profit and Loss statement summarizes the revenues, costs, and expenses incurred during a specified period. (cite1) The Balance Sheet reports a company’s assets, liabilities, and shareholders’ equity at a point in time.
Now that you know the important financial statements needed for your business, you should consider how to generate these statements on a consistent basis. Monthly statements are good to generate so that you can have up to date information about the health of your business. There are different types of software you can use to generate these statements. There are different types of accounting software that will suit your business depending on your business profile. Let’s go over a few software options for your business based on your business profile.
Business Profile: Freelancer, Service Based, “One-Person Shop
The Freelancer, Service Based, “One-Person Shop” simply means that most of the work is generated by the owner. This profile allows for paying subcontractors for specific work and other simple expenses. For this type of business profile I would recommend Freshbooks. Freshbooks is a web based platform that assists small and micro business owners with managing their accounting records. Why Freshbooks for the Freelancer, or One-Person Shop? The ease of invoicing customers, and collecting payments are the top reasons. The Freshbooks philosophy is,
“We know you went into business to pursue your passion and serve your customers – not to learn accounting. This is why we believe in executing extraordinary product and service experiences that helps save you time and get paid faster.”
The freelancer or “One-Person Shop” won’t have to worry about the ins and outs of accounting in order to generate statements that will help them make sound business decisions. Freshbooks also presents a price that is quite in line with small and micro businesses; starting at $15/month for 5 billable clients.
When does the cost of Freshbooks outweigh its benefits? If your business revenue becomes more complex than a service-based business. If you have bundled products and services that requires tracking inventory and various costs or if you have more complex needs for tracking expenses and payroll then Freshbooks may not be able to provide the tools needed for your business.
Business Profile: Small/Micro Business Product & Service Based Business
For this type of business profile I would recommend Wave Apps. Similar to Freshbooks, the accounting is simplified; no need to do any complex accounting. The WaveApp subscription starts off at $0. That’s right, zero! This kind of web-based platform can grow with your business and you are able to have multiple businesses with one account. For this business profile, this is a useful tool because many businesses that offer both services and products often have multiple businesses that are interdependent (think e-commerce with a consulting business, for example).
When does the cost of WaveApps outweigh its benefits? Similar to Freshbooks, the costs outweigh the benefits when if comes to the need for more complex transactions. Specifically when it comes to payroll. WaveApps has the capability to generate payroll for employees, and contractors. However, if you have statutory employees, WaveApps doesn’t have that capability.
Business Profile: Most Businesses
Quickbooks is the most well known accounting software for businesses of all sizes. Quickbooks has an array of products for most business profiles from Self-Employed individuals all the way to Enterprise level businesses. Unlike the previously mentioned platforms, Quickbooks does require small business owners to learn more about accounting in order to navigate the software; but it’s not impossible. This software can be used to support your business through all of the stages of growth. Quickbooks offers training and tools for small business owners in order to get the best out of the software.
When does the cost of Quickbooks outweigh the benefits? When the use of the software becomes more cumbersome for you to use as the business owner. Quickbooks has ProAdvisors available to help support your business and to assist in maintaining your financial records. However, this comes with a cost. If your business doesn’t have the capital to support enlisting the help of a Quickbooks ProAdvisor, you can consider using other lower cost software.
So...What should I use for my business?
So you are probably wondering what application or platform is best for your business. Well. It depends. There plenty of other web platforms and applications that can be used to produce financial statements for your business. You can even use Excel! Regardless of what you choose to use to generate financial statements for your business, it is important that you understand how the financial information can empower you to make informed decisions for your business.
Need more guidance on where to begin? Send me a message!
Need help on where to begin? Send me a message!