What accounting system should I use? And do I even need one? Great question! Truth is, it really depends on your business.
At any stage of your business, having a system will clearly make your job easier. If you are in the infancy of your business and only doing a few transactions a week, it is unlikely you need a accounting system. However, many of the common small business programs i.e. Xero, MYOB, Quickbooks aren’t that cheap and at the early stages most business owners are trying to minimise expenses.
I would suggest the best first step is to open a separate bank account for your business where you can charge expenses and to deposit income. If all transactions are in one place, will definitely be easier to pull together reporting whatever path you go down.
If you chose to use Excel, it is then a matter of classifying each item (from your bank statement) into an account type. For example, some pens purchased at Officeworks might be classified as Office Supplies. If there are only a few transactions each month, you can pretty easily pull together a report to show your profit and loss in Excel. For a template to do this, email me, and I’m happy to send you a template I have created.
If you chose to go down the path of an accounting system, great. This will make your life (and your accountant’s life) much easier! Most of the major programs now interface with your bank account and pull the transactions in, and can even automatically classify items for you. If you are registered for GST, the program can help prepare your BAS etc. But most importantly, they will help you understand your business’s cash flow, profit and loss and a range of other metrics for measuring performance easily.
In terms of which system is “the best”, again it depends on your business’s needs. There is plenty of information and comparisons available online. My personal favourite is Xero, it is cloud-based, and I have found it very intuitive and easy to use.
Have a conversation with your accountant and see what they suggest, but bear in mind they may have a bias to a program with which they are familiar!