What exactly is the Double Entry Accounting?
If you see the online reviews, a term accounting software is applicable to anywhere there is a calculation. It involves expense trackers, invoice making applications and double entry accounting applications like Impanix.
Is That Bad?
The answer is yes. Actually, it is. Some of the businesses use lite software for their accounting practices, but it might possibly hurt their businesses.
If you are into any business practices, you are suggested to use a double entry accounting system. And the good thing is that you do not even need to learn what double entry is! The double entry accounting works on the back side and makes your success easy. With more money in your pocket, without asking for anything special from you.
After asking some of the small business accountants for their views on the double entry accounting, here are the reasons that they gave:
Double entry accounting will minimize your income tax.
If your system is calculating all your deductions properly and is reporting well, it will create a big difference. “It matters for every small business, even little ones that sell things on Etsy,” says William Lopez, Partner at TropezCPA and Founder of AdvisorFi in West Palm Beach, Florida.
For Example, in a case, the tax bill was chopped from $150,000 to $ 30,000. And this was never possible without using the double-entry system.
You have a business loan. Or you might need it someday.
Without real double entry accounting, you might not be able to get a loan in the first place,” says Anna Abbruzzese, president of Actium Consulting Inc. in Toronto, Ontario. The Brokers want to see a balance sheet and it is only possible through double-entry accounting.
Just imagine that you need a loan or a mortgage from any lender or broker. The thing in which they will be interested is your property, assets, investments, and others. Same is the condition for the business loan. Here your major asset is your company’s balance sheet. Here the expense tracker or any invoice tool will not be going to work.
Once you get the loan, you then need to track it regularly. This also is possible through the double entry. “Invoicing applications might track your income and expenses. However, a loan isn’t income,” says Maggie Geiser, an accounting and bookkeeping advisor in British Columbia. The interest payable on that loa is your expense, but the principal payable is not. Now how will you track it without double entry?
You want to be awesome.
A research says that those who have the Double Entry accounting system are more confident. They understand the need of their business well and also know how they can take their business to success.
You want to grow your Business.
If you really want good to grow business habits in you and think that your business will grow at any cost, Geiser Says, Double entry is the way which is going to work absolutely. It will create a perfect business discipline inside you. Also, you really start analyzing the reports you were supposed.
Business decisions matter to you.
If you do not have the complete financial picture, you are not able to make effective decisions. And it is almost difficult to get your financial position without double entry or balance sheet. Especially in the case of small business, which is increasing continuously and will increase, the management has to take the decisions quickly and effectively.
When is it OK with the single entry system?
There were three reasons in the old times for not using the double entry accounting system,
- Time taking
But not in today’s date, especially with Impanix. So, in today’s world if your lite accounting system is giving you problems and losses, Don’t worry. You can correct everything using the double entry accounting system, and that too on the cloud.
Now, to identify your accounting software that whether it’s a lite one. If it provides you the double entry accounting along with other services then you are in the right direction.
Related Post: Scared of some Common Taxation Errors in Business