All businesses use an internal accounting system to record their income and expenses.
The most basic of systems would involve keeping a box full of receipts and invoices and listing them on a piece of paper at the end of the year and then sending this to the accountant, together with other documents such as bank statements and contracts.
There are no rules as to how to keep records and maintain internal accounting systems, but for businesses that need to keep track of the GST collected and paid, the wages they pay and tax withheld, the superannuation guarantee contributions they make, accounts payable and receivable, and their asset acquisitions and loans, a system as described above is too rudimentary and certainly wont be sufficient to meet their quarterly reporting requirements.
Our clients often ask us what systems or software we recommend. In the past, this was a difficult question to answer because most internal accounting software was not intuitive to users who weren't accountants themselves, or trained bookkeepers. The software was also expensive and required an up-front financial commitment and a licence to install on a computer. Then there was the problem of access to the software without the use of a network.
However, the use of cloud software has overcome the major issue of user access and financial commitment. It has also created a market for software developers to create beautiful accounting software that is intuitive and simple to implement, even by people who have very limited accounting knowledge. Furthermore, the vast majority of online accounting software provides online technical support.
So now when clients ask us to recommend a product, we can confidently direct them to really effective, convenient and affordable solutions.
Firstly, before you sign up with an online accounting software provider, you need to consider whether this is actually required. You can still use basic accounting systems such as excel spreadsheets if accounting software seems excessive for your business needs. Accounting software is recommended if any one or a number of the following apply to your business:
- You need to produce invoices to send to customers
- You have to keep track of invoice payments and outstanding invoices
- You have a large number of expenses that need to be categorised and sorted into taxable supply, GST-free expense and input taxed expense
- You want to reconcile your bank accounts
- You have multiple employees and need to produce payslips for them
- You have a large number of payment summaries to provide to employees
- You want to keep track of your superannuation guarantee obligations
- You want to produce regular sales reports, GST reports, profit & loss reports and other interim reports
- You want to easily share your information with your tax accountant
As public practice accountants, we have access to a large variety of accounting systems and software, and know what works for business owners.
There are two software providers that we currently recommend:
1) Sage One
Sage One is relatively cheap and has a multitude of functions which are beautifully presented for users who might not have a strong knowledge of accounting. It can be easily integrated into your business and is intuitive to use.
The easiest way to start using the software once you have set it up is to export your bank statements for the year directly from your online banking, then import it into the banking section of Sage One, and categorise each transaction. From there, you can start adding invoices and expenses on a periodic basis. You can add users (such as a bookkeeper) so that you don't have to enter the data yourself.
The major advantage of Sage One is that, SJB being a certified Sage One adviser, you can link your account to our "accountant console", which will allow us to easily access your reports when we need to prepare financial statements or activity statements for your business. Another feature is that you can download the Sage One app onto your phone and use the software anywhere at any time.
The biggest downside is that it does not have an internal payroll function. Sage One can integrate with Sky Payroll which is free when you subscribe to Sage One, and supports up to 5 employees. For more employees, you will have to pay an additional subscription fee to Sky Payroll. Of course, if you are willing to pay extra for it, Sky Payroll as a stand-alone payroll software is probably the best you can get.
Sage One subscription starts at $15 per month. If you would like to try Sage One, please use this link with our referrer details.
2.) Xero
Xero has all the same functionality as Sage One above, but without the accountant console link. However, you can add us as a user with limited access so that we can view your reports when it comes time to prepare your end of year financials.
The biggest benefit of Xero is the payroll function is fully integrated, depending on the subscription you have. This means that you can create payslips, payment summaries, and even pay your employees' superannuation contributions each quarter, directly from the software. You can also submit payment summaries to ATO and lodge TFN declarations immediately when you add a new employee.
The software generates a multitude of helpful reports, and has an attractive and easy-to-use dashboard which can also be customised. The software is probably a little more basic overall in terms of the functions, but overall, it is very comparable with Sage One.
As with Sage One, Xero has a free Phone app to make accounting easy and accessible from anywhere.
The downside is that it is more expensive than Sage One. With up to 5 employees, the monthly fee is $50. If you only have 1 employee, the minimum fee is $25 per month.
As far as functionality, both these cloud accounting providers are comparable and both are very good.
If you have any questions about either Sage One or Xero, please contact Dorin Bentley at SJB or leave a comment below and you will get a reply as soon as possible.