The struggles to keep on top of financial records has been a challenge for many farm operations for many years.
There is always so much to be done and when it comes to implementing technology to ease the workload, it can be overwhelming and time consuming.
It seems easy to justify technology for handling livestock or controlling your cropping but when it comes to the accounting it seems to be a more difficult decision. The upfront advantages are not always as obvious.
Accounting software offers many benefits. If you are wondering, “Do I need accounting software,” that is your first step. There are so many options on the market and on top of that, things are constantly changing and improving.
The good old pencil and columnar pad was a great way to at least keep things itemized but that does not always save time when you must go back and find an item or identify an error. If an ongoing error has been detected, the time and effort to correct it can be huge.
Software applications are popping up everywhere. How to make the decision of which one is right for you and your operation can be a daunting task. Whether you are currently using a pencil and paper or have initiated an excel spreadsheet or adopted a basic software package, what is the next step?
First, you need to choose the software package that is right for you and your business. Focus on what is available right now as software is constantly changing and progressing and so is your farm operation. Do not worry too much if you decide on a software that may not be the right decision five years from now; look for something that can expand and adapt as you will be doing a lot of adapting. A software program that is constantly updating their program will be a much better fit for your progressive operation.
Step one, you have decided to go with an accounting software. That is terrific. Now, what are you looking for that software to do? Some of the definite requirements are the basics, such as entering each of the transactions on your bank account, credit cards, and loans. Each transaction is accounted for. The ability to do bank reconciliations is a must. Maybe you want to file your HST through the software. This makes it so much easier when filing and having to locate dates and records. Do you need payroll? Do you need inventory? Are you diversified? Do you need the capability to run reports on specific entities? Do you have capital asset purchases and sales? These are the first steps and decisions to make and then the search for the right software can begin.
If you think that these steps are not required for your operation, you will see the need, unless you never are in a situation to borrow money or file taxes. Financial institutions are asking for more detailed reports and the accountants are requiring additional information as well. Canada Revenue Agency is requiring verification of more accounts on a regular basis.
Software improves efficiency. Entering the information and having the software do all the calculating for you saves time and provides accurate reports. “The devil is in the details” is a true verbiage when you are questioning what constitutes a total in your reports.
Information can be entered in any order and then manipulated by date, amount, etc within the software. The software can organize the dates, so you do not have to organize all your documents by date of the transaction or the date the cheques cleared your bank account. You can do this work ahead of time and when the bank statements are ready, you can then go back and finalize your monthly entries, simplifying your tax filings. Whether it is your HST filing or your tax preparation, software can save you many errors and many hours; ability to verify transactions and provide explanations for those transactions.
Audit protection. With software, you can dig down into the program. It is great to have a report but where do the numbers come from that compile the final number is important as well. Have you ever received your tax return from your tax preparer and wondered where those numbers came from?
Within the software you can follow the transaction down to the individual transactions.
The days of having to drop all your original documents off to your accountant or tax preparers’ office are gone as you keep your originals in your possession.
Having to respond to a review of your HST or payroll review is a matter or printing a couple of reports from within the software.
The advantages are maybe not as upfront and obvious but as the reporting requirements tighten you will very quickly see the importance of having those records easily accessible.
Software can also be used to your advantage when you are dealing with a supplier. Very quickly you can see how much you spend with a particular supplier or how much you spend on specific expenses. This can be a valuable report when negotiating.
Decide how detailed you want to be. Think of the past year or so and what have been your pain points; chances are they could have been avoided or eased by using an accounting software.