How to select the Best GST Billing and Accounting Software for your business, Speeding the delivery of high-quality information.
Do you know how much the Accounting & Billing process for your business is important?
An accounting process allows the business to understand their past activity and where they currently stand to plan for the future. By choosing the Best GST Billing and Accounting Software you can achieve the improvements.
As Warren Buffet says “Accounting is the language of business”. And it is true!. The accounting information is then used to reach decisions about how to manage the business, or invest in it, or lend money to it. Without this, the business can’t grow.
Know the fact
Many small businesses often neglect their accounting and billing until tax time or won’t do it at all.
8 out of 10 small businesses fail due to financial mismanagement of their company. This often leads to their failure to decisions for their business growth, meet financial obligations such as paying their employees or rent, missing tax deductions that can save the money or fail to pay their taxes altogether.
You can probably have a good product or service that you have to give to the world. Eventually, you will be faced with the reality of accounting and it’s best that, you should be prepared for it now so that you don’t want to suffer this type of problem later by choosing a Best GST Billing and Accounting Software for your business.
Don’t worry about that, We are here to help you out!
Let’s get started, First thing you should know, what is accounting? before going with the topic of choosing Best GST Billing and Accounting Software
What is Accounting?
Accounting is the process of recording, reporting, interpreting, and analyzing financial information.
Before that, you have to know that why accounting is important or a thing in the first place to choose the Best GST Billing and Accounting Software. To understand why accounting is important, It is best to look at a simple example, Let’s say you own a painting company. And you charge $150 to paint one person’s house and that includes additional coating, applying primer, removing fixtures, covering floors and furniture to protect from damage and so on. That time let’s say you just started your business so you decide to do everything yourself at beginning, fast forward some months later all of a sudden your business is booming, your phones are ringing off the hooks, your schedule is full for the week and you don’t have time to do anything from customer service, sales or even delivering the painting services and it’s going on.
And now you’re stressed, you don’t know what to do. Logically this is a good problem to have your business is growing and perhaps you just need to hire some people to help you out at this point. And now you need to take some very tough decisions such as for one who do you hire first, how much do you pay that person, how can you ensure that there’s enough work for that person to do, and most importantly how much can you afford to spend to hire that person and also how much can you afford to spend to keep expanding your business at the same time.
Now there are some things to help you make this decision such as
- Knowing your profit margin.
- Knowing your current financial obligation like dept and expenses.
- Knowing how much cash flow currently your business generates.
If these things are absent then you are unable to make informed decisions to grow and scale your business, and If you make the wrong decisions it can be detrimental to your business.
For example: What would happen if you hired someone but they did not have any idea or interest to work on that project, now you’re wasting money on that person or what would happen if your customer doesn’t pay you on time and you don’t have enough cash to pay your vendors, and now you can’t afford to operate your business or lastly what does it takes to expand your business, how much can you afford to spend in marketing or service improvement.
Whatever you decide to do there will likely be financial implications, in other words, it will cost money and if you don’t understand how money is currently flowing in and out of your business you risk making an ill-advised decision that can cause your business to fail. You also risk tax consequences by missing business deductions that can save you money on your tax bill.
Now you can save yourself from these financial headaches by having the best GST Billing and Accounting Software in place from the very beginning.
Now, Let’s discuss the accounting process that you need to deploy to accomplish this.
Earlier, We saw that the accounting process is broke down into 4 simple steps recording, reporting, interpreting, & analyzing which are all very important. So let’s go over these steps.
The first part of the accounting process is to record all the transactions that occur in your business. Every time a transaction occurs then you must record it. And there are 5 major transaction types that you must know,
- Liabilities &
Now, You must understand what these five transaction types are because they will determine how your reports are organized and influence how you interpret your business finance. Here we look into its detailed view.
Revenue is the value of all sales of goods and services recognized by a company in a period. In other words, revenue is income earned by the company from its business activities.
For example, When a customer paid the painting company for its painting services their payment represents revenue. Now revenues are also commonly referred to as sales.
Expenses, on the other hand, are costs incurred to run your business. In the painting example, My expenses would be the cost to hire a contractor and the painting supplies used those services are provided.
Assets are resources that are owned by the company with a measurable future value. In other words, An asset is something that provides a current, future or potential economic benefit for an individual or other entity. Therefore, a $10 bill, a desktop computer, a chair, or a car are all assets.
Liabilities are what the company owes to creditors.
For example, If you took out a loan to pay for your expensive more number of painting tools, then it would also have a liability to pay that loan back later in this scenario you would gain an asset(the painting tools) and a liability(the loan).
Equity is the degree of ownership in your business. Your equity is the difference between your assets and your liabilities or in the other words, equity is the difference between what you own and what you owe.
Now the most fundamental part of accounting is recording and categorizing each transaction that comes into your business into one of these categories. There are quick and easy ways to do this by syncing your business bank account to a bookkeeping system and classifying your transactions within that bookkeeping system. This whole process is called bookkeeping. If you are searching for the best bookkeeping system which makes all your accounting and billing processes with all in and out workflow, then ProfitMax is the best ERP(Enterprise resource planning) software with tax entry support.
Let’s move on to the second major component of accounting,
Once your bookkeeping is complete you will be able to prepare financial reports that depict the financial health of your business. There are three major accounting & billing reports that every business should be familiar with,
- Income Statement
- Balance Sheet
- Cash Flow Statement
Let’s talk about these, one by one.
- Income Statement
In your income statement, where you can find your total revenues, expenses and most importantly your profit. Your income statement tells if your business is growing or slowing. You can review your income statement in two formats, On a cash basis or an accrual basis. Cash basis simply means that you recognize revenue and expenses based on when money is exchanged. The difference between cash basis and accrual basis accounting comes down to timing. If you do it when you pay or receive money, it’s cash basis accounting. If you do it when you get a bill or raise an invoice, it’s accrual basis accounting.
- Balance Sheet