If you’re still using paper to track your business payments and receipts, you may want to reconsider. Paper records and supporting documentation can be easily stolen or misplaced. They may even be accidentally ruined, as by a spilled cup of coffee or a water leak in the building. Enter the world of digital bookkeeping.
What’s digital bookkeeping?
At its simplest, digital bookkeeping means storing your accounting records online, either on a local server or in the cloud. But there’s more to it than that. Digital bookkeeping allows you to use available software to connect data and streamline payment processes more than ever before. Here are a few ways it can help your business become more efficient and save money.
Ever try to present a faded-out receipt to an IRS auditor to back up a claimed expense? The IRS routinely disqualifies anything they can’t read. A digital record never fades and, with the appropriate safeguards, rarely gets lost or damaged. You can also link your bookkeeping program directly to your bank accounts, so that banking transactions are automatically recorded in real time.
Sending paper invoices was great – back in the day. Nowadays, though, invoicing via email is the preferred method, for both businesses and their customers or clients. Using digital bookkeeping, you can invoice directly through your accounting software system. When you invoice electronically, your customers are more likely to see your invoice and begin processing it immediately. Plus, both you and your customer will have an electronic record of each transaction.
Digital bookkeeping also allows you to see and supplement your accounting data wherever you are, using any mobile device. You can, for example, snap a photo of a receipt with your phone and upload it to your accounting system. Or you can allow employees in different offices to access the same centralized database.
Data at a glance
With digital bookkeeping, it’s easy to see your accounting data all in one place. You can track trends and create reports that enable you to make better business decisions. Quarterly and annual journal entries, balance sheets and income statements become easier to produce.
Sharing with your bookkeeper/accountant
One of the most important features of digital bookkeeping is that it allows you to share your data directly with your professional bookkeeper or accountant, with no time delay at all. Your bookkeeper or accountant can immediately classify and categorize your transactions. Then they can, in turn, prepare the proper tax and other business-related filings based on up-to-date information.
Far superior to paper records, digital bookkeeping will streamline the exchange of business information, promote more accurate recordkeeping and help ensure that you comply with applicable tax laws.