Whether you operate a sole proprietorship or a large company, keeping tidy financial records makes it much easier to file your taxes each spring. You also need to track invoices and payments in order to handle potential client disputes, issue refunds, and understand how to budget effectively for the next year. Digital records make it easier than ever to store, manage, and analyze your records.
But can QuickBooks replace an accountant entirely? Not quite. QuickBooks stores and analyzes data for you, but you still need a human accountant to give you sound financial advice and to keep up with the latest changes in tax legislation. Here are some things QuickBooks can and cannot do for your small business.
What Can QuickBooks Do?
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To understand the value of QuickBooks, it’s important to break down the differences between accounting and bookkeeping.
It’s true that QuickBooks has revolutionized bookkeeping for business, but is it actually sophisticated enough to replace professional accounting services? It’s understandable that, as a business owner, you want to save money wherever possible, but there are still quite a few financial processes that require the expertise of a knowledgeable human accountant.
QuickBooks is, at its core, a bookkeeping program. It can process your invoices, manage sales and expenses, track your employees’ time, and generate useful reports for budgeting and tax purposes. You can even pay bills and receive due date reminders.
While you might gain a lot of valuable accounting insights from QuickBooks’ balance sheets, profit-and-loss statements, and cash flow reports, the information you receive is still limited to raw data. And that’s the big distinction between bookkeeping and accounting.
Bookkeeping services Culver City helps you to keep your financial data in order; accounting takes things a step further, devising actionable recommendations and strategies based on historical data, missed opportunities, and sound financial principles. For that, you need the help of an accountant.
What QuickBooks Can’t Do?
Accountants use QuickBooks. CPAs use QuickBooks. Payroll managers use QuickBooks. The software is trusted by millions because it’s powerful and versatile, but it’s only as good as the person pulling the strings. There are several important things it cannot do.
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Keep You In Compliance
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Grow Your Business
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Save Your Time
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Correct Mistakes
QuickBooks is an excellent piece of software, but relying on QB alone can land you in hot water. For instance, tax legislation is constantly changing, and the program is seldom updated as quickly as the laws.
If QuickBooks bookkeeping services Culver City miscalculates your refund based on outdated tax rates or adjusts for a deduction that you no longer qualify for, you may find yourself fined or audited by the IRS.
That’s just one reason why it’s so important to work with an accounting professional who remains current on the guidelines and legislation.
More importantly, QuickBooks cannot guide the kinds of high-level financial decisions that will help you to grow your business. It can create some pretty impressive reports, like income statements that highlight correlations between revenue growth and specific expenditures.
But without an informed expert to analyze and interpret those reports, you can only guess at how the information might be used to improve your bottom line.
A knowledgeable accountant Playa Del Rey, and especially a certified public accountant (CPA), specialize in analyzing the minutiae. They identify the kinds of financial indicators that even the most intelligent software would miss, like the relationship between profits-and-losses and external market trends.
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Anyone can learn to use QuickBooks, but bookkeeping and financial analysis are time-consuming processes that demand a lot of attention. The more time you spend analyzing and breaking down financial reports, the less time you have to run your business.
The process also takes considerably longer for a non-professional than for someone who specializes in finance, so it’s just not an efficient use of your time.
Finally, QuickBooks is not error-proof. Even though it provides you with the tools to manage your finances and taxes, the onus is on the user to ensure that those tools are utilized properly and the data inputted correctly.
This can be extremely difficult for someone without a financial background. Consider that 60% of business owners admit to having an average to below-average understanding of accounting—and those are just the ones willing to admit it.
QuickBooks And Accountants Go Hand-In-Hand
Bookkeeping vs accounting always go hand in hand. By combining sophisticated accounting software with the services of a trusted CPA firm, you can ensure that your business:
- Remains in compliance with the IRS and other state and federal regulators
- Remains profitable and experiences steady growth over time
- Manages its income, expenses, payroll, and taxes as efficiently as possible
By sharing software access with your CPA firm, you’re able to manage the simple day-to-day recording duties while your accountant takes care of the big-picture work.
Cloud-based software systems have made it easy for CPAs and clients to share financial data in real time and ensure that all information remains current and accurate. Some CPAs even take things further, providing CFO and business management services to better serve their clients.
So, while software has become an essential part of the bookkeeping and accounting process, it will never replace the invaluable insight and discernment of an experienced accountant Playa Del Rey. The software is just the paintbrush and canvas; the accountant is the artist who brings the canvas to life.
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