In the start-up phase of your business, there are so many things that you need to do: register your business, obtain relevant licenses, create a marketing plan, just to name a few. There are many costs associated with this early phase of your business, and you may be wondering if you can save money by waiting to purchase accounting software. After all, many accounting software packages come with a hefty price tag or subscription service.
Is Accounting Software Required by the IRS?
The short answer is no. The IRS does not require small businesses to use any particular accounting software. Your requirement as a business owner is to keep records that are accurate, complete, and thorough. This means keeping track of all of your income and expenses in a chronological date-order.
Some very simple businesses may be able to accomplish this using excel or even a manual bookkeeping journal. As long as your bookkeeping records make sense and you keep all relevant documentation, you can hold off purchasing accounting software.
When Should You Invest in Accounting Software?
This will vary for each business. If you have employees, or you have large quantities of inventory, or numerous accounting transactions from day one, then you should probably purchase an accounting system from the start. It will make your life easier, especially since many accounting programs out there can be customized to your particular industry. The money you spend up front will be well worth the time you save.
On the other hand, simple service-type businesses with no employees and few transactions can choose to wait until business really takes off before investing in software, as long as they have some sort of bookkeeping system in place and adhere to the IRS’ guidelines.
Closing Thoughts
If you’re still not ready to purchase accounting software, another option is to outsource your bookkeeping. This will be more cost-effective in many cases, and you don’t have to use your valuable time learning about accounting software, or training your staff.
If you need help setting up your bookkeeping system, or would like to talk about outsourcing your bookkeeping altogether, feel free to contact us.