When should you switch from manual bookkeeping to accounting software?

This article was paid for by Intuit QuickBooks.

Manual bookkeeping may work when your business is small and you only have a few transactions. But as you add customers, employees, accounts and expenses, spreadsheets become harder to manage — and easier to get wrong.

How do you know when it's time to make the switch to accounting software?

Here are seven signs your business has outgrown manual bookkeeping, along with ways accounting software can help you spend less time on these tasks and more time growing your business.

Whether you're a freelancer, solopreneur or a business owner with employees, there are some clear indicators you're ready to upgrade from balancing your books with a spreadsheet or pen and paper.

1. You're generating more invoices 

If you're sending more than a few invoices each month, managing them can quickly become time-consuming. Accounting software like QuickBooks Online can automate invoice creation, track payments and send reminders about outstanding balances.

Not only can that cut down on late or missed payments, but it'll give you a clearer view of your cash flow.

2. You're adding employees or contractors

As you add workers, your bookkeeping needs will become more complex. Accounting software can automate payroll and other routine tasks, giving you more time to focus on running your business.

QuickBooks Online can be paired with QuickBooks Payroll to help you track hours, manage direct deposits and benefits, and handle payroll-related tax tasks. You can also assign hours to projects and clients, which can help you invoice more accurately.

3. You're using an accountant or bookkeeper

If you work with an accountant or bookkeeper, even if it's just at tax time, you may need an easier way to share financial information while still controlling access to sensitive data. Accounting software lets you limit permissions, so the pros only see the data they need to do their job.

QuickBooks Online's Simple Start and Plus plans come with the ability to add two accountants, while the Advanced tier allows you to add up to three.

4. Your bookkeeping needs are getting more complex

Bookkeeping can get complicated long before your business becomes larger. Accounting software is especially useful if you:

• Have to collect sales tax
• Manage inventory
• Own equipment and need to account for depreciation
• Track expenses or hours by client or project

Managing these details in a spreadsheet can become difficult and time-consuming. Accounting software can help organize this information and incorporate it into financial reports, making it easier to understand your finances and prepare for tax reporting.

5. Your business expenses are increasing

Hopefully, you're past keeping paper slips in a shoebox. Good accounting software lets you upload snapshots of receipts, so you don't have to keep physical copies. 

Powered by Intuit AI, QuickBooks Online will match receipts to expenses you've already entered or create a new entry for you. Best of all, there's no daily or overall limit on how many receipts you can upload. 

6. You're relying more on other business software

If you're using point-of-sale, payroll, e-commerce or payment software, your accounting shouldn't live in a separate ecosystem. Connecting outside tools can reduce duplicate data entry and help keep your books current.

QuickBooks Online integrates with over 800 business and financial applications — including Etsy, Amazon, Square, PayPal, Shopify, eBay, Gusto, Excel and Stripe — and connects directly to nearly 3,000 U.S. banks, credit unions and credit card issuers.

7. You're spending too much time preparing for tax season

Manual bookkeeping can be particularly stressful at tax time, when you find yourself poring over months of records and receipts. Accounting software helps you stay on top of your finances year-round by importing and reconciling bank transactions, highlighting potential deductions and generating up-to-date P&L and income statements.

QuickBooks Online stores digital receipts to support deductions and provides secure cloud access, making it easier for a tax professional to review your records or export the data they need.

You don't have to run a large business — or even be registered as an official entity — to benefit from accounting software. If any of these scenarios sound familiar, manual bookkeeping may be taking more time and effort than it's worth.

The sooner you establish an accounting system that can adapt to your business, the easier it will be to keep up with your evolving financial needs.

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