When buying new accounting software or upgrading your existing solution, it’s critical to evaluate your options carefully. The right platform can streamline operations and improve financial reporting accuracy. However, the wrong one can result in reporting delays, compliance risks, security breaches and strategic missteps. Here are some common pitfalls to avoid.

Relying on a generic solution

You might be tempted to choose a familiar, off-the-shelf software product. While this may seem like a practical solution, if the software isn’t tailored to your company and industry, you may be setting yourself up for inefficiencies and frustration later.

For example, construction firms often need job costing, progress billing and retainage tracking features. Not-for-profits need fund accounting and donor reporting features. Retailers may benefit from real-time inventory management and multi-channel sales integrations. Choosing a one-size-fits-all tool may result in a patchwork of manual fixes and workarounds that undermine efficiency and add risk.

Overspending or underspending

Accounting systems vary significantly in their features and costs. It’s easy to overspend on software with flashy dashboards and advanced add-ons — or to settle on a no-frills option that doesn’t meet the organization’s needs. Both extremes carry risk.

The ideal approach lies somewhere in the middle. Start by benchmarking your transaction volume, reporting complexity, staff skill levels and support infrastructure. Then build a prioritized feature “wish list” and set a realistic budget. Avoid paying for functions you’ll never use, but don’t underinvest in critical capabilities, such as automation, scalability or integration. Think strategically about where your business will be a year or two from now — not just today.

Clinging to legacy tools

Upgrading or moving to a new accounting platform is a major undertaking, so it’s easy to put these projects on the back burner. But waiting too long can lead to inefficiencies, data inaccuracies and missed opportunities. Modern platforms offer cloud-based access, AI-driven automation and mobile functionality — features that older systems can’t match. As more businesses shift to hybrid work and remote collaboration, staying current is essential for accuracy and speed.

If your financial closes take too long, if reports don’t reconcile easily or if you can’t view your numbers in real time, it may be time to modernize. Treat accounting software upgrades as part of ongoing business improvement — not an occasional “big project.”

Test your system periodically to ensure efficient data flows, accurate reconciliations and useful management reports. This exercise moves you from merely “keeping books” to driving financial insight.

Ignoring integration, mobility and security

In the past, accounting software was a standalone application, and data from across the company had to be manually entered into the system. But integration is the name of the game these days. Your accounting system should integrate with the rest of your tech suite — including customer resource management (CRM), inventory and project management platforms — so data can be shared seamlessly and securely. If you’re manually entering data into multiple systems, you’re wasting valuable resources.

Also consider the availability and functionality of mobile access to your accounting system. Many solutions now include apps that allow users to access real-time data, approve transactions and record expenses from their smartphones or tablets.

Equally important is cybersecurity. With financial information increasingly stored online, prioritize systems with data encryption, secure cloud storage and multi-factor authentication. Protecting your data means protecting your business reputation.

Leaving your CPA out of the loop

Choosing the right accounting software isn’t just an IT project — it’s a strategic investment decision for your business. Our team has helped hundreds of companies select accounting technology tools that fit their needs. Let’s get started on defining your requirements, evaluating software features and rolling out a seamless implementation plan. Contact us to discuss your pain points, training needs and budget. We can help you find a solution that works for your business.

Financial statements report historical financial performance. But sometimes management or external stakeholders want to evaluate how a business will perform in the future. Forward-looking estimates are critical when evaluating strategic decisions, such as debt and equity financing, capital improvement projects, shareholder buyouts, mergers, and reorganization plans. While company insiders may see the business through rose-colored glasses, external accountants can prepare prospective financial reports that are grounded in realistic, market-based assumptions.

3 reporting options

There are three types of reports to choose from when predicting future performance:

1. Forecasts. These prospective statements present an entity’s expected financial position, results of operations and cash flows. They’re based on assumptions about expected conditions and courses of action.

2. Projections. These statements are based on assumptions about conditions expected to exist and the course of action expected to be taken, given one or more hypothetical assumptions. Financial projections may test investment proposals or demonstrate a best-case scenario.

3. Budgets. Operating budgets are prepared in-house for internal purposes. They allocate money — usually revenue and expenses — for particular purposes over specified periods.

Although the terms “forecast” and “projection” are sometimes used interchangeably, there are important distinctions under the attestation standards set forth by the American Institute of Certified Public Accountants (AICPA).

Leverage your financials

Historical financial statements are often used to generate forecasts, projections and budgets. But accurate predictions usually require more work than simply multiplying last year’s operating results by a projected growth rate — especially over the long term.

For example, a start-up business may be growing 30% annually, but that rate is likely unsustainable over time. Plus, the business’s facilities and fixed assets may lack sufficient capacity to handle growth expectations. If so, management may need to add assets or fixed expenses to take the company to the next level.

Similarly, it may not make sense to assume that annual depreciation expense will reasonably approximate the need for future capital expenditures. Consider a tax-basis entity that has taken advantage of the expanded Section 179 and bonus depreciation deductions, which permit immediate expensing in the year qualifying fixed assets are purchased and placed in service. Because depreciation is so boosted by these tax incentives, this assumption may overstate depreciation and capital expenditures going forward.

Various external factors, such as changes in competition, product obsolescence and economic conditions, can affect future operations. So can events within a company. For example, new or divested product lines, recent asset purchases, in-process research and development, and outstanding litigation could all materially affect future financial results.

We can help

When preparing prospective financial statements, the underlying assumptions must be realistic and well thought out. Contact us for objective insights based on industry and market trends, rather than simplistic formulas, gut instinct and wishful thinking.

Whether you operate a for-profit business or a not-for-profit organization, strong accounting practices are essential for maintaining financial health and making informed decisions. These include creating budgets, monitoring results, preparing accurate financial statements, and complying with tax and payroll requirements. Over time, even efficient systems can become outdated or inconsistent. Here are three simple ways to enhance your accounting function and keep operations running smoothly.

1. Review and reconcile

Management oversight is a critical component of internal controls over financial reporting. Start by ensuring that whoever oversees your finances — such as your CFO, controller or bookkeeper — regularly reviews monthly bank statements and financial reports for errors and unusual activity. Quick reviews can prevent minor discrepancies from turning into major issues later.

It’s also smart to establish clear policies for month-end cutoffs. Require all vendor invoices and expense reports to be submitted within a set period (for example, one week after month end). Delayed submissions and repeated adjustments can waste time and postpone financial reporting.

Don’t wait to reconcile balance sheet accounts until year end. Doing it monthly can save time and reduce stress. It’s much easier to fix mistakes when you catch them early. Be sure to reconcile accounts payable and accounts receivable subsidiary ledgers to your balance sheet to maintain accuracy and visibility.

2. Standardize workflows

Designing a standardized invoice coding sheet or digital approval process can improve accuracy and speed. Accounting staff often need key details, such as general ledger codes, cost centers and approval signatures, to process payments efficiently. A simple cover sheet, approval stamp or electronic workflow helps capture all this information in one place.

Include a section for the appropriate manager’s approval and multiple-choice boxes for expense allocation to departments, projects or programs. Always document payment details for reference and audit purposes.

Another tip: Batch your work. Instead of entering or paying each invoice as it comes in, set aside dedicated blocks to process multiple items at once. This saves time and reduces task-switching inefficiency.

3. Leverage accounting software

Many organizations underuse their accounting software because they haven’t explored its full capabilities. Consider bringing in a trainer or consultant to help your team unlock automation features, shortcuts and reporting tools that can save time and reduce errors.

Standardize the financial reports generated by your system so they meet your needs without manual modification. This improves data consistency and provides real-time insight, not just end-of-month visibility.

Also, automate recurring journal entries and payroll allocations when possible. Most accounting systems allow you to set up automatic postings for regular expenses, payroll distributions and accruals. Just remember to review estimates against actual figures periodically and make any necessary adjustments before closing your books.

Small improvements can make a big difference

Accounting practices are continuously changing due to advances in automation, cloud-based systems and AI-driven analytics. Review your workflows regularly to identify steps that could be automated or eliminated if they don’t add real value. Not sure where to start? Contact us to review your systems and brainstorm practical ideas to modernize your accounting function, enhance efficiency and improve financial oversight.

Small business owners might be tempted to rush through setting up customer profiles in QuickBooks® just to get invoices out quickly. But the extra data fields aren’t just busy work. Complete, accurate customer records help you generate more insightful reports, communicate with customers more effectively and save time on bookkeeping tasks later. Here are answers to some common questions to help ensure your files are set up properly in your accounting software.

How do you create customer profiles?

If you already have customer information stored in a spreadsheet, you can import it directly into QuickBooks Online. Make sure the first row contains clear column headers; then use the import tool to match each column from the spreadsheet with the corresponding field in QuickBooks. Reviewing QuickBooks’ sample import file first is a smart way to catch formatting issues before you upload.

If you don’t have an existing database of customer information or don’t want to deal with the import process, you can enter each customer manually. QuickBooks provides a customer record template for manual entries.

You technically need only a customer name to get started, but you’ll want to fill in other details, such as tax status, opening balance, payment terms, and preferred delivery and payment methods. When you enter more than just a name, QuickBooks automatically applies the appropriate settings whenever you create a sales form. That means fewer manual edits and fewer mistakes. It also means you can see balances and history at a glance, making it easier to follow up on overdue invoices or spot your best customers.

Customer profiles are easy to edit as you get more information. So you can start small and gradually build them out. Also, get in the habit of updating profiles when things change — such as a new contact person or billing address — to keep your records accurate.

How can you use customer records?

Once a profile is saved, it appears in your customer list. This serves as a dashboard for all customer-related actions. From there, you can create invoices, send reminders for overdue balances and drill down into customers’ profile pages.

Each profile page (or “homepage”) shows the customer’s contact information, transaction history, open estimates and account balance — all in one place. This makes it easy to answer questions on the spot. For instance, if a customer asks about their outstanding balance, you can open the profile, click “transaction list” and immediately see unpaid invoices. You can even email a statement directly from that screen without switching tabs or running a separate report. For businesses with recurring work, this page also serves as a quick reference for which jobs or projects are in progress and what’s already been billed.

When should you create sub-customers?

Depending on the nature of your business, you might want to set up sub-customer records. This functionality allows you to “nest” a customer or job under a “parent” customer.

For instance, an advertising firm might set up each campaign as a sub-customer to track project-level profitability. Or a home builder might set up different properties, projects or phases as sub-customers. This setup keeps everything tied to the main customer while allowing detailed job-cost tracking. You can choose whether invoices go to the parent or the sub-customer.

For more information

Spending a little extra time setting up and maintaining customer profiles in QuickBooks pays off in the long run with improved accuracy, time savings and better insights. You’ll have faster answers when customers call and more accurate reports for marketing and decision-making purposes. Contact us with additional questions about managing customer records in QuickBooks or any other elements of this essential bookkeeping tool.

You shouldn’t rely on gut instinct when making major business decisions, such as launching a new product line, investing in new equipment or changing your pricing structure. Projecting the financial implications of your decision (or among competing alternatives) can help you determine the right course of action — and potentially persuade investors or lenders to finance your plans. One intuitive tool to consider for these applications is breakeven analysis.

What’s the breakeven point?

The breakeven point is simply the sales volume at which revenue equals total costs. Any additional sales above the breakeven point will result in a profit. To calculate your company’s breakeven point, first categorize all costs as either fixed (such as rent and administrative payroll) or variable (such as materials and direct labor).

Next, calculate the contribution margin per unit by subtracting variable costs per unit from the price per unit. Companies that sell multiple products or offer services typically estimate variable costs as a percentage of sales. For example, if a company’s variable costs run about 40% of annual revenue, its average contribution margin would be 60%.

Finally, add up fixed costs and divide by the unit (or percentage) contribution margin. In the previous example, if fixed costs were $600,000, the breakeven sales volume would be $1 million ($600,000 ÷ 60%). For each $1 in sales over $1 million, the hypothetical company would earn 60 cents.

When computing the breakeven point from an accounting standpoint, depreciation is normally included as a fixed expense, but taxes and interest usually are excluded. Fixed costs should also include all normal operating expenses (such as payroll and maintenance). The more items included in fixed costs, the more realistic the estimate will be.

How might you apply this metric?

To illustrate how breakeven analysis works: Suppose Joe owns a successful standalone coffee shop. He’s considering opening a second location in a nearby town. He’s familiar with the local market and the ins and outs of running a successful small retail business. But Joe likes to do his homework, so he collects the following cost data for opening a second location:

• $10,000 of monthly fixed costs (including rent, utilities, insurance, advertising and the manager’s salary), and
• $1.50 of variable costs per cup (including ingredients, paper products and barista wages).

If the new store plans to sell coffee for $4 per cup, what’s the monthly breakeven point? The estimated contribution margin would be $2.50 per cup ($4 − $1.50). So, the store’s monthly breakeven point would be 4,000 cups ($10,000 ÷ $2.50). Assuming an average of 30 days per month, the store would need to sell approximately 134 cups each day just to cover its operating costs. If Joe’s original store sells an average of 200 cups per day, this gives him a useful benchmark, though market dynamics may differ between locations. If Joe forecasts daily sales for the new store of 180 cups, it leaves a daily safety margin of 46 cups, which equates to roughly $115 in daily profits (46 × $2.50).

Joe can take this analysis further. For example, he knows there’s already another boutique coffee shop near the prospective location, so he’s considering lowering the price per cup to $3.75. Doing so would reduce his contribution margin to $2.25, causing his breakeven point to jump to 4,445 cups per month (about 148 cups per day). Assuming forecasted sales of 180 cups per day, the reduced price would lower the daily safety margin to 32 cups, which equates to about $72 in daily profits (32 × $2.25).

Joe might also consider other strategies to reduce his breakeven point and increase profits. For instance, he could negotiate with the landlord to reduce his monthly rent or find a supplier with less expensive cups and napkins. Joe could plug these changes into his breakeven model to see how sensitive profits are to cost changes.

If Joe opens the new store, he can monitor actual sales against his forecast to see if the store is on track. If not, he might need to consider changes, such as increasing the advertising budget or revising his prices. Then he can enter the revised inputs into his breakeven model. He could also revise his breakeven model based on actual costs incurred after the store opens.

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Breakeven analysis is often more complex than this hypothetical example shows. However, it can be a valuable addition to your financial toolkit. Besides assisting with expansion planning, breakeven analysis can help you evaluate spending habits, set realistic sales goals and prices, and judge whether projected sales will sustain your business during an economic downturn. Contact us to learn how to analyze breakeven for your organization and leverage the data to make informed decisions about your business’s long-term financial stability.