The Downside of Accounting Software For Business Cash Flow Management
Most business owners have a terrific, on-going, love-hate relationship with their accounting software system. The reason for this, in my opinion, is that accounting software systems actually have a dangerous little myth built into them that is secretly masked as something that is “supposed to help you.”
What is this myth? Accounting systems cannot help you with cash flow management: using your cash flow to your best advantage. They only tell you, after the fact, if you did well or made mistakes. This means the ‘agreed-upon financial system’ that we rely on to help us, only has the ability to tell us what happened in the past – not how to handle our money in the future to fix money management mistakes and get better results.
You might think the subject of accounting seems complicated and mysterious. Accounting software is simply used for recording what occurred after money came into a company or a household. It keeps track of how much money came in and where that money was spent; pure mathematics, no thinking involved.
Accounting Software Is A Record Keeping Tool
Accounting software keeps you behind the 8 ball by only looking at the past
Any standard accounting software system is actually a look back into the past. It tells you how much was made or lost, and how much money is currently owed. While this is important to know, it can put the company or individual in a position of being controlled by the money – always making financial decisions based only on how much money is left in the bank.
The Cash Flow Mojo Software Is A Planning Tool
On the other hand, cash flow management and planning is done by looking toward the future. Planning occurs BEFORE the money comes in and BEFORE it is spent. This puts the company or individual in control of the money. If you can control the money, then you can control your financial future.
Planning how to get in more income and implementing those plans is essential for everyone. Nothing stays stable for very long. It either goes up or goes down. Income is at the mercy of this natural law. An individual or company has to continue to push income up, while cost of living increases, rising prices and taxes eat away at income growth.
To be profitable and create wealth, reducing expenses so you are operating within your income is sometimes necessary. But, be careful to make sure you don’t cut expenses in areas where it would reduce your ability to produce income. Careful spending on items that bring more money back in than was spent is the goal for responsible financial planning.
Many business owners make the mistake of cutting back on marketing and promotion when that is the only way they will get in a constant flow of new and repeat customers. Using existing cash flow and resources in a way that prevents waste and generates more income is vital. All of these actions require planning before doing. That is operating in the future. Thinking is definitely required.
Where did all the money go? Your accounting software system tells you that.
How much money will be coming in? How can your cash flow best be used to increase the long term survival potential of a company and the individuals in the group? The answers to those questions require frequent, consistent, and careful cash flow planning and cash flow management – no accounting software required for those steps.
Don’t get me wrong, I’ve been using QuickBooks since the early 90’s and I recommend it to my clients: we need it simply to keep records for preparing our tax returns. But I also use the Cash Flow Mojo® software on a weekly basis to stay in control of my financial future.
What are you doing to take charge of your financial future?
The Downside of Accounting Software For Business Cash Flow Management