Even though blockchain, a technology with which the verification of bookkeeping can become even easier, is right behind the corner, the modern financial accounting is still based on the equation assets = liabilities + equity, the very foundation of the double-entry bookkeeping system. In simpler words, this means that no matter how honest business owners are, they still need an independent third party to audit their books and be trusted by other businesses.
And even though most online accounting solutions are built on simple-entry bookkeeping, suggesting it’s the end of the double-entry system, the latter still has a bright future.
The Basics of Double-Entry Accounting
How Double-Entry Bookkeeping Goes with Online Accounting
We cannot emphasize enough how easy double-entry bookkeeping is today for SMBs, especially since the dawn of online accounting services. These clever solutions are not only capable of rationalizing your whole bookkeeping so that you can say goodbye to those piles of files and dreaded Excel spreadsheets, but they also radically eliminate chances of making a mistake due to real-time data recording. This is basically the system behind single-entry bookkeeping. The problem is that it is still very likely you will make mistakes (this is an unavoidable human factor) and you are still not trusted by creditors and other business partners until your books have been verified.
This is where the advanced double-entry bookkeeping enters into the picture. Since businesses can record in real-time what they owe and own, and what they have earned and spent over a given period of time (ergo the transaction is recorded the moment it is processed), owners and/or auditors can spot mistakes when it comes to the verification. In fact, your online books are open for accountants and bookkeepers upon invitation by the business owner; therefore they can immediately interfere should some data get recorded in an incorrect manner. Furthermore, advanced accounting solutions like Xero are capable of constantly balancing out the classic double-entry bookkeeping equation, taking into consideration various factors for assets, liabilities, expenses, equity and revenue.
Whether you trust your accounting program or ask for the help of an auditor (or even combine the powers of both), when it comes to lending capital, bankers can see a full set of historically accurate, audited numbers, thus they can evaluate whether you’re eligible to receive capital.
Bookkeeping Without Borders
One of the best aspects of online accounting is that you don’t have to rely on local auditors. Thanks to the cloud-based technology, an auditor overseas can easily verify your books the same way (if not faster or cheaper) than a colleague based in the U.S. could. In fact, both local and foreign auditors get equal chances by getting certified by the best online accounting software providers, so the moment SMB owners search for them, only the best of the best are listed.
Furthermore, by cooperating with a foreign auditor, businesses conducting activities in other regions of the world can get verified in other countries and be eligible for loans therein as well.
Best Online Accounting Software of 2024
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