Accounting software might seem straightforward and useful, but be sure you take these hidden costs and potential risks into account.
These days, we want to do everything ourselves, and the rapid explosion of Internet-based products make it seem more feasible than ever before. However, while not all online accounting software is terrible, there are several dangers associated with even the best software. If you’re trying to decide whether to purchase accounting software, keep these hidden costs and risks in mind.
Potential Subscriptions Costs for Accounting Software
Many people don’t know that many types of accounting software require subscriptions. That is to say, to continue using the software year to year and to get the updates necessary to use it properly, reflect current tax law and meet other regulations, you have to pay subscription costs. While these might be worth it to you, it’s good to be aware of the fact that you’ll likely pay additional fees from year to year. You should also know that often if you stop paying the subscription for software that backs up to the cloud, you cannot access your information once you stop paying the subscription.
Lack of Knowledge
One of the hidden costs of DIY accounting software is simply not knowing how to use it. Rules related to payroll, quarterly estimates and taxes are often convoluted, and without professional training, you’re likely to get them wrong. Even professional accountants and tax preparers sometimes get these incorrect – especially when you take annual rule changes into account – so imagine how much more likely a rookie is to get them wrong.
Fixing Accounting Mistakes in Accounting Software
This is closely related to the above cost. If you don’t know what you’re doing with your software, there’s a good chance you’ll slip up no matter how carefully you follow directions. Mistakes can result in underestimating your taxes, incurring fees or even getting audited, all of which can get very expensive.
Training Time for Accounting Software
These programs typically claim to be easy to use. While they certainly aren’t impossible to learn, there are hours of training involved to find out how to use this software. That can mean:
Puzzling through it on your own- Reading hours of instructions before getting started
- Taking a class
- Or even paying someone to train you or one of your employees personally
Accounting Software Updates
After a period of time, many types of accounting software stop offering support for old versions. If you have anything older than three years, you’re frequently out of luck if anything crashes or goes wrong. You then have to pay for the new version. Plus, if a system crashes and isn’t backed up properly, you can’t get your information back.
Accounting Software Data Backups
To avoid this, you have to back up, which can also be expensive. If you use your own accounting software and save information to your hard drive, you have to back up your data consistently (using your server or external hard drive) or risk losing it. While there is some accounting software for individuals and businesses that does back up to the cloud, you typically have to pay extra for this. Plus, if you ever stop paying for your subscription, then once again, you will lose access to your own information.
When all is said and done, there are quite a number of hidden costs and risks associated with accounting software. You may still choose to use it, but do be aware of these risks. If they seem sufficiently dangerous to you, you should get in touch with a professional tax accountant who can meet your needs without the risk.