How to choose the best bookkeeping software for your handmade business

If you are not already using bookkeeping software to track your business finances, doing so is one of the smartest steps you can take to save time, improve your cash flow and simplify your processes.

Most small businesses start out with some sort of ad hoc paper based system and then move to a simple spreadsheet. These systems can be great when making only a small number of sales and purchases but can quickly become unwieldy and overly time consuming when your business starts to grow.

It is recommended to factor in where you ultimately want to be with your business when selecting software to prevent the time consuming and costly situation where you need to upgrade systems down the track.

Your needs as a craft business are different to most general retailers as you have a manufacturing process and also raw material inventory that needs to be tracked, so keep in mind that popular mainstream accounting packages may not provide you with all the tools you need to generate the numbers you need for your tax.

Tip: Craftybase is designed specifically for the needs of small DTC makers. The software features inventory management for raw materials and products, expense categorisation, order tracking as well as importing from several popular online marketplaces.

You’ll need a system that as a minimum allows you to:

1. Track your order revenue, including tax and shipping
2. Log and categorise your indirect expenses
3. Calculate your raw material inventory value at start and end of year, including unsold stock
4. Calculate your Cost of Goods Sold (COGS) for products sold
5. Report on the location of orders placed, including any tax paid

Considerations

When evaluating bookkeeping software, you’ll want to consider the following:

1. What features do you need? You’ll want to make a list of your desired features and then split these into essential and “nice to have”.
2. Do you manufacture your products from raw materials? If so, you’ll need to ensure that you have a raw material inventory module included in your package to calculate your COGS.
3. Will this product grow along with your business, or are you likely to require an upgrade to something else in the future?
4. Does it offer the ability to import data to limit the amount of data entry you need to do? You’ll be wanting to look for the available integrations advertised and how they work.
5. Do you want to pay a sum upfront to purchase software, or pay on a subscription basis? Purchasing software outright can lead to future costs of upgrades that should be factored in as part of your decision making.
6. How secure is the software? What are the backup procedures available in case of disaster?
7. How prompt and helpful is their support options? You’ll want to find out if there is an additional fee for support if not specified in the package options.
8. Is a free trial available? This can be a good way to get a feel for the software to ensure that it is the right fit of your business. It can also give you a good opportunity to test out the support response time.

Important: Even the very best accounting software will not replace the need for a good bookkeeper or accountant - as well as helping with your tax obligations, these professionals can be a great source of advice on the best structure for your business as well as deductions and schemes you can take advantage of.