Small Business Accounting Software
An accounting software application can be used to process the day to day financial transactions of most small businesses. If you are starting up a new business, you will need to decide what kind of software or system you will use for bookkeeping and accounting...
What Does Accounting Software Do?
Some owners muddle through using a spreadsheet. Others purchase an on-the-shelf accounting package. Deciding how to handle the finances can be a bit daunting at first. The main functions of most popular bookkeeping software packages, include modules for the sales ledger, purchase ledger, cashbook, costing, nominal ledger, fixed assets, cash flow forecasting and management reporting. Most UK based applications can also calculate Value Added Tax (VAT). In addition, they may include options for issuing payslips, and ensuring that Pay As You Earn (PAYE) and employers and Employees' National Insurance (N.I) contributions are correct. Lastly, financial accounting software can help you get a system credit control system in place. In turn, this can avoid cash flow problems, by reducing the number of days that outstanding invoices are left unpaid.
Most accounting programs are Microsoft Windows compatible. This provides the convenience of being able to export management reports and templates into standard desktop software applications like Word and Excel. This can be a low cost and easy way to generate invoices, purchase orders, credit notes, delivery notes, reminders and other official business documents.
Do-it-Yourself or Use a Bookkeeping Service?
Many business owners choose to do their own bookkeeping and financial accounting, by using a small business accounting package. This helps to reduce their accountancy bill. While other business owners, like to hand over full control to their accountant or a bookkeeping service. If you have just started your own small business the first time, you will soon realise the scale and hassle of having to log, document and account for all financial transactions for tax purposes. You will need a method for recording and classifying all cash inflows and outflows, then matching them up to your statements from your business bank account. This will need to be checked against every receipt, every invoice and every credit note.
Many 'one mad bands' (such as home based micro firms and sole traders), tend to muddle through using spreadsheets. This keeps the accountancy bills down. However, using an excel spreadsheet to maintain bookkeeping transactions may cause more problems than it solves. Typically, transactions may be incorrectly classified, data inputting mistakes mount up, and old receipts cannot be accounted for. This all makes producing the end-of-year accounts more difficult to generate. Conversely, accounting software can minimise data inputting mistakes. Thus, keeping accurate books up to date, becomes less of a time consuming chore....
Advantages of Using a Mainstream Accounting Software
These simple accounting tools, help you track all assets and liabilities and revenues and costs. They highlight cash flow gaps between debtors and creditors. Most mainstream programs are also designed around the needs of small business operations. The most popular ones tend to be low-cost, off-the-shelf programs, (such as Sage, Pegasus, Quickbooks or KashFlow). They force owners to 'fill in the gaps', to ensure that all entries balance according to double entry bookkeeping principles. Most will automatically produce your Profit and Loss account, Balance sheet and cash flow statement. This helps provide an up-to-date true and accurate business picture. Small business accounting software is designed to meet national regulatory compliance standards. The range of functionality within these sorts of software applications scales by cost.
As well as the core functions that off the shelf packages provide, many also can help you calculate Value Added Tax, issue supplier invoices, improve the accuracy of cash flow forecasting and help in your payroll processing. In simple terms, an accounting package can help organise vast swathes of data into meaningful management information. This can even include tracking complex business transactions, ecommerce transactions with different local taxes applied, inventory control and even trading with multiple currencies.
Generally speaking, the greater the volume of transactions in your business, the greater the business value of a enterprise software application. This is why many larger companies invest in developing custom add-on modules to enhance the basic program. In addition, packages can easily speed up online electronic filing of employees and company notices, thus streamlining accounts workload.
Which Software Package to Buy?
Shopping around to compare packages can be a bit of a daunting task. Ask your accountant for a product recommendation. If they use a particular software package, they may also want you to adopt the same one, (to help them produce your year end annual accounts quickly and more cheaply). Check any software program you purchase, meets with any legal standards or accounting requirements for your local geography.
Lastly, do not forget to buy some product training. Although most applications are fairly intuitive and easy to use, most software vendors also sell online accounting training as well as having links to accredited classroom training provided workshops. These training resources are essential, in helping you get to grips with a bit of software which will ultimately manage all aspects of your financial day-to-day business. Some software can be downloaded online as freeware. However, this can be extremely risky, (if no professional services exist to support clients dependant on free software). Most vendors provide free trial download versions of the software, so you can fully familiarise yourself with the package taking taking the plunge.
Good luck buying your first small business accounting software package!