Pick a system that is straightforward,
easy to follow, and, this is important, in which it is easy to make
changes and correct mistakes. Some systems make it extremely painful just to
change a name in the general ledger. It is true that the more expensive systems offer
the greatest flexibility. MAS90, by Best Software, is an example of an
accounting software package that has been well thought out.
However, it can run into the thousands
of dollars depending on how many modules you want to buy. QuickBooks has many fine features, however, in my opinion, it has
some strange
quirks. For instance, when setting up your chart of accounts you are given an option to have names
and/or numbers. That’s cool but, hidden in the system is the button that
turns on the preference for numbers. As you set up your categories you can put
in the beginning balances.
Don’t miss one or make a mistake because in that
system you don’t get a second chance. You have to enter any numbers left out in
another section. Plus, if you made a mistake you can’t easily change the
number. Maybe there is a way to make these adjustments. If so, it isn’t
obvious, which is my point? Why make you suffer? I have found that the
People’s Choice software is well designed for the very small business. Their
basic module does not include full-blown accounts payable and accounts
receivable module. You can add these on when you are ready for them. In fact, they
are offering a start-up system for free.
Look to see whether the system will
automatically bring up the next check number when entering checks. That’s a big time saver. In addition,
look at the report called “Detail of the General Ledger” to see how it is laid
out. This report is invaluable as an investigative tool. It tells you, by account,
exactly what transactions were posted and where they came from. This should also
be a very simple and straightforward report but, often it isn’t. Last, the
financial statements should be easy to read, spaced properly on the page, and,
professional looking.
In summary, determine whether you want
to have a combined manual/computer or full computerized system. Let the size and complexity of your
business and your budget determine which accounting package to buy. When doing
so, keep in mind simplicity and flexibility. Sometimes having all the bells
and whistles is worse than not having them. You must be committed to learning the
system. Learning only part of the system can be frustrating. First, take the
time to plan your accounting needs, then, set up your accounting framework. It
pays to do so, since all the data collected is organized into that framework.
You can learn how to establish a chart-of-accounts and develop an accounting
framework in
Phase III of the Real Life Accounting
course.
QUESTION:
How Can I
Bypass the Accounting Software’s Accounts Payable and Accounts
Receivable Systems If I Don’t Need Them?
Here is how you can do it. Let’s say you
pay all your bills each month except for a few vendors from whom you
buy inventory. All that will be required is a couple of journal entries each
month. You don’t need to use the formal Accounts Payable system that comes
with your accounting package. Use your general journal to record the
inventory purchases, such as:
DESCRIPTION DEBIT CREDIT
Inventory 500.00 -
Accounts Payable - 500.00
To record purchases From Langley Beauty Supply
When you write your check the following
month and pay “Langley Beauty Supply” you simply debit Accounts Payable and credit Cash for the amount of
the payment. It’s the same for Accounts
Receivable. If you only have a few customers to whom you give credit, why
bother with the formal system? Keep track of how much they owe you on a
separate document. Record the sale when the customer pays you. This way,
you can skip Accounts Receivable altogether. TIP: Getting Started With Your New Accounting Software. Getting started correctly is the key to
working successfully with your accounting software. Assuming you have
set up your company information, your first job will be to establish what general
ledger accounts you are going to use. By this, I mean accounts such as Cash,
Inventory, Accounts Payable, Owner’s Draw, Sales, Rent, Utilities, etc.
Next you will need to assign them an account number.
This is your Chart of Accounts. Once you
have set up these accounts in the system, your next job will be to post your beginning balances. If
you are moving from one system to another, this includes balances from all accounts
of the old system as of the date you transfer the data. If you are starting out
at the
Beginning of a new year, then you will
only use the balances from the prior year’s balance sheet. If you are
starting a new company, then there won’t be any new beginning balances. After this is done, you can
begin entering your monthly transactions and you are on your way. Don’t underestimate
the importance of starting out on the right foot. If you don’t take the time to
plan what accounts you are going to use and organize them properly, you
will soon find that you have a big mess to clean up. << Forward
