LESSON 5: Demand these things from your accounting soft Articles

LESSON 5: Demand these things from your accounting software and it will be a godsend; ignore them and it will be a nightmare

 It is never too early to invest in accounting software so long as you have, or intend to have, a business. However, if all you ever want to do is to operate as a self-employed individual, then you do not need accounting software. Even before you start your business, provided you are serious about your […]

5.1 Stick to systems based on double-entry principles, or risk sinking into a quagmire of errors and tangled logic

 Financial record-keeping and accounting has specialist and sometimes complex principles all of its own. Some of these can be side-stepped in small and medium businesses without doing any harm. Other principles however must be followed if you are to keep a reliable tab on your money and be able to monitor and guide your business. […]

5.2 Be certain your accounting system can perform its core processes as reliably and constantly as heat streams from the Sun

 The core processes of accounting systems are normally organised into six modules. These are: ONE – Suppliers – or trade creditors. Formally this module is called the Purchase Ledger. It tracks invoices received from each supplier, and payments made to each supplier. It will tell you exactly what you owe each supplier now and retrospectively […]

5.3 Accounting systems and budgeting

 One further capability which your system should have is that of handling planned (budgeted) information. As you will see later plans, or budgets, are all but indispensable for the management of your business. You need to be able to record planned financial information, for example planned sales income, and planned costs, in your accounting system. […]

5.4 Don’t be dazzled by ‘whistles and bells’ or by claims of automation or over-simplification

Just like any other business, software houses exist to make money. While those that provide good accounting packages supply an incredibly useful product, they all naturally want to increase their sales, or at least not lose market share. One way for them to do this is to add more functionality to their products. Adding functionality […]

5.5 Automatically generated figures slash time, but you need to understand how they are compiled

 One particular danger is the lure of simplification through automatically produced reports, and other tasks undertaken by ‘wizards’. Automation is very useful because it can slash the time required to complete a task, and/or because it can ensure that crucial steps are not missed out from a complex task. But there is a caveat. Even […]

5.6 Consider whether it would be useful for your system to handle any other major tasks

 So long as you can handle with confidence the core functions described above, you may benefit from having additional functionality in your accounting software, or benefit from using it if it already exists. Here are some examples of such secondary processes that you might want to use: Stock control Generation of sales invoices Control of […]

5.7 Specialist software for industry sectors may lack accounting rigour

 Some software providers specialise in solutions for particular industries. There is a situation you have to beware of with specialist packages. That situation is where the software was developed out of an initial need to handle complexities which were essentially administrative. Having produced software that handled those tasks well the developers then felt it was […]

5.8 Web-based accounting; think before you follow the herd

 Recent years have seen the development of web-based accounting. The idea is that you have access to an on-line accounting program and data storage facility. Instead of having the accounting software and data on your hard drive it is all on a distant server somewhere. I would advise caution if you are tempted to go […]