Having a small business means taking care of all the administrative paperwork, including accounting responsibilities. If you are an accountant, or you have a background in basic accounting, this should not be a problem. However, for entrepreneurs who have little or no accounting training, a little help with the books is needed. The high cost of hiring an accountant is impractical for those with small and home-based businesses.
With today's technology, all you need is the right computer software to process information and produce a report. For small businesses, simple accounting software that covers the basic areas of bookkeeping will do. Here are the important things to look for in accounting software for your small business.
- The core modules for accounting should be present. These modules are: accounts receivable, where money received is recorded; accounts payable, where the payments that need to be made are entered; general ledger, which is the company's accounting book record; billing, which produces the invoices given to clients; stock or inventory, where the company monitors its stock items; purchase order which is a form to order inventory; and sales order which is the record of customers' orders.
- Decide whether additional modules are useful for your business, such as debt collection, where you track overdue bills, which is also part of your accounts receivable; payroll, where employees' salaries and taxes are tracked; and electronic payment processing when your business accepts credit cards.
- The software should be easy to navigate and possible to be learned by anyone who is computer literate.
You can find individual solutions for specific applications, like separate payroll software and invoicing software.
You can purchase software through online stores or from computer software stores. Major software companies have a wide range of accounting programs, such as Microsoft and Oracle. There is also free online business software that you can use on a trial basis. These applications, however, have limited features, and are usually just trial versions of the actual software that is for sale. If you are in the process of selecting which software to buy, it is advisable to try out free versions online first.
You can also have an accountant create a simple accounting program for you using available spreadsheet programs such as Microsoft Excel. This is good for those who have limited accounting background but are knowledgeable in using the spreadsheet application, since the formula can be checked and reviewed for analysis.
However, it is important, regardless of your educational background, to learn basic accounting and to practice the preparation of reports such as cash flow, income statements and balance sheets. This will make sure that regardless of your choice of bookkeeping software, you will be able to track any possible errors. Remember, any software that runs information inputted by a user is a "trash in, trash out" system. It will produce an output whether the data were correct or not.
It is advisable for small businesses to have at least a yearly compilation report of its cash flow, income statement and balance sheet, which can be reviewed by an auditor. Before passing it off to the auditor, you may want to take advantage of the numerous, easy-to-take online accounting classes which are out there so you can thoroughly review it yourself.