Lecture 7- Accounting software for smaller businesses

One advantage of maintaining accounting records manually is that [blank_start]manual recording[blank_end] of [blank_start]transactions[blank_end] may be perceived as [blank_start]quick[blank_end] & [blank_start]easy[blank_end]

Another advantage of maintaining accounting records manually is that it is [blank_start]cheaper[blank_end] than [blank_start]software[blank_end]

The primary advantage of using accounting software over manual records is the [blank_start]full integration[blank_end] of [blank_start]data[blank_end] & [blank_start]accounting principles[blank_end]

One feature & function you might expect to find in accounting software designed for smaller businesses is [blank_start]financial reporting[blank_end]. This includes [blank_start]income statement[blank_end], [blank_start]expenditure analysis[blank_end], [blank_start]bank reconciliation[blank_end], [blank_start]inventory management[blank_end], etc

Another feature & function you might expect to find in accounting software designed for smaller businesses is [blank_start]process basic statutory requirements[blank_end]. This includes [blank_start]value-added/sales tax reports[blank_end] & [blank_start]statistical reports[blank_end]

Third feature & function you might expect to find in accounting software designed for smaller businesses is [blank_start]general information systems[blank_end]. This includes [blank_start]backup data[blank_end], [blank_start]password and access control[blank_end], [blank_start]web integration[blank_end] & [blank_start]data import and export[blank_end]

Three ways of how smaller businesses can maintain their accounting records are [blank_start]manual records[blank_end], using [blank_start]office software suites[blank_end] & using traditional [blank_start]accounting software[blank_end]

There are several legal business forms such as: [blank_start]sole traders[blank_end], [blank_start]partnerships[blank_end] & [blank_start]limited companies[blank_end]. [blank_start]Size[blank_end] of an economy will influence what is [blank_start]small business[blank_end]

From operations perspective, small businesses focus on [blank_start]single/small[blank_end] number of business sector/s, accounting is done by [blank_start]business owners[blank_end]/small accounting team, are unlikely to have complex [blank_start]accounting systems[blank_end] & tasks, routine accounting is done by [blank_start]external[blank_end] accountant & keep records to meet [blank_start]regulations[blank_end] as it's more important than planning for them

Considering [blank_start]nature[blank_end] of their operations is [blank_start]useful[blank_end] in understanding what they need in terms of [blank_start]managing[blank_end] accounting information

Use of accounting software is impacted by [blank_start]cost[blank_end] which includes [blank_start]actual cost[blank_end] of either purchasing software & employing an accountant or engaging services of an external accountant. [blank_start]Cost[blank_end] also has [blank_start]time[blank_end] element or opportunity cost as many [blank_start]small[blank_end] business owners may find they do not have [blank_start]time[blank_end] to invest in maintaining accounting records

Reasons for maintaining accounting records manually is that manual [blank_start]recording[blank_end] of transactions takes [blank_start]less time[blank_end], [blank_start]cost[blank_end] of software & hardware may be [blank_start]very high[blank_end], may be [blank_start]averse[blank_end] to technology & easier [blank_start]maintenance[blank_end] when business is more [blank_start]mobile[blank_end] (e.g. plumber, carpenter)

One disadvantage of maintaining accounting records manually is that it is [blank_start]prone[blank_end] to [blank_start]human[blank_end] error. Therefore, there would be [blank_start]inaccurate[blank_end] information

Another disadvantage of maintaining accounting records manually is that there is no [blank_start]integration[blank_end] of records. Therefore, there would be no basic [blank_start]decision-making[blank_end] information

Third disadvantage of maintaining accounting records manually is lack of [blank_start]accounting knowledge[blank_end] by preparer. Therefore, will be [blank_start]poor[blank_end] & [blank_start]incorrect[blank_end] accounting information & fundamental [blank_start]errors[blank_end]

Fourth disadvantage of maintaining accounting records manually is [blank_start]incomplete records[blank_end]. Therefore, cannot apply basic [blank_start]accounting principles[blank_end]

Advantages of office suite applications include: mundane tasks can be [blank_start]automated[blank_end] (e.g. adding up figures), office suites are available on [blank_start]many devices[blank_end] which make records [blank_start]portable[blank_end], some [blank_start]security[blank_end] available (password protection), [blank_start]file backup[blank_end], sorting & searching of [blank_start]records[blank_end] & some suites are [blank_start]freely[blank_end] available (OpenOffice, Lyx)

Disadvantages of office suite applications include: not automatically [blank_start]integrated[blank_end] (expertise required to do so), no [blank_start]incorporation[blank_end] of accounting [blank_start]principles[blank_end] & [blank_start]difficult[blank_end] preparation of decision-relevant [blank_start]information[blank_end]

Accounting software- There are [blank_start]software[blank_end] products that focus on supporting [blank_start]accounting cycle[blank_end]. They have ability to [blank_start]record[blank_end] basic business transactions & [blank_start]prepare[blank_end] standard financial reports from these

Other factors to consider when talking about specialised accounting software applications include: [blank_start]size[blank_end] of company, [blank_start]tax/legal[blank_end] jurisdiction & design [blank_start]strategy[blank_end]

[blank_start]Manual[blank_end] records & [blank_start]office suite[blank_end] applications do not offer much data integration compared to [blank_start]accounting software[blank_end]

Four advantages of accounting software include: [blank_start]seamless[blank_end] data integration from [blank_start]prime entry[blank_end] to [blank_start]financial statement[blank_end], supports accounting [blank_start]concepts[blank_end] & [blank_start]rules[blank_end] (e.g. double-entry system), includes [blank_start]standard[blank_end] financial reports & includes standard/sector-specific [blank_start]charts of accounts[blank_end]

Another three advantages of accounting software include: include some [blank_start]management accounting[blank_end] functionality (e.g. budgets), specific accounting [blank_start]knowledge[blank_end] not necessarily required (built into software) & may be [blank_start]cheaper[blank_end] than full [blank_start]office suite[blank_end]

Greatest advantage of accounting software is [blank_start]integration[blank_end] of data from recording of [blank_start]business transactions[blank_end] through to [blank_start]financial statements[blank_end]

Fourth feature & function you might expect to find in accounting software designed for smaller businesses is processes daily [blank_start]business transactions[blank_end]. This includes sales, [blank_start]purchases[blank_end], returns, [blank_start]cash payments[blank_end], print customer invoices & process [blank_start]electronic payments[blank_end]

QuickBooks has different [blank_start]versions[blank_end] with increasing [blank_start]functionalities[blank_end] (offline & online versions)

QuickBooks has [blank_start]simple[blank_end] navigation using icons & graphical representations of [blank_start]accounting cycle[blank_end]. Navigation is designed with smaller business [blank_start]user[blank_end] in mind rather than [blank_start]accountant[blank_end]. Interface is designed to be [blank_start]simple[blank_end] & reflect how business works

One function QuickBooks has is [blank_start]customer functions[blank_end]. It is for [blank_start]invoicing[blank_end] goods or services sold, entering [blank_start]cash[blank_end] received when customers pay & customer [blank_start]refunds[blank_end] & credits

Another function QuickBooks has is [blank_start]supplier functions[blank_end]. It is for recording [blank_start]supplier invoices[blank_end] (termed ‘Bills’), paying these [blank_start]supplier invoices[blank_end] & generating [blank_start]value-added tax[blank_end] returns

Third function QuickBooks has is [blank_start]banking functions[blank_end]. It is for recording [blank_start]deposits[blank_end] (allows grouping of [blank_start]multiple[blank_end] cash receipts into [blank_start]single[blank_end] bank deposit), writing [blank_start]cheques[blank_end] (business can enter [blank_start]cheque[blank_end] (or electronic) payments which have not been entered using Suppliers option) & [blank_start]reconciling[blank_end] (allows business to [blank_start]compare[blank_end] its bank records with bank statements on regular basis)

Fourth function QuickBooks has is [blank_start]employee functions[blank_end]. It is for paying [blank_start]employees[blank_end] on basis of time sheet or fixed salaries, software will [blank_start]calculate[blank_end] all relevant [blank_start]payroll[blank_end] figures such as net pay & payroll taxes due & facility to pay [blank_start]employees[blank_end] electronically is also available

Fifth function QuickBooks has is [blank_start]reporting functions[blank_end]. QuickBooks reports can be distributed in [blank_start]several[blank_end] ways. There is some level of report [blank_start]customisation[blank_end] & it can be exported to [blank_start]spreadsheet[blank_end] program such as [blank_start]Microsoft Excel[blank_end]. Reports menu classifies reports according to [blank_start]type[blank_end] or [blank_start]business area[blank_end]

Net worth graph report shows [blank_start]assets[blank_end] compared to [blank_start]liabilities[blank_end] on monthly basis in graphical [blank_start]format[blank_end] & net trend

Security features of QuickBooks include: user options to [blank_start]backup[blank_end] & [blank_start]restore[blank_end] data files, prompts users on [blank_start]regular[blank_end] basis to perform data [blank_start]backups[blank_end], [blank_start]password[blank_end] protected user accounts with different levels of [blank_start]access[blank_end] to selected areas of software & provides useful option called [blank_start]Accountants Copy[blank_end] (creates backup copy of company’s data files for use by external accountants)