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Accounting Software for Small Business
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Accounting Software for Small Business:
Before entering the discussion about accounting and the accounting software for small business let us try to understand what small business is.
The very term small business signifies a sole proprietorship form of business where the annual turnover of the business is limited with limited investment mostly brought in by the sole owner with a small portion of debt from local bank against hypothecation of the business inventory and also against mortgage of personal property of the sole owner. The business turnover in a year is normally less than a million dollars.
The small business can be a purely trading concern, or manufacturing or service provider. An illustrative list of small business given hereunder for better understanding:
1. SMALL SHOPS 2. GROCERY 3. STATIONERY 4. POULTRY 5. MILK VENDOR 6. FOOD & BEVERAGES 7. SNACKS 8. SMALL RESTAURANTS 9. BARS 10. TAXI HIRE 11. HIRING OF VEHICLES 12. PRINTING
For writing software it needs to be understood about the specific nature of the particular business,
number of employees and other certain aspects which will make the software user friendly.
The following points should be understood:
1. Stage of recording of primary entry or journal entry 2. System of billing to customers 3. Stock inventory procedures 4. VAT/sales tax requirements 5. Income tax requirements 6. Bank statements
The accounting systems and procedures to be established shall be simple and easily operated by the clerical level staff. Purchase accounting, stock taking, and payment to vendors, customer billing, debtors ledger, sales tax returns, and income tax returns should be incorporated in the accounting system and also in software for accounting systems.
Another issue to be decided is to whether to go in for off the shelf software or customized software and also the platform to be used that is whether it is DBASE OR EXCEL OR LOTUS SPREAD SHEETS OR ORACLE.
At present the most popular software used for small business software is EXCEL SPREADSHEET. In India Tally accounting software is most popular because it is easy to use for small business. The main emphasis in any accounting software for small business is only one data entry is to be made at the time of origination of transaction that is data entry for journal entry is to be made. After the basic data entry, the accounting software should take care of Ledger Posting, drawing of trial balance and generation of monthly profit and loss account statement and balance sheet.
For example, if billing is made in the computer system at the point of sales to a customer, if the bill is prepared then automatically Sales ledger and debtors ledger should be posted. Therefore data entry is made at the time of billing only. All other subsequent accounting entries for ledger posting and trial balance.
The accounting software shall also take care of sales tax/VAT return also. This is because small business cannot afford to employ accounting professionals or they can take outside help. So the accounting software shall take care of basic requirements with regard to accounting, tax returns and also MIS.
One more requirement all accounting software shall take care is MIS reporting requirements and also other general purpose reports. The software should generate BANK RECONCILATION STATEMENTS which is very important statement for a small business.
Another requirement is preparation of outstanding debtors and outstanding creditors report popularly known as non-moving reports that is these reports is used for follow up of outstanding debtors. This report shall be in the form of statement for management review. This report shall highlight debts outstanding for more than 30 days, more than 60 days and more than 180 days, so that marketing department can concentrate better and give individual attention on serious cases.
Another requirement is stock taking reports or inventory reports. In case of business involved in dealing with high volume low priced products like grocery shops this report is important. Because periodically reconciliation between actual physical inventory and book inventory shall be carried out to find out the strength of the accounting systems and procedures in vogue. This will help to take corrective action during the accounting period itself instead of waiting for the accounting year end.
The above discussion shall raise a natural doubt in the minds of businessmen or entrepreneurs who will think is all the above efforts worth the time, effort and money that is required to be invested
The answer is a definite YES. The present investment in accounting systems, software and procedures and in manpower and time will provide a strong foundation and base for future expansion without much pain. Banks appreciate business with good track record for transparent accounting particularly in case of inventory.
Also if the business starts growing and new partners are brought inside the business who contributes capital, they expect a sound accounting systems. All the stakeholders like creditors, society, government, tax authorities, banks and investors expect ethical and integrity for the purpose of safeguards in any business enterprise. Other
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