A bookkeeping program for small business

Recently the director of a business incubator asked me to speak to the entrepreneurs at his facility and to his staff on the topic of bookkeeping programs for small business.   I’m sure he was thinking in terms of accounting software programs but it was an interesting question because a software program is only the beginning of what a small, growing business should embrace in order to; record the transactions of the business, protect the interests of the entrepreneur, and help the business owner achieve his / her goals.

Here are a few tips I shared with them.  I hope you discover some nuggets of good advice as well.

First, a bookkeeping program should include five key and interlocking elements.

  1. A reliable, user friendly and well-supported accounting software package that fits the needs of the business today and that can grow with the business.
  2. An optimized configuration of that software program to take full advantage of its features and functions.
  3. A competent bookkeeper, CPA and a CFO as your trained financial advisors
  4. Financial controls to minimize the risk of fraud and loss
  5. Monthly financial reviews of where the business has been and where it is headed.

Regarding point number one, the software program, there are two broad categories of programs; cloud based and desktop.  I am a big proponent of cloud based programs because they can be 30 – 40% less expensive over time than desktop programs and in most cases offer all the functionality that is needed.   The website http://accounting-software-review.toptenreviews.com recently posted their list of the top desktop accounting programs for 2013.  The ranking was based on functionality.  Of the top 5, two stand out above the rest and one is the industry leader.  Peachtree is an excellent program but QuickBooks is the industry leader with somewhere around 90% market share.  It is an excellent and fairly easy to use program with many features and functions.  But, what gives it the big edge is the support that the maker of the software, Intuit, provides with its ProAdvisor network and its extensive online resources.  There are also hundreds of excellent add-on programs for the QuickBooks family of products that can add functionality for such things as; CRM, Inventory control, Project management, time-keeping, etc., etc., etc..  My recommendation, based on much first-hand experience with my clients, is QuickBooks.  But, do your own research.

The second element of a good bookkeeping program is that the software must be configured properly to take advantage of its programs and features and to make it easier for the program to grow with the company in a methodical and organized manner.  You have heard the term “do it right the first time”, well this is a perfect example.  Setting a program up properly will save time and money later on.  I recently met with the owner of a small business whose chart of accounts was the size of a chart that is typically found in much bigger companies.  And, he had nearly 200 classes set up in QuickBooks.  It was chaotic and out of control and the program now needs extensive and expensive re-organization.  Among his many problems was that he had created several GL expense codes that duplicated some of his classes.

The third element is a competent team that includes someone to enter data daily, run reports, handle billings and collections, purchasing, etc.  This person is commonly called a bookkeeper or controller.  Then the company must have a CPA for tax work and a part time CFO to ensure that the information given to the CPA is accurate and to help the business owner navigate the tricky waters of building a successful company.

The fourth element is a set of basic financial controls to ensure that what the business owner earns stays in his or her control.  Creating a budget and reviewing financial performance on a regular basis is a form of control because it helps to identify activity that is out of the ordinary (or that was not expected) sooner than if there were no discipline of regular financial reviews at all.   Another important control is that whoever reconciles the bank statement should not be the person who approves and pays bills or writes checks.  Conducting unannounced spot inventories is a great theft deterrent as is awareness of the so-called ‘Fraud Triangle” that says that if someone on your staff is under severe financial pressure at home and has the opportunity and means to steal from you they often will and they do so with some form of rationalization.  Being aware of that is like being fore-warned.   A business owner can look for telltale signs with his/her staff.  There are many other good tips for practical financial controls for small businesses.  Call me for help on this.

The fifth and last element of a good bookkeeping program is the discipline of regular monthly financial reviews with your CFO to review historical transactions as well as trends and forecasts of the future.  These reviews will identify problems and issues that need to be dealt with before they become big problems and, they help the business owner make better decisions in a much more timely fashion.

With a good bookkeeping program in place, a company is far more bankable than other companies that have not embraced such a program and its chances of success increase dramatically.

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