Every business functions through a range of disciplines,
sales and marketing, operational skills, purchasing and
management. Small business accounting software is an
essential tool to bring financial control to the business.
No matter how skilled and well trained the business every
small business needs a full range of functions to reach the
highest levels of success.
Liquidity is a first lesson in business to ensure that
business has sufficient cash to trade the next day. Failing
to meet this target and the business is finished which is
why financial control which can be provided by accounting
software should be regarded by the small business
management as an essential piece of kit.
Suitable small business software is available to suit every
type of business and can vary from a simple spreadsheet
arrangement to sophisticated databases. The choice to adopt
a solid financial control system is vital to ensure sales
are high enough to generate profits, gross margins are
sufficient, expenses are controlled, net profits are
generated, cash flow is under control and losses can be
identified and reversed or halted. No large business would
survive without a sophisticated system of financial control
and small businesses have the same requirements albeit on a
different scale but usually with more devastating effects.
Operating the finance function of a small business may seem
to be an administrative burden but is actually a vital tool
to assist the generation of safer stronger profits growth
and the early warning system of dealing with problems if
the business does not perform.
Use the small business accounting software to update the
financial records at least once each month. With sales
recorded every month peaks and troughs in performance are
obvious and can then be examined to replicate those actions
that produced higher sales levels and cut out those actions
which produced lesser results. The result hopefully being
sustained sales growth.
Record all the costs each month and as with sales the trend
to higher costs or more efficient cost control will be
evident from the financial accounts. Also of importance
will be the profit margin being achieved and this can be
viewed against the level of sales and justified.
Statistically small businesses run by born salesmen achieve
high sales but at the cost of lower margins while
businesses run by accountants tend to achieve higher profit
margins but with lower sales.
This statistical fact is true as is also the fact that most
small businesses are run by neither accountants nor
salesmen but by the skilled worker applying their trade or
area of expertise. By using a small business accounting
software the entrepreneur can judge what he would like the
figures to show against what they actually show and take
the necessary action to change the future and produce the
desired result. Without financial control the entrepreneur
works in the dark depending on hunches more than financial
facts.
No matter how good or bad a business is the cash flow or
lack of it might well determine future growth or in the
worst case scenario, poor liquidity can affect survival.
Many small businesses that do not use a small business
accounting solution package and run into difficulties have
often been in financial problems for many months before it
is obvious as reductions in profitability are hidden by
extended credit from suppliers or tightening credit lines
with customers.
Small business accounting software can indicate which parts
of the business are doing well, where action is needed if
underperforming and may also indicate where action needs to
be taken. Accurate control of money owed in and money owed
out is extremely difficult without the information to know
how significant these figures are. Underperformance can be
critical and the earliest warning provided by a small
business accounting package can alert the management to
make corrective changes and improve financial performance.
A disadvantage of small business accounting software is
that it may sound like a foreign language to non
accountants but it does not have to be difficult to use.
Accounting software using a database can require some
bookkeeping skills but there are other alternatives. A
small business accounting software solution written on
excel spreadsheets that produces all the main requirements
with all transactions visible can be an ideal solution for
the small businesses with little or no bookkeeping or
accounting knowledge and experience.
----------------------------------------------------
Terry Cartwright is a UK qualified accountant designing
Accounting Software at http://www.diyaccounting.co.uk/
providing complete accounting solutions for small to medium
sized business in the UK written on excel spreadsheets at
http://www.diyaccounting.co.uk/smallbusinessaccounting.htm
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