How to set up accounting software to manage your business finances

A short, independent guide to computerising your accounts.

Staying in touch with your business means staying in touch with your accounts.

Good financial management isn’t just part of running a business, it’s absolutely vital to its success. That’s because maintaining accurate financial records is one of the most effective ways of staying in touch with the growth of your business – whatever the size and type of your business.

However, it’s often easier said than done, and looking after business finances is one of the most daunting tasks that business owners face. But the benefits far outweigh the negatives, and fortunately, you can now hand over all the hard work to dedicated accounting software that you run on your computer.

So, whatever kind of business you run, it’s never been easier to keep track of your creditors and debtors, generate invoices, calculate VAT, and forecast your income. In fact, the hardest part of it all is often simply deciding just what kind of accounting software you and your business will benefit from the most – and this guide to computerising your accounts can help you do just that.

Computerised accounts – the facts

Did you know that…

· Just 20% of SMEs use software specifically designed for managing their accounts.

· Almost 50% of all SMEs still manage their accounts manually, using pen and paper.

· Around 30% of owner-managers believe they spend too much time dealing with non-core business activities such as paperwork, credit control, and other statutory financial requirements.

(From http://www.kashflow.co.uk/press-release-issues.asp)

But before you decide to computerise your accounts, it’s a good idea to find out exactly what it can mean to your business – and here are some of the issues that you should be aware of…

FACT: Accounting software can…

· Save you time. · Ensure your essential tax data is always available. · Make forecasting and analysing simple. · Reduce your accountant’s bill. · Help you produce accurate and professional-looking reports whenever you need them. · Make it easy to produce VAT reports. · Help you remember significant financial events.

BUT: It can also mean…

· A higher cost initially, as a computerised system is generally higher than a paper based system. · You may need to pay for additional yearly maintenance and support. · You may need to change the way you currently manage your account to suit your software – especially if your business is unusual. · You could need specialist help in installing and setting up your software.

What if I get my accounts system wrong?

It’s easy to put most of your time and energy into your ‘core’ business activities, such as developing new products and services. However, many business owners forget that managing finances is a core business activity, too. That’s why it often gets neglected, and it’s why many business owners choose manual systems over computerised ones.

However, while manual systems might work for some businesses, they can make the situation worse for many others. For example, it’s extremely difficult to implement correct accountancy practices and procedures with manual systems. This can lead to a lack of control over business finances, and in many cases, difficulties with cash flow.

In fact, it’s widely known that poor financial management contributes to the closure of nearly 100,000 SMEs each year, and up to 70% of businesses during their first year of trading.

Even if your business does survive, poor financial management can lead to increased costs, charges for late or inaccurate filing of reports and taxes, greater demands on your time, and the possibility that your business could lose out when it comes to applying for finance.

How do I make sure it’s right?

Getting your accounts systems right means swapping your spreadsheets, scraps of paper, and notebooks for a reliable, efficient, and accurate software package. Remember, though, it’s not simply a case of buying the first accounting software you see – or even the cheapest. So, here’s how you can make sure you choose the right system for your business…

Decide on the features you need. Will you be processing orders, creating invoices, managing stock – or more? It’s a good idea to decide on exactly what you need your software to do before you purchase it, so that you don’t end up with a system that offers more (or worse, less) features than you need.

Consider the cost. If you choose a bespoke system, it will be expensive in the short term, but it will fit your business perfectly. An off the shelf solution will be cheaper initially, but could turn out to be costly if you need to upgrade as your business grows.

Ask for advice. Your accountant may be able to offer advice on some packages, and you’ll be offered masses of information from software consultants and distributors, large retail stores and professional bodies such as the Institute of Chartered Accountants.

Think about more than just the software. How much support and training do you think you’ll need? Does it come bundled with your software, or is it available as an add-on package? It’s reassuring to know that help, advice, and support are always available if – or when – you need it.

After you’ve purchased your software… Once you’ve purchased your software, the next step is to install it on your computer. It’s normally a simple process – and your software will prompt you for all of the information it needs – but it’s a good idea to have key details to hand, such as your latest bank statement, receipts, and VAT details.

Backing up. There’s only one thing that’s more important than getting your accounts systems right -and that’s backing up your data. Backing up means ensuring you always have an up-to-date copy of your essential data, and it’s a good idea to back up your systems at least once a week. Your accounts software will include full instructions on how to do this effectively.

Your questions answered

As with all major decisions that affect how you run your business, you’ll probably have a few questions about computerising your accounts. We’ve answered some of the most common ones here, but if you need more detailed answers, it’s a good idea to seek professional advice.

Why should I computerise my accounts? Using a computerised accounts package can make a huge difference to the way you run your business. Not only could it save you money in accountant’s fees for example, it can make it much easier to keep track of your creditors and debtors, generate invoices, calculate VAT, and even accurately forecast your income.

Is managing finances really a core part of running a business? Yes – it’s just as important as finding new customers and developing your products or services. In fact, many small businesses who have great products and plenty of customers fail each year – simply as a result of neglecting to manage their finances properly.

What should I look for in a computerised accounts system? That depends on what your business really needs from it. For example, you might need help with processing orders, creating invoices, managing stock, or a combination of all three, or something else entirely. Different solutions offer different benefits, so it’s wise to shop around.

Are computerised accounts systems expensive? Again, that depends on your business, and the features you need. Software doesn’t need to be expensive at all if you run a relatively small business and don’t need too many features. But remember, the money you spend on a software solution could be much less than you’ll save on your accountant’s fees as it makes their job so much easier.

Can I link my accounts software with my other business software? Yes, that’s certainly possible, however, it depends on which additional software your developer offers. Most major software developers offer accounts solutions that integrate with a range of other business software packages such as Customer Relationship Management and Payroll software.

Will it take a long time to install new software and learn how to use it? Not at all. Most accounts software solutions are exceptionally easy to install, and will offer detailed on-screen instructions throughout the installation and set up process. Then, once you’re all set, you’ll probably find that using it is much, much easier than using a paper based system.

What if I need help or support after a few months of using my software? Reputable software developers will normally offer a good support or help package alongside their software, which means that if you do get stuck, there will always be someone you can call on for help.

What about the law – will my accounts software meet legal requirements? Yes, your accounts software solutions should meet all legal requirements that apply to your business, such as submitting annual accounts that meet accountancy standards, and must do so in the future.

Is there anyone who can help me choose the right software for my business? If you need advice on choosing the right software, your accountant will often be able to point you in the right direction. You could also try asking developers and distributors of the software, or a professional body such as the Institute of Chartered Accountants.

How safe is the financial information on my computer? Your financial information should be at least as safe as any paper based records you currently keep, if not safer. Remember, though, that it’s absolutely essential to regularly back up any data you hold on your computer, so that you always have an up-to-date copy should the unthinkable happen.

Is your current business accounts system doing the job?

This quick survey can help you decide whether your business could benefit from a computerised accounts system.

About your current accounting system. If you answer mostly ‘no’ to these questions, a computerised system could really make a difference to the way you manage your business finances.

· Do you currently have a computerised accounts system? Y/N · Do you think a paper-based accounts system is the most appropriate system for your business? Y/N · Do you find that managing your finances is ‘easy’? Y/N · And is it quick? Y/N · Does your current system make it easy for you to track payments to your business? Y/N · Do you enjoy managing your finances? Y/N · Do you consider financial management to be a core part of your business? Y/N · Could you easily explain your system to someone else? Y/N · Could your current system cope if your business grew? Y/N · Are you happy with your current accounts system? Y/N

What does your business really need from its accounting system? If you answer ‘yes’ to any of these questions, it might be time to switch from a paper based system to a computerised one.

· An accurate way to forecast future turnover? Y/N · The ability to generate and manage estimates and invoices effectively? Y/N · The ability to tailor the appearance of your invoices? Y/N · The ability to email invoices to your customers? Y/N · Instant access to management information and decision support reports? Y/N · The ability to easily keep track of creditors and debtors? Y/N · The ability to deal with complex issues such as VAT calculations and end of year? Y/N · The ability to manage stock and customer orders? Y/N · The ability to link your financial software with any other business software you currently use such as Payroll or Customer Relationship Marketing? Y/N · The ability to provide your accountant with properly formatted reports that are industry accredited and meet legal standards? Y/N

Want to find out more?

You can seek advice on computerising your accounts from a number of sources, including government business initiatives. But what’s more important is that you talk to an advisor, who will help you choose an accounting software solution which is right for your business.

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