Computer Accounting Systems for First Time Users
This post is just one part of a 12-part guide to setting up a new business. Download the full business set-up guide to discover everything you need to know about satisfying HMRC and steering clear of any unwanted penalties and fines.
This chapter is intended to alert the business user to areas of information technology that require attention and action when installing or updating a system. It is not intended as a complete DIY handbook covering every eventuality.
The choice of computer hardware involves primarily:- Hard disk size, Processor speed and Memory (RAM).
In general terms go for as much memory and the highest processor speed within your budget. Around £600 plus VAT will be the current price of a business PC.
The processor, or central processing unit (CPU) is the part of a computer responsible for responding to and carrying out the sets of instructions necessary to perform operations. The clock speed of a processor, measured in Hertz (Hz) is a measure of how quickly the computer can execute these instruction sets. Bandwidth, measured in ‘bits’, relates to the amount of information that can be handled simultaneously by a processor within a given time. Higher clock speed and bandwidth will therefore yield better performance in a machine.
Another important aspect to consider when selecting a system is the amount of Random Access Memory (RAM) that a machine has. RAM is comparable to the short-term memory in the brain, as it is a temporary storage solution. Various pieces of information are stored flexibly whilst a program is running so that it can be accessed quickly; a linear storage space would take longer for data to be retrieved. Having more RAM, therefore, allows programs to run faster, so again ‘more is better’.
The hard drive of a computer is used as a permanent storage solution and is used to store files and application data. The more storage capacity a hard drive has, the more information it can contain. The size of a hard drive is measured in bytes; many new desktop computers now come with at least 640Gb of space (6.4 billion bytes) which is more than adequate for most businesses. Portable hard drives are also available if required, adding even more storage capability to your system.
All software programs give their ‘minimum system requirements’ which are the requirements a computer system must meet to run a piece of software. Some programs give details of ‘recommended system requirements’ which will run the software more effectively if your system can meet them. It is therefore recommended that you check that your systems can meet both the minimum and recommended system requirements of any software applications your business will require.
Accounting software, like hardware, is now very powerful and comparatively inexpensive. Integrated software includes Sales, Purchase and Nominal Ledgers with Sales/Purchase Order Processing and Stock Control in a single suite of programs. Networked versions for multi-user use are generally more expensive than single-user versions.
Choosing an Accounting Package
It is necessary to consider your requirements and what you want to be able to do before buying a package. There are often different levels of functionality in different versions of a program. Consider both the ability to get data into the product and also the reporting requirements that you have.
Consider also online “Cloud” based accounting packages which will not incur you in any upfront costs – simply pay a monthly fee for its use. These may have integrated payroll too if you have employees in your business.
The Government proposes to require businesses to submit accounts information to HMRC quarterly as part of their “Making Tax Digital” project. This is planned to start for VAT reporting in 2019 and you should consider a computerised accounting package from the outset that enables you to comply with this new obligation. We can advise on the most suitable accounting software for your business.
Modular systems are made up of individual programs for each of the above functions, each of which is more powerful and flexible than the integrated systems. These are put together to form a total system for the larger business, usually on a network of a number of PC’s.
Developing and maintaining a website can be as complex and expensive as you care to make it. Careful thought needs to be given before significant time and expense is incurred as to how this technology be best implemented to suit your business. There are many options to consider; at ABC Accountants, we can give some useful independent advice and thoughts in relation to your strategy in this area.
The rise of social media in recent years has meant that today there are a plethora of different social media platforms that can be used to the advantage of business owners. This guide will introduce several social media platforms that are currently popular for business use.
Twitter is a micro-blogging service whereby users send and receive messages of up to 140 characters in length to each other, known as “tweets”. Users can track the tweets of other users by “following” them, and in turn can have their tweets “followed”; the more followers a user has, therefore, the more visible their tweets are. Twitter is useful as a business tool because it allows you to personally engage with potential and existing customers, monitor what is being said about your company and keep interested parties up-to-date with your company’s newest developments, products and offers.
Many people are already familiar with Facebook for personal networking, but opportunities exist to use Facebook for business purposes. The most prominent of these is Facebook Pages, a flexible space within which users can promote their local business, band or organisation, amongst others. Facebook also offer a number of paid advertising solutions, whereby campaigns can be targeted at Facebook users according to defined demographics such as age, location and interests, which can direct people to the company Facebook Page or an external website.
Billing itself as the world’s largest professional network, LinkedIn is designed for users to showcase their professional qualities. User profiles include elements such as professional experience, education and honours and awards, as well as endorsements from other LinkedIn users. LinkedIn is thus a great place to establish yourself as a competent individual within your industry. Moreover, due to the number and diversity of groups on LinkedIn, it can be a great tool for finding and networking with like-minded individuals, as well as discovering potential business partners or additional company personnel.
The computer industry is well known for “here today, gone tomorrow” suppliers. Make sure that you choose one with a good local reputation and never part with money until you have received the goods. Paying extra for on-site maintenance is a sound insurance for equipment being used for business.
Planning and Implementation
Planning and implementation must cover the layout of your accounts, control over the information going in and verification of the information coming out of the system.
It will also be necessary to produce the accounting data for entering the opening balances.
Where advanced management information is involved, such as profit and loss by departments, more detailed planning is required. Development of a system can only take place at the pace at which staff are able to increase their own skills. The following phases of development may be appropriate for a new start-up system:
- Recording of prime entries (Cash Received and Paid; Sales and Purchase Invoices)
- Bank Reconciliations and VAT Returns
- Monthly Adjustments (e.g. Depreciation and Stock Change) producing monthly management accounts
- Sales Invoicing Routines
- Advanced Management Information e.g. detailed analyses of sales and departmental costs
- Sales and Purchase Order Processing with Stock Control
Even at the first stage, the system will produce Aged Debtors and Creditors on a regular basis to enable the business to improve its cash flow.
Training and Support
Training staff on your computer software is essential. ABC Accountants can provide training, on request, tailored to your specific requirements.
The popular press would have you believe that it is only a matter of time before a virus attacking your hard disk eats up your data! The most frequent reason for loss of data is not taking backups.
ABC Accountants will not only advise on, but also insist that, proper procedures are in place to make your data as secure as is practical.
Hardware and software is dependent on prevailing market prices. Installation and training is proportional to your requirements and usually charged at an hourly rate.
ABC Accountants have the necessary balance of computing and accounting expertise to help you to both get off to a good start and later to improve your system.
We have good working relations with local service providers who will supply and maintain your equipment. Many will also provide the technical support for networks and, if needed, tailor your software to specific requirements.
Installation of Accounting Systems
- Consult your accountant! Grants may be available for training.
- Decide on starting date, consider trial period.
- Set up nominal ledger accounts, Balance Sheet and Profit and Loss Layout.
- VAT? Accrual or Cash Accounting.
- Are departments required for sub analyses?
- Use a dummy company for practice (Multi-company systems only).
- Obtain starting trial balance.
- Obtain starting Sales and Purchase Ledger balances.
- Enter Trial Balance by journal entry.
- Enter Sales/Purchase account code, names, addresses, etc.
- Enter Sales and Purchase Ledger balances by posting directly to Sales/Purchase control account.
- Enter live data:
- Sales and purchase invoices
- Cash received
- Cash paid
- Petty cash
- Consider the need to keep manual records for at least three months and Cash Book for full year.
- Reconcile Bank Statement with Cash Book and Computerised Bank Control Account.
- Consider direct production of Sales Invoices.
- Keep a backup disk for each of the five weekdays. Keep a weekending backup off the premises. Many businesses backup using “Cloud” based systems these days for additional security of data.
Benefits will be mainly a business that you manage – instead of a business that manages you!
Double Entry Principles
By entering a Sales Invoice in the Sales Ledger, the customer’s account, the Sales Ledger Control Account (agreeing the total of the individual sales ledger balances to the total debtors in the trial balance), the VAT Account, and the Sales Account in the Profit and Loss Account are all automatically updated. Posting Purchase Invoices, Cash Received and Cash Paid all complete the double entry and update Control Accounts.