Accounting for the Success of your Family Business

In today’s global economy, it sometimes seems as if all the major technological developments being reported have applications suited only to corporate environments rather than small and medium scale businesses. By far, the clear majority of businesses online and in the real world are actually small proprietorships or family generated operations, but it may take some sleuthing to find relevant information and resources to bring your family business up-to-date.

This overview of the key accounting techniques and software resources available also brings into focus the basic factors one should take into account before you decide to invest in accounting software.

Set a budget for your software and IT upgrade. How far do you want to go? Is this just a simple migration of data or will it entail hardware investments too? Think about post sales support. Who will you call when you’re in week two and at a loss about what to do next?

Consider what type of business you operate. Mom and pop stores may be simple, but a chain may need to have inventory systems tied up to accounting. Other similar set-ups need specialized data and recording too. Do you manufacture crafts or have a machine shop that only orders on a per need basis? Are you a medium sized retailer that’s transitioning to using a POS or point-of-sales system? Even career professionals – architects, doctors, lawyers – may want more specialized programs for billing suppliers or insurance companies.

Talk with a professional accountant. Consulting an expert for an honest evaluation of your business needs can clarify the direction you need to take with your software programs. Don’t put off consulting an IT professional either, especially one who works in the field with accounting systems. They’d be up-to-date with options that best fit your business.

Benchmark. Reach out to other businesses in your industry. Find out what your contemporaries are using, especially your competitors. Network with your associates, or ask your consultants what their clients in similar businesses use. This’ll help you narrow down your options for the best financial accounting software for your business.

Before you even go through independent accounting software reviews, it is always a good idea to review some of your basic financial principles, no mater what business you’re in. GIGO, garbage in, garbage out, still applies after all. To ensure financially literacy, understand your basic accounting needs. If you’re a small business and getting bigger, it may be the best time to compare the 2 accounting techniques and figure out which is best for your situation.

The 2 basic accounting techniques are cash-basis accounting and accrual accounting. The key difference between them is the way your business decides to document the cash coming into and going out of your coffers, which also affects how much your liquidity is (available cash) and how much your tax will be.

Let’s put it this way: cash-basis accounting is like IM; it records in real time, earnings and expenses. This is simple, does not require a huge accounting staff and gives a clear cut picture of what you have at hand at one time.

Accrual accounting on the other hand, is more like your whole list of emails, calendar notes and to-do lists. All corporations must use accrual accounting following the guidelines laid out in GAAP or the generally accepted accounting principles. Accrual accounting records the value of your corporate earnings and expenses at the time they were formally agreed to, even if you haven’t actually been paid yet, nor paid for your bills. This allows planning, projections and deferment of both expenses and earnings, which allows for a valuation of larger-scale businesses without being tied down to one particular time.

While we all place a value on time, taking the time to review these basics will definitely go a long way in setting the framework for your search for the perfect accounting software for your business.

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