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Midwest Accounting, P.C.

 

It's a Personal Thing! Tailoring Your Accounting Systems

So you say you are different, unique, one of a kind, a rare bird. No doubt! And because you are unlike any one else in the world, so should the way you do your accounting fit your uniqueness.

There are various stages in an organization's growth. These stages build upon each other. Early Stage businesses are absorbed in building a foundation for their pursuits. Emerging businesses have completed the basics and are working towards becoming firmly established. Established businesses have been around for a long time and know very well what they are doing.

  • Early Stages. Because you are probably a small operator wearing many hats, your accounting knowledge and/or time is likely limited. But have no fear -- you need not know accounting to be a success. You do need to know your business -- that's what counts. Keep your records in whatever manner you are comfortable with that works for your business. Take suggestions from and negotiate with your accountant regarding methods and record keeping that both you and he/she can live with, and get on with your business. If you are a large and profitable enterprise you can hire the expertise. Don't complicate the life of a new business with difficult and time consuming accounting that may not be appropriate for your size. Do plan on making improvements when you are more established. There's nothing like sweet success, is there?

  • Emerging Businesses. You've taken care of the basics. You now have a customer base, trained personnel and some day-to-day procedures. Now is the time to put a better structure in place. Consider computers and/or upgraded manual systems. This may involve more work for your company including the cost of a new system, training and/or additional personnel. But the benefits, in the form of more efficient operations, will out weigh the cost (see Value of Information).

  • Established Businesses. You have been around for a while and have a firmly established structure. However, a common downfall for you may be that your systems are too mature. You should update with new technology that will improve your organization's efficiency. And being established usually doesn't mean your business will not continue to grow and/or change. Your systems should be able to grow and change as your business does.

Here are some other considerations and tips that will help speed you along your way.

  • Value of Information. Having information at your fingertips, usually in your computer, can prove priceless. Mailing lists, product offerings, inventory levels, previous sales, invoices and other information can make your next sale, fend off a lawsuit, or make an IRS audit a pleasant experience (well, maybe for your accountant).

  • Don't assume what works for someone else will work for you. When we think of this, our favorite advice comes to mind. It is "don't take accounting and/or tax advice from a tool and die maker" (no offense intended, don't take this type of advice from medical doctors, architects or engineers either). Leave this to a professional accountant or someone who specializes in accounting systems.

  • Get Training. The local community colleges and adult education programs offer a variety of accounting and computer courses at reasonable rates. Another excellent source of relevant and tailored training is your accountant. Take advantage of these sources.

  • Be patient. A good accounting system can take years to build!

- Greg Randazzo

Break Even Analysis

A break-even analysis graph is a quick way of seeing how much profit should be made on your sales. To read the graph, find monthly sales on the left hand scale, follow across to the sales line, and drop down to the profit line. Then read the right hand scale to find the profit.

If you are interested in a break-even analysis for your company, please contact us. We also have a more detailed report form format for a more in depth understanding.

The New Age

Computers have revolutionized the world. Today's computers are quicker, more powerful, hold more data and are as reasonably priced as any that have come before.

This revolution has virtually placed a computerized power plant on the desk tops of many small businesses. And with this advent has come a variety of accounting programs that may make accounting a simpler chore.

Most accounting programs range in price from $195 for a complete system to $5,000 for each part of your system (like accounts receivable, payable and general ledger).

The programs that cost $195 for a complete system may be more than adequate for your business. These programs are surprisingly versatile and are geared for all kinds of businesses including manufacturers, retailers and service organizations. They also offer many tools to help you manage your business like inventory reorder points, bills of material, budgeting, and cash requirements reports.

A computerized accounting system offers the following additional benefits:

  • You can use your system to bill your customers. This is usually the primary reason most businesses have for implementing a system. And running a Windows program like Quickbooks or Peachtree for Windows puts a ton of graphical power at your fingertips for creating customized invoices.

  • You can pay your vendors and employees by printing general and/or payroll checks. And most vendor discounts and payroll calculations are automatic.

  • As you create your invoices, checks and other transactions, your accounting records are automatically updated. This gives you complete reporting capability virtually seconds after you have finished printing.

  • These programs also offer a variety of reports and analysis that may not be available to your business now. The ability to spit out a variety of reports with the stroke of a key or the mouse is always a standard feature.

The following are some tips when installing an accounting system;

  • Design your system very carefully before you start. Many of your initial set-up selections can not be changed once they have been made. Making a poor choice can cause problems over the life of the system.

  • Be sure to design procedures and controls into your system. The computer and software are only one part of the system. People, procedures, and controls are equally important parts.

  • Make sure your staff is thoroughly trained before you begin. Run a parallel system for a month before "going live" to ensure everything is running smoothly and to "fine tune."

  • Install one module at a time, making sure each is totally functional and that you are comfortable, before going on to the next. Install modules that are most important first and general ledger last.

  • Continue with whatever parts of your current system you need to until it is eventually phased out.

  • Hire a professional accountant to do the design, training and installation. By doing so, you are ensured that your system will operate smoothly once it is installed since most accountants will stand behind their work.

- Greg Randazzo

The tax saving, financial and business ideas presented in this newsletter may or may not apply to your situation. It is recommended that you seek competent, professional advice before implementing any of these ideas.
Send mail to grandazzo@mwaccounting.com with questions or comments about this web site.
Last modified:June 05, 2001