Tag: bookkeeping

double entry bookkeeping

The Simplest Accounting Solution For Non-Accountants You’ll Ever See

No matter what line of business you’re in, the Accounts function is one of the most important aspects of your business. And even if you’re a non-accountant, it’s essential that you appreciate the power that accounts knowledge can give you– including how accounting software can revolutionise your business.

double entry bookkeeping

Depending on whose figures you believe, the SME sector in Ireland accounts for around 56% of the total turnover in the business economy, representing just under 50% of Gross Value Added.

These companies are involved in everything from manufacturing to software development, or from walking tours to pubs and restaurants. But two things link them all. Firstly, the need to understand how their businesses are performing, and secondly, the need to effectively manage their day-to-day account functions, anything from double entry bookkeeping to preparing a basic Profit & Loss Account.

For smaller companies, in particular, the idea for a new business often comes from either someone with a marketing background, or someone who has worked in a management role within their chosen field.

This means that very few of them are qualified accountants. And until the business is up and running for a year or two, it’s unlikely that they will be able to afford the luxury of a fulltime accountant or financial controller.

Despite this, however, invoices have to be issued, cash has to be collected and accounted for, VAT and tax have to be sorted – plus a whole host of other accounts-based tasks that are absolutely essential to the health and wellbeing of the company.

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In this scenario, the owner or management team have a real problem on their hands. At least one of them will have to develop a working knowledge of the accounts function.

But in looking to do so, they can take heart from the fact that top-class accounting software is available to them at very affordable prices. Apart from the time-saving involved on repetitive functions like double entry bookkeeping, software like Sage 50c (formerly Sage 50) is full of handy features that will give them the management information they so desperately need. This can be anything from month-on-month invoice variations to debtor days.

All this is meat and drink to accounting software like Sage 50c. And while the time may come when the company needs to invest in a full-time Financial Controller, choice of the correct accounting software can postpone that day until the company is able to afford it. And even better news is that when you eventually hire a Financial Controller, there will be no need to change your software.

And no matter how little of an accountancy background you may have, you can still understand your business so much better via your accounting software. The main features of your package are explained in simple, non-accounts jargon . Remember, too, that there are practice and demo data section available to you that will you understand the different tools available.

Another benefit of this type of accounting software is that functions such as payroll or credit card processing are available to you as add-on modules, so as your business becomes more complex, you can keep pace with it.

So what else can a non-accountant get from his accounting software?

Well for starters, software like Sage 50c facilitates simple and accurate tax computations, This means that management know in advance what their tax liability will be, and can ensure that there are no nasty surprises that will impact negatively on cashflow.

Another benefit to non-accounts members of management from professional accounting software is that they have summary data on hand if they need to talk to their bankers about raising working capital, or perhaps seek private sector investment. The more information you have at your fingertips, the more professional and authoritative you’ll appear.

Also, because Sage 50c automatically deals with all aspects of double entry bookkeeping, it makes it that much easier to observe the workings of double entry. And until you get a firm grasp on this fundamental principle of any accounts function.

Another big plus of a suite of accounting software is that it will automatically spit out the reports that you need on a weekly or monthly basis if you are to genuinely stay on top of your business.

The most common of these are things like:

– Accounts Receivable (how much money is owed to you by your customers at any given moment)
– Accounts Payable (how much money you owe to your suppliers or creditors at any given moment)
– Sales (how much revenue you are generating from selling your goods or services)
– Purchases (raw materials for manufacturing or any other supplies that you buy on behalf of your business)

Even better news for non-accountants is that they can delve down into any of these reports to an almost limitless degree. For example, you could create one report for raw materials, and a separate report for other purchases such as packaging or even postage.

A further benefit to management with little or no accounts expertise is that their accounting software can offer them a greater level of security than manual, paper-based systems. And in many businesses, accounting data may often be sensitive in nature, so it’s comforting to know that it’s hosted in the cloud and offers multi-level security features that make it pretty much bullet-proof. Management can decide to restrict access to only a core team, significantly reducing the likelihood of theft or fraud.

It’s also worth pointing out that accounting software like Sage 50c is highly intuitive to use. And the more you use it, the more confident you become, which means that you’ll soon be looking to explore some of the more advanced features that can add so much to your company’s smooth running. If you can understand the inner workings of your digital TV service, then you definitely have enough ‘smarts’ to investigate the mechanics of your accounting software.

The bottom line is that, although you may initially just use it for simple functions like double entry bookkeeping, you will soon be using your software like a pro. And when the time comes when you eventually have a Financial controller on board, you’ll be well equipped with the accountancy grounding needed to converse with him in a meaningful way.

bookkeeping software

Five Things About Bookkeeping that You Simply Have to Know

Make sure that you know enough about your company’s accounts to fully understand what’s happening in your business. Knowledge is power, so even if you’re not an accountant by profession, here are some basics that you absolutely need to know – including how bookkeeping software can be your saviour. bookkeeping software

Unless you studied some form of accounting or commerce at school or university, the basic principles of bookkeeping will probably be Greek to you. And that’s not a problem if you’re a larger company – you simply hire in the expertise to sort it all out – and you probably have sophisticated bookkeeping software in place to help you do so.

All the best small business accounting software on the market can give you the bookkeeping oomph that your company needs. For smaller companies or start-ups, however, this may be an avenue you have not yet explored. Therefore, it’s good to have a basic grasp of the principles that your accountant is applying on your behalf.

Why so? Well simply because your accounts are your passport to really understanding your business. If you don’t have a firm handle on your financial and commercial position, you’re relegated to guesswork rather than informed decision-making.

Remember, too, that if you’re talking to banks or investors, they’ll be very interested in your books, and you’ll need to display a more-than-basic understanding of them.

Your understanding of bookkeeping need not be particularly deep, but here are a number of key principles that you simply have to grasp – regardless of whether you use bookkeeping software or a paper-based approach.

These days, all the best small business accounting software will cover the issues we’re talking about here, but it’s still important that you understand the underlying principles.

 

1) What’s the basic principle of Double-Entry Bookkeeping?

Most businesses these days use some form of accounting software instead of physical ledgers. And the best small business accounting software will obviously automate the tasks we’re about to talk about. The principles of the software approach and the ledger approach are identical, and right at the heart of things lies the principle of double entry.

What this means in essence is that every single transaction you make is recorded in two places. To give you a simple example of how this works, let’s take a furniture business that spends €1,000 on timber. If you simply looked at your cash account, it would seem that you’re down a grand – and with nothing to show for it.

But a corresponding entry should also be made to your inventory, reflecting the fact that you now have €1,000 worth of raw materials in your workshop.

This is not just a semantic point. It gives you a much clearer picture of what’s happening in your business than if you simply had the debiting of €1,000 from your cash account. This principle of double entry is reflected in all reputable bookkeeping software, as well as the old-fashioned ledger approach.

And the best small business accounting software on the market will obviously ramp up this functionality even further.

 

2) You need a full suite of Accounts

If we take the case of our furniture business, it’s self-evident that it would like to keep an eye on its cash balance – and also on the level of raw materials it has. They are both key pieces of information in running the business.

It follows, therefore, that records must be kept of any subsequent movement in the levels of cash or raw materials, so the Cash and Inventory accounts need to be constantly updated.
But there are other accounts that also come into play if you want to have a holistic view of your business. The most common of these include:

– Accounts Receivable (money that’s due to you from your customers).
– Accounts Payable (money that you owe to your various suppliers or creditors).
– Sales (the revenue your business takes in from selling your goods or services).
– Purchases (raw materials or other supplies that you buy for your business).
– Payroll (staff salaries and other staff costs).

As your business gets bigger and more complex, you can create further levels of accounting to give you a better snapshot of your company. Those raw materials that you buy for your furniture business, for example, could be sub-divided into timber and leather.

For companies using bookkeeping software, it’s really simple to add as many accounts as you want, and it involves no extra time or effort. And by investing in the best small business accounting software that you can afford, you give yourself scope for infinite levels of drilling down into your accounts.

 

3) The books MUST balance.

You may well have heard people talk about balancing the books, but what does this term actually mean?

It’s probably easiest to explain this concept by returning to our example. We bought €1,000 worth of raw materials, and from this, we manufactured furniture which we sold for €2,000

What does this look like based on our double-entry principle. Well, for a start, we’ve got an extra €2,000 in our cash account, but our inventory has reduced by €1,000.

But where does the extra €1,000 that we’ve ‘made’ appear in our accounts. This is obviously a profit item, so it appears as retained earnings in an account set up for this purpose.

This is obviously a very simple example, but it demonstrates the basic principle of balancing the books – making sure that there is a full picture in place of what happened as a result of various transactions. Availing of the best small business accounting software you can afford means that the books always balance, as all transactions are subject to the principle of double entry.

But whether you’re still using ledgers or have moved on to bookkeeping software, this principle applies with equal certainty.

 

4) Your Financial Statements are critical

So far, so good. We’ve established the principle of having accounts in place, and ensuring that the books balance. But on top of this, you also have to have a number of key financial statements in place, which provide a summary of how your business is doing, and may form part of your statutory obligations.

All the best small business accounting software make these statements super-easy, but you should still know what’s going on behind the scenes.

You probably appreciate that a Profit & loss Account will be at the top of the list of financial statements, as it provides not just an indication of how you’re doing, but may also form the basis for your Revenue bill at the end of the year.

There are other financial statements of equal importance, including an Income Statement and a Balance Sheet. In essence, these combine figures from your various accounts and consolidate them in a form that’s easy to understand – and easy to act on!

The good news is that modern accounting software will automate this task for you, making it easier than ever to track the performance of your business.

 

5) Get the help of bookkeeping software as soon as you can

As you have seen from our earlier examples, a single transaction can be the cause of a number of accounting entries. And the more complex your business becomes, the bigger the challenge to make sure your accounts reflect what’s happening.

You can do it the old-fashioned way, but adopting accounting software is a far more cost-effective way of making sure that your accounting practices are in rugged good health, giving you all the management information you need to drive a profitable business.

The bottom line is that investing in the best small business accounting software will save you both time and money – but make sure that automation doesn’t make you lose sight of the fundamentals.

If you need a bookkeeping software or have specific requirements Email us now! or Call us on Tel: 051 395 900

 

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