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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


Pimbrook now offering Sage One Accounting Software for Small Business

Pimbrook Software, one of Ireland’s leading Sage Partners, has now added Sage One Accounting Software for Small Business to its product portfolio, offering simple and secure online accounting and payroll software to start-ups and small businesses in Ireland.

Sage One Accounting Software for Small Business

Sage One Accounting Software for Small Business

Sage One is a world-class suite of cloud-based accounting software for small business, offering start-ups and small businesses the power to run the accounts and payroll side of their operation simply and efficiently, without eating into valuable management time.

Commenting on the addition of Sage One accounting software for small business, Pimbrook, Managing Director Stephanie Davies stated that “the move is a logical and timely addition to our range of software solutions for small business. We believe it’s important for new and developing companies to start as they mean to go on, and a move to software solutions is a big part of this.”

“Because Sage One accounting software for small business (cloud-base), it means that companies have instant, real-time access to what’s going on in their business, and can react quickly and appropriately to any challenge they may be facing. If cash-flow is poor or sales are low, for example, it’s too late to find out about it at the end of the year or end of quarter. Action needs to be taken immediately to put things right, and this instant availability of management information is a huge source of power for emerging businesses.”

“Adopting a software approach early in their development also allows companies to focus on what they’re good at, without eating into valuable time in managing accounts and payroll. Sage One Accounting Software for Small Business is highly intuitive to use, and demands no previous expertise in accountancy or payroll.”

“It’s also a perfect match for businesses with a mobile workforce, as management can access the software from anywhere at any time via laptop, mobile or tablet. Another plus is that it’s a really simple way of making sure that they’re always compliant with the latest legislation for accounts and payroll, so they’re not expected to be an expert in this very rapidly-changing area of business.”

Pimbrook was formed early in 2017 following the merger of Pims Business Systems and Brook Software Solutions, and the company services its client base from offices in Dublin and Waterford. It services over 1,000 clients and boasts over seventeen years of experience as an accredited Sage Developer and Reseller. The company develops, implements and supports a range of Sage Business Management Solutions for its countrywide client base.

FAQs when buying Accounting Software

Many businesses understand the need for  business software. Trying to manage and control your business with multiple, isolated systems is a labour-intensive process that is replete with the possibility of entry errors,  making it very difficult to deliver the results you want to achieve. You need integrated software solutions that provide efficiency, cost, and performance improvements.

But, before you embark on a software purchase, there are a few questions you should ask. Outlining your specific business needs beforehand will make the process smoother, and ensure that you get the solutions that will have the best impact on your business. But, remember, you don’t have to engage in a total all systems integration all at once. By taking your time, you and your staff can gain confidence for the next steps and build a functional plan that delivers results.

In essence, the software purchase process is all about managing your business intelligence in a way that improves your operation. Data mining, analytical processing, and reporting are functions that all businesses need to employ, but it’s the way you deploy them for your specific operation that makes them so effective.

Accounting Software

Ask yourself these FAQs before choosing your accounting software:

  • What software do we use to perform the majority of our mission critical tasks?

This question can help you identify the most important areas of your operation. If excel is a primary application, then you need to identify a solution that will enable data transfer to your new accounting software. Once you’ve identified the most important software you use, then list your remaining programmes in order of importance.

  • Who will need access to what information?

With data protection laws becoming stricter, guarding sensitive information is extremely important. When conducting your software purchase, consider who will need access to what information, where and when. Applications can include hierarchy controls and conform to mobile access. For example, your mobile sales team may need access to current inventory counts, customer discount information, etc. while on the road. Buying an application that allows this type of mobile response can improve your sales performances.

  • What tools will offer the best functionality for our operation?

Perhaps you struggle with keeping your accounts payable current? Maybe accounts admin are constantly interrupted with unanticipated data corruption? Every operation has its own unique woes, but by getting the best training, coupled with the best small business accounting software, you can’t go wrong.

  • What accounting software features do we need?

Purchasing? VAT? Bank Reconciliation? You may use a specific invoicing application already. So choose wisely.

By asking the right questions of your prospective software provider creatively, you can find a solution that is right for your company. The professionals at Pimbrook understand the various options available for your business and are ready to assist you every step of the way. Contact one of our knowledgeable experts today.