| A small business accounting program should | | | | common business form is simply a check. Any |
| accomplish three tasks: track income and | | | | checkbook program help you do this. Other |
| expenses, generate business forms, and keep | | | | business forms that small businesses commonly |
| detailed records for other assets and | | | | need to produce include invoices, credit |
| liabilities. | | | | memos, monthly statements, purchase orders, |
| | | | and so forth. |
| Tracking Income and Expenses | | | | |
| | | | If you have a small business with very simple |
| The task of tracking a business's income and | | | | form requirements-perhaps you need only |
| expense is really the most important job of | | | | checks-then a checkbook program may work very |
| an accounting system. If you own or manage a | | | | well for you. |
| small business, obviously, you need some tool | | | | |
| for measuring your income and your cash flow. | | | | However, if you have extensive or complicated |
| | | | business form generation requirements, a more |
| Although checkbook programs like Quicken and | | | | full-featured small business accounting |
| Microsoft Money do little more than keep a | | | | package, such as Intuit's QuickBooks, |
| checkbook, you can actually keep financial | | | | Peachtree's Complete Accounting, or Microsoft |
| records for a business right out of a | | | | Small Business Accounting will do a better |
| checkbook. To do this, you simply categorize | | | | job for you. |
| deposits as falling into some income | | | | |
| category. And when you write a check or make | | | | If you produce more complicated forms, but |
| some other withdrawal, you categorize | | | | you produce these other forms with a word |
| expenses as falling into some expense | | | | processing program, then a checkbook program |
| category. | | | | may still work for you. |
| | | | |
| One problem with using a checkbook program, | | | | Detailed Record Keeping for Other Assets and |
| however, is that by using a checkbook | | | | Liabilities |
| program, you are implicitly using cash-basis | | | | |
| accounting to track your income and expenses. | | | | The third task that a small business |
| Cash-basis accounting counts income when you | | | | accounting program should help you with is |
| receive a deposit and counts expense when you | | | | detailed record keeping of your most |
| write a check. | | | | important assets and liabilities. A checkbook |
| | | | program lets you keep good detailed records |
| Cash-basis accounting is easy to understand, | | | | of cash, and for some businesses that is the |
| and that means you are less likely to make | | | | principal asset. But many small businesses |
| errors in implementing it. However, | | | | have other significant assets and liabilities |
| cash-basis accounting is generally too | | | | they need to track, for example, accounts |
| imprecise for more complicated businesses. If | | | | receivables, inventory, and vendor payables. |
| you use inventory in your business, for | | | | |
| example, cash-basis accounting isn't very | | | | Whether or not a particular software |
| accurate-and the Internal Revenue Service | | | | program's accounting tools provide adequate |
| does not allow it. | | | | asset and liability record keeping depends on |
| | | | the situation. However, no small business |
| And there are other circumstances, too, in | | | | accounting program does everything you need |
| which cash-basis accounting produces serious | | | | it to do. Any accounting program that |
| and usually unacceptable errors in precision. | | | | provides an extensive list of features, by |
| For example, if you often receive money | | | | its very nature, becomes a challenge to use. |
| before you have actually earned it or if you | | | | For example, moving to the accrual basis of |
| often incur expenses long before you actually | | | | accounting adds an entire layer of complexity |
| have to pay for them, you need to use a more | | | | to financial record keeping, and keeping |
| sophisticated accounting program than a | | | | detailed records of inventory adds another |
| checkbook program. | | | | layer. |
| | | | |
| Generating Business Forms | | | | For these reasons, even when a particular |
| | | | program doesn't do everything you need it to |
| The second task that a small business | | | | do, your best choice still may be to use the |
| accounting program should help you with is | | | | program-and then simply live with its |
| the generation of business forms. The most | | | | shortcomings. |