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