In this chapter we’ll look at some of the alternative methods of bookkeeping. These include:

 

Computerised Bookkeeping

Over the past few years there has been a significant improvement in bookkeeping software available for the small to medium-sized business. With the invention of the IBM compatible personal computer or PC there was a standard platform for running computer programs and the first affordable bookkeeping programs became generally available.

These programs are able to undertake all your bookkeeping and will also allow you to ‘do the VAT’, prepare management reports and prepare the final year end accounts. Some programs will calculate the wages for your employees and also keep track of your stock.

With bookkeeping you have to be 100% accurate. On early programs it was not possible to change an entry once it had been made. This was sold as a security feature because, having balanced a particular account, it could not subsequently be altered. The idea was sound but unfortunately it ignored the human factor: we all make mistakes! Under that system it became difficult to correct such errors. If you had wrongly entered a receipt as £96.39 instead of £69.39 it was necessary to enter a payment of £27.00 to correct matters. Not only was this messy and awkward but it was also difficult to check the entries at a later date.

Fortunately most programs today include a ‘delete transaction’ or an ‘Oops’ button to remove erroneous entries. Even with this more friendly approach it is still necessary to exercise care when using computer bookkeeping. Unfortunately there is a danger that because the printout looks neat, you feel it must be right. This is not necessarily the case and indeed some of the worst bookkeeping is undertaken using computers. Any computer program is only as good as the data input and the old maxim ‘Rubbish in = Rubbish out’ certainly applies to bookkeeping packages.

Some Observations On The Introduction Of A Computerised Bookkeeping System

‘If it had not been for the help that I had from my accountant it would have been in the bin long ago.’

‘The computer company’s idea of training is to go on a training course for one day. I think that if I sat in a class with a lot of others I would perhaps pick up some of the basics, but most would go in one ear and out the other! It would seem much better to tackle problems as they arise: that way it is at a better pace and you understand the answer. Of course that means that you have to find someone to explain.’

‘I think I understand it now. The screen is like a piece of paper: you just have to get used to thinking of it in that way.’

Choosing The Software

First you must consider what you want your system to achieve and also to some extent the nature of the equipment available to you. Most bookkeeping software used by small businesses runs using a Windows operating system although there are different versions of Windows available. Windows is a graphical interface which provides an intuitive and efficient work environment for your personal computer. The majority of users of small business systems will use Windows although there will be a few who will use Linux or Unix. It is to a degree a matter of personal choice, although if you purchase a new computer it is likely to come with Windows ME or one of the other versions of Windows.

If you have an old computer it may be painfully slow at printing any reports. If this is the case then you should consider updating your computer. With many machines now available for under £600 an upgrade has become more attractive, and remember that not only will it run your accounts software quicker: you will also be able to play some of those super new games!

You should also consider what you want your program to do. Different programs have different strengths and weaknesses. For example, do you want to incorporate a stock control system so that you can always know exactly what goods you have in stock?

Finally, you should consider who is going to use the program and how many different businesses you need to maintain records for. If you are in a busy office you may want to select a program that will allow more than one person to input information at the same time. For example, you may want a clerk in the purchasing department to be able to work on the purchase ledger whilst the sales ledger clerk is preparing sales invoices using the system. For most small businesses this will not be important but it is not infrequent for such entrepreneurs to have more than one business. A multi-company option may therefore be useful.