Wednesday, April 2, 2014

How much detail do you need in your accounting system?

I can't tell you how often I hear people talk about how easy accounting is or should be.  The invention of accounting software certainly has improved the process.  It is not, however as easy as people think it is or should be.  What takes time and thought and experience is deciding what level of detail you need and how to best achieve this level of detail. More and more businesses use outside systems for sales, purchasing and payroll.  Full details on each of these areas reside in the systems so the question is what level of detail do you need in your accounting system?  If the systems don't integrate, you don't want to have to enter the information twice, once in the outside sales or invoicing system and again in the accounting program.  While it is nice when the systems do integrate, we often find that they don't so we have to figure out the best procedure to transfer the information.

I find that if the detail is in the outside system (your invoicing program has all the customer names, invoice details, contact information) then there is often no need to duplicate this level of detail in the accounting program.  What you want in your accounting program is the financial details-what were your sales in dollars, how much did you spend on advertising, what was your net profit for the month, what does your cash flow look like?  You can get this information without all the customer details or payroll details in the accounting program.

We are often called into a business when the process has become bogged down by trying to keep up with the work flow.  Working through where all the information comes from and creating a process to get the pertinent details into the accounting program while eliminating as much duplication of effort takes time, but it pays off almost immediately.  Doing research upfront into the various systems you will be using to run your business and making sure they play well together is always a good idea.

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