19 Feb How to Let your Accounting Software Help Run your Business
Accounting softwares were introduced in 1985 with the TurboCASH accounting software. Over time, these applications have evolved and taken over the manual accounting operations. They have the ability to run operations that would’ve taken hours, minutes or seconds even. These accounting softwares have several functions that help run a profitable business, especially small businesses. It is important to choose the right accounting softwares, that would be effective in running your business. For instance, a small business owner who wants a cloud-based software can search for online accounting software for small business and choose from the best ones available.
While operating with a small business accounting software, one has to understand the mode with which an accounting system work. There are four aspects of operations in accounting softwares;
The income aspect of the accounting operations is where you find the Accounts Receivable Ledger, the Sales Journal, the Cash Receipts Journal and the Inventory Ledger. This is where you enter the sales from a business. Every cash coming into the business is recorded in this part. There are some online accounting software for small business that are connected to certain services that makes your operations easier. If your cloud-based accounting software is connected to a POS (Point of Sale System), the monetary entries are automatically registered on the accounting software. From this group, you generate your sales receipts and invoice and post them to the sales journal.
The purchase group of accounting operations is where you enter all expenses from your business. The cash and sales going out of the business is entered into the Accounts Payable Ledger, purchase orders are entered into the Purchase Journal and all payments for expenses are posted on the Cash Disbursement Journal. When purchase orders are made on a business’s inventories, the amount is entered into the Inventory Ledger, all of which accumulate in the general ledger.
The payroll aspect of the accounting software, is entered by the employees in a business. It eventually goes into the accounts payable ledger then, the general journal. It is a service-based record on the accounting software that is converted to pay per hour or week or month as agreed by the employer and employees.
Finally, the record keeping aspect of the accounting software is where the General Ledger is located. This is where all entries from every account or journal is accumulated. You can make corrections to the General Ledger by simply making correction on the journals posted directly to the ledger. There are six journals that post directly to the General Ledger; the Cash Receipt Journal, Purchase Invoice Journal, Payroll Journal, Sales Invoice Journal, Cash Disbursement Journal and the General Journal.
The small business accounting software is designed to function in this format. The software functions semi-automatically and you have to make an input for the software to give an output. Having a knowledge on the groups of accounting operations, all you have to do as a small business owner is input your data on the proper accounting group and the software takes the operations from there. The accounting software is designed in such a way that entries into a particular journal or ledger is automatically posted to the preceding account and the general ledger. There are some small business accounting softwares that do not post the entries automatically. These ones allow for cross checking of the total entries in a day before posting is done. This is why it is important to read the specifications for online accounting software for small business before purchasing one.
Once these entries are posted in their appropriate accounts, the software does the whole work from there on. It generates invoices and receipts, profit and loss accounts, manages bill payments including tax deductions, provides financial statements and other functions depending on the software being used. Accounting softwares are very fast and accurate but it takes the right input to generate a concise output. To run your business effectively with the accounting software, you and your employees have to be well versed on the operations of the software. Accurate data yields accurate information.