Essential Records: A smooth sail

In the wake of April 15, it is common to analyze ones recordkeeping methods in order to ensure a smoother process for the next tax time.

Not only is good recordkeeping essential in avoiding over or under payment of taxes; good records allow more efficient operation of a business, thereby increasing profitability. There are numerous methods of accounting systems that can be categorized as manual or computerized. A manual accounting system can be simply the pencil and paper to the famous “shoebox method” (the latter is not a wise method). However, since the topic is to have an efficient recordkeeping system that will be instrumental in maintaining a good relationship with one’s banker, the computerized method will be explored.

Computers are an integral tool for a business. The number of computerized accounting programs available is vast. Many software programs require basic knowledge of accounting and can be used for point-of-sale to backroom transactions. Before selecting any software program, planning is necessary. One consideration is to explore which software programs are compatible to your accountant, which will minimize frustration.

Other questions to address are the ease in entering data.

• How many steps are needed to enter transactions?

• Is the program easy to understand?

• Does it work with existing software programs (spreadsheets, word-processing, customer management databases)?

• What technical support is available and at what cost?

• Is the program an integrated system or are components purchased separately (accounts receivable, accounts payable, general ledger, payroll)?

The cost of the accounting software must include upgrades, compatibility with the existing hardware and software, and training requirements.

Training is most often overlooked during the pre-purchase phase. The direct cost of training is apparent; however, the hidden costs such as on-the-job-training, repeating efforts caused by mistakes and maintaining dual accounting systems (old and new) for a month are often overlooked. Another item to consider is to realize the accounting program will alter the way various procedures are completed and it will not solve all problems.

It is recommended that all business owners complete a basic accounting class. This class is usually a four-credit-hour course and can be taken as an audit at a local college.

The class will provide knowledge for the preparation, reading and understanding of financial statements generated by a computerized accounting program.

The ability to maintain a good and smooth recordkeeping system is essential for a profitable business.

Sandra Taylor-Sawyer is director of the Small Business Development Center at Clovis Community College. Call the center at 769-4136 or visit www.nmsbdc.org/clovis