Book-keeping alternatives for the small business
Many small business owners ask me “What is the best way to record my business transactions?”
There are several options, each solution having its own pros and cons. I set out below the most common alternatives.
Manual cashbooks and spreadsheets
Many small businesses continue to keep records either manually in a cashbook, or more commonly use a spreadsheet which automatically performs some additions.
This is a very simple way of recording your transactions and if it is used methodically can be very effective. One of the key advantages of this approach is that it is very transparent and easy to change if you make a mistake. On the negative side it is often difficult to measure performance on a periodical basis with these types of records and the lack of any controls can lead to inaccuracy in the data.
For a more complicated business the use of an accounting package is advisable. The most common suppliers on the market are Sage and QuickBooks, both of which have products available to suit businesses of differing size and complexity.
The key advantage of these products is their ability to quickly generate reports which measure performance, show who owes you money and who you owe money to. They will also produce VAT returns for you and generate professional looking sales invoices which will reduce administrative time.
On the negative side, the programs have generally been designed by accountants and are not always easy to understand and the lack of transparency can make mistakes difficult to correct. The data is also stored at a fixed location making sharing of data difficult.
Cloud based products
These products are relatively new to the market and have the same functionality as traditional accounting packages but have a key advantage as the program and the data are held remotely and accessed via your web browser. As a consequence you, or any other authorised user can access the data remotely at any time, from any PC. In addition the way the data is viewed can often be tailored for the needs of the user, so the owner will often view data in a different format to their accountant making the data more meaningful for both parties. On the negative side, these products do require access to the internet, so if you are working remotely this may be an issue and the cost of some products can be high. Sage and Quickbooks offer online solutions and there are many other providers in this market such as Xero, Liquid, Paradise and Aquilla.
Whichever package you decide to use the most important thing is to use it as efficiently as is possible and record the information accurately to ensure that you can evaluate the business performance and provide something meaningful your accountant.