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By Bill Kennedy - My client was a small association. Their "books" consisted of wide green sheets that recorded all of the transactions. At the end of the year, an external accountant would turn the sheets into financial statements, which would be presented to the Board of Directors several months later. The new Executive Director, Jan, wanted monthly financial statements and a faster year end. We had arranged to meet to discuss her needs, but she called a few days before, all excited.

"Guess what? I just bought our first computer. Oh, and our accounting system as well."

"Which one did you buy?"

"Excel."

That triggered a little discussion about the merits of a spreadsheet as an accounting program. I love Excel, but not for accounting. There is no audit trail. If you change the contents of a cell, no history is kept. It can be made to print invoices and checks, but it is awkward. I reassured Jan that she could get a good entry level accounting package for under $200.

Microsoft changed all that. Now you can get Microsoft Office Accounting Express for free, but please remember that the software is only half the battle. Planning and thoughtful setup of the system will save many hours and dollars later.

What do I mean?

Start by deciding what you want. In Jan's case, she needed financial statements to present to her Board. We polled the Board of Directors on what they wanted in their statements. Most of the Directors said they were happy with what they were getting, but one sent in a detailed response laying out the kind of expense break down he wanted to see. That became our detailed statement. We then subtotalled like accounts to create a summary statement.

Another client wanted to track the component costs of the dolly he was building and selling, so we used his manufacturing plans to determine what accounts to create.

In a nutshell, your accounting system needs to support your reporting needs and business decisions. Start with what you need and work backwards! Find a professional accountant with experience setting up accounting systems to begin with. Later on you may need only a bookkeeper to maintain the system or you may learn to do it all yourself.

What's next?

After system set up, write down your routine. Create some "cheat sheets" for the normal processes such as:
  • Invoicing customers

  • Depositing cash receipts

  • Paying the bills

  • Issuing purchase orders

  • What to do at month end

That way, even if you are sick or on vacation, there is a set of instructions for someone else to follow. Who knows? You may just grow to the point where you can hire someone to take all that administration off your hands!

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