Contents of the free course 
Benefits of Computerised Accounting
Help with Book Keeping
Help with Sales Administration
Help with Wages Calculations
Help with Purchasing Administration
Dealing with the Bank
Better Quality Information for your Accountant
Better Quality Information for the Taxman
Better Quality Information for You
Types of Accounts Packages
Financial Organisers
Integrated Packages
‘Junior’ Packages
Full Blown, Modular Packages
Industry Specific Packages
Have you also considered these aspects of the course?
- Choosing your Software
- Coding Your Accounts
- Installing a New System
- A Typical Package — Sage Instant Accounting
- Controls, Routines and Procedures
- Management Reporting 69
- Working With Other Computer Packages
- Filing your Records
- Entering Data and Correcting Mistakes
- Preventing Fraud
- Answers to Exercise
- Glossary of Accounting Terms
Enroll on a full bookkeeping course to increase your earnings or even start a self employed career!
Benefits of Computerised Accounting
Thousands of businesses, large and small, have benefited by installing a computerised accounting system.
We cannot promise that computers will help you give up smoking, stop your socks smelling or make you more attractive to the opposite sex. We do, however, feel that we ought to start this course with a summary of the benefits which computerisation can bring to your business.
Help with Book Keeping
Most businesses start out in a small way. To begin with their book-keeping may be restricted to recording ‘cash in’ and ‘cash out’ in an analysed cashbook. As the business grows, more details are needed so the cashbook grows. Eventually you would need a cashbook a metre wide, and you still wouldn’t be able to record all of the details required!
In the old days, a business may have moved to a manual double entry system, but this makes no sense today. Manual double entry takes too much time to learn, practice and use. Your manual book-keeping records cannot produce management reports automatically like the computer can. The only practical accounting system beyond the cashbook is computerised accounting. Despite the silly assertion to the contrary, mistakes are hardly ever the computer’s fault. If the computer makes a mistake, it is usually because a human gave it the wrong information to start with!
If your manual book-keeping system is running out of steam, you should consider computerised accounting
Your cashbook grows!
Help with Sales Administration
If you sell goods or services on credit, you will already know that this involves a great deal of administration.
Here are some ways in which a computerised accounting system will help you:
. improve the neatness and accuracy of your invoices
. track credit limits so customers can’t exceed the limit that you have set them
. calculate trade discounts accurately
. calculate VAT accurately
. generate customer statements with little effort
. print remittance advices
. give you an aged debt list (this will tell you who owes money and for how long)
. generate personalised debt chasing letters.
If you have problems invoicing customers or collecting debts, you will benefit from computerised accounting.
Enroll on a full bookkeeping course to increase your earnings or even start a self employed career!
Help with Wages Calculations
Manual payroll calculations can be a nightmare. Using tax and national insurance tables for even a small number of employees is very time consuming. Here are some of the areas when the computer will help:
. calculating gross pay
. calculating amounts of tax and national insurance owed to the Inland Revenue
. writing payslips
. entering the wages deductions into the accounts
. administering Statutory Sick Pay
. administering Statutory Maternity Pay
. administering Student Loan repayments and Families Tax Credits
. producing year-end returns, etc.
A computerised payroll can be a real time-saver. Not only will it generate employees’ payslips automatically, it will also produce your year-end tax returns as well. For employees who are paid the same amount each period, you don’t even need to update the amount — just run the payroll!
Payroll programs help you cope with exceptional items; for example, the treatment of directors’ national insurance, expenses and benefits in kind, pensions etc. The payroll program will remember all these details and calculate wages and salaries accordingly.
The output from the payroll program can be connected to a bankers electronic payment system. This way, the wages calculated by the program are transmitted to the employees’ bank accounts automatically.
If yon employ more than half a dozen people, you should consider a computerised payroll program.
Help with Purchasing Administration
If you buy a lot of goods or services on credit, you could benefit from the installation of a computerised purchase ledger.
Your purchase ledger keeps track of how much you owe those suppliers who provide goods and services on credit. You can use the purchase ledger to help plan your expenditure. On the one hand, you don’t want to pay too quickly. On the other hand, you don’t want to pay so slowly that your suppliers put you on their ‘stop’ list. Your purchase ledger program will help you decide who, and when, to pay.
In many businesses, purchased items are charged to individual jobs or departments. Your computer program can allocate purchased items to these areas quickly and easily.
If you have large numbers of items bought on credit, you should consider a computerised accounting system.
Dealing with the Bank
You probably won’t see your bank manager very often, especially if your account is in credit. However, if you
need a loan or overdraft, you may need to convince the bank’s lending manager that your business can meet the repayments. Evidence for this may be provided in the form of accounts for past years together with cash/profit projections for the future.
Your computer will produce management reports which you can use to convince the bank that you are credit worthy.
Better Quality Information for your Accountant
The computer can produce the sort of information that many businesses once went to their accountant for. Provided your book-keeping has been done conscientiously, your accountant won’t be shedding any tears. This is because you are no longer asking him to do the donkey work.
Good computerised accounting records will enable your accountant/auditor to produce your annual accounts quickly and economically. You may also find that your accountant’s bills are reduced. This is because much of your accountant’s cost may be incurred checking your manual book-keeping records. If you enter book-keeping information conscientiously into a computerised accounting program, you will save your accountant’s time and cost to yourself
Most accounts software will produce a draft profit and loss account and balance sheet for the accountant to start work on. This can be a real time saver. It is unlikely that the raw accounts produced by your accounting program will show a ‘perfect’ profit figure. This is because a ‘proper’ set of accounts includes a lot of accounting adjustments which may not be incorporated in the raw accounts produced by your computer. These adjustments include accruals, prepayments, depreciation, tax allowable versus non tax allowable expenditure etc. You may still need an accountant to make these adjustments for you. However, even if the computer produces accounts which need adjustments, you will still have saved a great deal of time, effort and money along the way.
If you want to reduce your accountant’s bills, you should consider computerised accounting.
Better Quality Information for the Taxman
You may not regard the idea of supplying the tax man with clear information as a benefit. However, in our experience, clearly presented tax information can save a great deal of time in form filling and answering follow-up questions.
The Inland Revenue will appreciate accurate and prompt returns. Failing to file your returns on time can attract penalties. HM Customs and Excise also demand prompt returns. They can levy fines for late returns and late payments.
If your business turnover is below the VAT registration threshold, you don’t have to account for VAT. However, once your turnover exceeds the VAT registration limit, you have to register for VAT and submit returns to Customs and Excise. Even if you are accounting for VAT under the simplified cash accounting scheme, you will still find computerised VAT accounting a real boon.
When your sales turnover exceeds the cash accounting limit, you have to account for VAT using the ‘tax point’ date. Tax point accounting for VAT by hand is a nightmare which involves a great deal of administration. Computerised accounting for VAT is virtually essential if you are a tax point trader.
Computers produce the VAT return figures at the press of a button. You can also ask for a list of the book-keeping entries which made up that VAT return. This is useful if the VAT man asks questions. Some packages even print out a copy of the VAT return for you. This makes VAT administration as painless as possible.
A change in VAT status from non registered to registered, or from cash accounting to tax point accounting, could be the trigger point for you to change over to computerised accounting.
Enroll on a full bookkeeping course to increase your earnings or even start a self employed career!
Better Quality Information for You
We have saved the most important benefit till last.
With manual systems, most businesses find it hard to make time to enter even the basic book-keeping entries. There is little time left to discover what those entries mean in terms of business performance. However, once information has been entered into a computer, it can be analysed automatically by the program to give meaningful reports. At the very least, you need answers to the following questions: 
. How much money have I got?
. Where does my money come from?
. Where does my money go to?
. How much do I owe others?
. How much do they owe me?
. Am I trading profitably?
The computer will help you answer these basic questions. Remember, if you cannot answer these questions, you are not in control of the business.
Of course, you don’t have to stop there. Once you have mastered the basics, you can develop the financial reporting as far as you want. Most computerised accounting programs have reports pre-programmed into them. Here are some typical examples.
. top customer list
. bank receipts and payments
. aged debt reports
. customer trading history
. VAT report details
. profit and loss account
. balance sheet
. departmental budgets
. expense account history
. fixed asset list, etc.
With the computer, it is possible to generate management reports which previously were the provenance of much larger companies.
You may even be able to ‘export’ information from your accounts package to your word processor, spreadsheet or database package which will enable you to enhance the appearance of the information still further.
If you need to improve your financial reporting, you should consider computerised accounting.
Summary
There are many areas where computerised accounting brings benefits. The effort of installing a computerised accounting system will be repaid many times over.
Once you have taken the plunge and computerised, you will be able to harness the computer’s power to manipulate and present information. This puts you in control of the business so that it works for you rather than the other way round.
However, there are many problems and pitfalls lying in wait for anybody trying to computerise their manual accounting system. If the following chapters sound like a catalogue of disasters, remember that thousands of small businesses have installed computerised accounts successfully. Most of these businesses wonder how they ever managed without it.
We are not saying that everything is plain sailing; the transition between manual and computerised accounts can be particularly traumatic. However, if the problems listed in this chapter are familiar to you, computerised accounting could deliver real benefits. With benefits like these, can you really afford to ignore computerised accounting?
Types of Accounts Packages
A computerised accounts package comprises a ‘family’ of accounting programs which run on a computer. For the size of business we are considering in this book, the computer will probably have an Intel chipset running the Windows operating system.
There are many types of packages on offer. In order to give you some idea of the range, we have classified them into the following five broad categories:
. Financial Organisers
. Integrated Packages
. Junior Packages
. Full Blown Module Packages
. Industry Specific Packages.
Here is an explanation of each.
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Financial Organisers
These packages are designed to help individuals and very small businesses control their bank accounts. They are cash based. They cannot cope with accounting for debtors and creditors.
They help you reconcile the bank account. They also produce reports and graphs which help you understand your finances.
Some can track a share portfolio, produce an asset register for insurance purposes or help with VAT. One even offers an interface with an invoicing package, reminiscent of the modular approach of the larger packages.
Examples:
. Quicken from Intuit
. Money from Microsoft
. Money wise from Sage.
Price guide:
. Around £50 (although they can often be had for less).
We will not be spending further time on these packages. Although they are excellent products in their own right, they do not have the business emphasis which we need.
Integrated Packages
These packages are not based on separate programs (or ‘modules’ as they are often called). They comprise a single self-contained, integrated package which covers most financial aspects. Previously, you had to buy separate programs for each accounting task.
These are comparative newcomers to the accounting package scene. Whereas their predecessors tended to mimic manual systems on the computer, integrated packages really flex the computer’s ability to solve the book-keeping problem.
They offer a great deal of flexibility enabling you to make changes at almost any time. You can also access any part of the system so there are very few restrictions on the way you work.
With an integrated package, you could be more restricted by your knowledge of accounting theory than by the program itself.
Examples:
. Quickbooks from Intuit
. TAS Books from Megatech Software
. Instant Accounting’ from Sage.
Price guide:
. Around £100 although you should watch for special offers.
 ‘Junior’ Packages
The longer established accounting software companies like Sage and Pegasus became involved in computer software in the late seventies and early eighties. They either:
. developed an accounting package for small business using PCs (and later developed a larger, more comprehensive version for mainframes), or
. they already had a full scale mainframe package which they ‘cut down’ for use by the smaller business.
These packages tend to talk about nominal ledgers, sales ledgers etc and stress their book-keeping origins rather more proudly than their integrated competitors. However, the two types of packages are rapidly becoming indistinguishable as the integrated packages become more comprehensive and the ‘junior’ packages become more user- friendly.
Examples:
. Capital Gold from Pegasus . . . : : .•
. Sage Line 50 from Sage.
Price Guide . ..
. £200—E700 depending on the features offered.
Some of the lower end products have dropped in price to compete with integrated packages.
Full Blown, Modular Packages
These systems cope with the demands of large organisations requiring sophisticated accounting solutions. The complete system is expensive but it will handle large amounts of data and perform more complex accounting functions. We anticipate that most people reading this book will not need this type of system yet!
Examples:
. Opera from Pegasus
. Sage Line 1 00 from Sage
. Sun Systems from Systems Union.
Price Guide:
. Expect to spend at least £1,000 possibly £1,500 per module or more — serious money.
Industry Specific Packages
Businesses in the same industry tend to have similar accounting needs. This has prompted software suppliers to write packages for specific industries like the insurance industry, hotel, motor trades and builders. The software writers claim that ‘sector specific’ packages fit the business requirements more closely than a general package. In many instances, they do. However, if you are thinking of buying one of these packages, check whether the software company has enough customers to make it financially worthwhile for them to continue supporting the package. How would you feel if you were totally dependent on one industry-specific accounting package and the package developed problems after the software supplier stopped trading?
Instant Accounting is a typical introductory package for small and medium sized businesses.
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