Paper and Pencil vs. One-Write Systems vs. Quicken vs. Quickbooks vs. Peachtree vs. MYOB vs. Netsuite vs. Business Works
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What size accounting system is for you? Your choices include: paper and pencil, one-write systems, spreadsheets, Quicken, Quickbooks, Peachtree, MYOB, Netsuite, and Business Works
For small business entrepreneurs selecting the right "size" accounting system is important. The wrong size shoes can give you blisters; the wrong size accounting system can be more painful than any blisters you ever had.
Let me go from the very simple (small businesses) to the complex (larger businesses).
Paper and Pencil
Paper and pencil still works! If you have a small business and you have fear of the computer, paper and pencil is for you.
It is hard to find any blogs on this topic; I have not written one because I assume that people who like this method don't read blogs.
The important thing is that there is a disbursement journal, which is a spreadsheet which categorizes expenditures.
A cash receipts journal is needed to summarize deposit.
There should be some place where the two journals are tied into the checkbook; the checkbook balance has to be reconciled to the bank.
There are great one-write systems that have a carbon strip on the check. When you write the check, it is automatically copies in the disbursement journal. These systems are still popular today.
I believe that the following is the most popular:
There are generic systems which you can find by searching the Internet; these may be a little less expensive than Safeguard- Mcbee; I usually recommend Sageguard- Mcbee because I find the service to to worth the extra cost.
If an experienced bookkeeper wants to keep your books using one of these methods, don't force them to use a computer.
Spreadsheet
For a very small business a spreadsheet program is all that is needed. Write checks by hand and enter them on a spreadsheet. Use the sort function to categorize them.
A computerized general ledger package really is just a big sort program. It takes the data that was entered and sorts it by account; this is called the general ledger. The trial balance is just a listing of the sorted account totals and the financial statements are just the trial balances totaled and separated into balance sheet and profit and loss. You can do this faster yourself by using a spreadsheet program.
The shortcomings of this system is that it does not write checks, track inventory, maintain accounts receivable detail, or record accounts payable. This works for the small cash business and for analyzing transactions at year end when there was not a system in place during the year.
The advantages are: (1.) it is very fast to learn, (2.) data entry is very quick and easy, and (3.) It costs next to nothing.
I wrote two blogs on the topic; the first is short and gives the reader an idea of how this works:
The second blog goes into great detail:
Quicken
If you have a small business and you want your checks to look professional, Quicken is for you!
Often entrepreneurs who are starting a business already know Quicken because they used is for their personal accounting. It is much faster to learn than Quickbooks.
The disadvantages of Quicken are that it does not track inventory, receivables or payables. It work great with small cash business and some small accrual businesses.
The below link details how to use Quicken
Quickbooks, Peachtree etc.
Quickbooks and Peachtree and similar programs are amazing! They only cost a few hundred dollars; I can remember when simple general ledger programs cost tens of thousands of dollars.
The author of the following blog lists five good programs:
Quickbooks seems to have the largest share of the market. So if you are just starting, you may want to use Quickbooks because their future seems bright. If you are already using one of the others, I don't see any reason to switch to Quickbooks.
These programs do it all for most small and medium size businesses. Inventory costing can be rather unique in different industries and companies. If you have complex inventory costing issues, you need a good consultant to study what works best for you. Manufactures have the biggest problem because they have to track labor throughout the production process.
Several of these packages come tailored for different businesses. Once you have concluded that you are the right size for a general ledger package you have to pick the correct package.
The link below can be helpful in selecting the right package:
The following blog is must reading. It deals with mistakes small business owners make when using Quickbooks:
The following link contains a good discussion of when Quickbooks will not work.
Larger Businesses
This hub is not intended to cover larger businesses. If you have inventory, accounts receivable, and accounts payable and your sales are approaching $10 million, you need a consultant to recommend what is best for you.
