Bookkeeping. Recording all money in and out is an important function of your business.
Two of the main ways to accomplish bookkeeping are spreadsheet accounting and computerized accounting. Recording transactions with either option will work. However, one of these choices saves time, improves accuracy, and provides historical and reporting information with ease.
Spreadsheet accounting is when transactions are manually entered into spreadsheet software, such as Excel. Transactions can be recorded individually or grouped together. For instance, if you have sixty transactions for repairs and maintenance in a month, it would definitely be easier to total them in one cell called “repairs and maintenance” rather than having a line item for each transaction. Recording each transaction individually could lead to a large and complicated spreadsheet. Accuracy and reporting when working with a spreadsheet are dependent on how fluent you are with the software. Accuracy is important.
The month-end spreadsheet balances must match the bank account and credit card balances. Discrepancies can be from an incorrectly entered transaction or an incorrect formula. It will take time to find that error. It is useful to use historical information to generate reports that show the financial standing of your business.
Two useful reports are the balance sheet, which shows a standing of what you own and what you owe, and the profit and loss statement, which shows you how much was earned and spent. These reports can be generated from information within the spreadsheet; however, it definitely takes some time and knowledge of the spreadsheet functions to create these reports. Entering details accurately and clearly is what leads to relevant and useful reports. Comparing the prices of similar items purchased by different vendors could lead to cost savings. This information would not be available in the spreadsheet if individual transactions were grouped into one cell. Instead, you would have to review the physical receipts or bank statements to find this information. Obtaining transactional history can be done, but it takes time and has a large margin of error.
Computerized accounting is when transactions are entered into a computer software program, such as Quickbooks. The same information is captured for each transaction: date, vendor name, dollar amount, and expense (what the transaction was for). Transactions could be grouped together, but that would undermine the benefit of utilizing computer software. Accuracy and reporting when working with computerized software are dependent on the information entered for each transaction. A huge timesaving benefit of computerized software is that bank accounts and credit cards can be synced together. When accounts are synced, the individual transactions are automatically uploaded into your software, and the information only needs to be reviewed once to verify the expense. Printing reports using computerized software is quick. Most software programs have a listing of standard reports to choose from and can be created in a few clicks. Quickbooks has numerous standard reports, including reports organized by vendor or expense.
Reports can be filtered with more specific criteria using any of the information entered for each transaction. For instance, a report could be run to see all repairs and maintenance expenses purchased at Lowe’s between January 1st and February 15th. The ease, speed, and flexibility of reporting in computerized software are huge benefits for business owners. Comparing spreadsheet accounting and computerized accounting is simple. Spreadsheet accounting has a high probability of error due to manual entry, manual formulas, and manual reporting of financial information. Entering information takes time and does not easily allow all the information for each transaction to be captured. Reports are manually created using information from certain cells that may or may not be correct. Finding and correcting mistakes takes time.
Computerized accounting software has a low probability of error since each transaction is “touched” only once at the point of entry. It is entered, reviewed, and then saved. This financial information is used to create multiple different reports based on your needs, in just a few clicks. You do not need to worry about incorrect math, as the computer generates the report totals by seamlessly adding up individual transactions.
Having accurate financial information is important for your business. Recorded properly, it will show you where you earn your money, how you spend your money, and how to save money. Make your financial information work easily and efficiently for you. Choose computerized accounting!