Accounting Software for Cash Flow

Cash flow, which lies at the heart of any small business, represents one of the most common reasons for early business failure. So how can a small business keep an extremely close eye on daily credits and debits? How can the business stop spending more cash than it receives and ensure that there is always sufficient cash in the bank? The answer lies in cash flow forecasting.

Cash flow Forecasting

Finding the right accounting software to make this task easier for the small business and to help increase the positive earnings can sometimes be overwhelming. One criterion for choosing good accounting software is to assess the kind of features, the accounting software provides for cash flow forecasting.

Good accounting software should have the ability to accurately, record the flow of money into the business, from the sales or services. Compare this with the money, which flows out through periodic spend, such as monthly expenses. Cash flow forecasting essentially allows you, to plan the future cash requirements of the business. It is an estimate of what cash goes into the bank account, of the business and what cash, goes out of the bank account. The result of the forecast, being the bank balance at the end of each period.

When looking for the right accounting software, one secret is to compare which accounting software is best at managing the gap. The lag between money, that comes into your small business and when, bills are due to be paid. In some cases, the gap could be small like weeks, which helps to improve the business earnings, while in other cases it could be months, which represents a bad position. The key here is to focus on accounting software, which has proactive features.

Some business owners spend valuable time preparing forecasts on spreadsheets, setting up basic templates and entering in figures. This serves to perfect a suitable level of information, without considering whether there is a better way. Creating a cash flow forecast for various purposes can prove tricky, which can sometimes mean cash is just a balancing figure act. A further consideration, is weighing the time spent creating the spreadsheet, with the cost of purchase.

Another consideration, when it comes it comes to functionality of accounting software, is the ability to produce consolidated cash forecasts for multiple departments. Time is often of the essence for many small business owners, so an easy -to-use accounting software, which is flexible and enables the business to quickly get together a cash forecast should be at the top of your agenda. This makes the process of performing a cash flow analysis easier.

Cash Flow Analysis

Accounting software can help a small business owner, better analyse and identify revenue problems using your cash flow statement. Performing a cash flow analysis is probably one of the most important functions for any small business.

The statement identifies where the money, is coming into your business and where you are spending money. It represents the primary source of information for use in the analysis to determine the value of a business. The cash flow statement is also very significant for a small business because it does not include credit accounts, in contrast to the other financial statements.

The right accounting software should comprise of features, which can be used to measure and standardize expenses on a periodic basis, in order to help the business, better identify which areas need more control.

The small business can use accounting software to provide a proper cash analysis, which improves the performance of the business and forms the basis for success. Accounting software can be effective for the cash flow analysis, within three key areas, that form the foundation of the business; core operations, investments and financing. Choosing the right accounting software, which provides an effective model to manage these areas, helps analyse your cash flow better and improve the health of your business.

The accounting software also needs to be able to take into consideration, factors such as inventory position, as well as receivables and payables in order to predict accurate cash flow. When choosing the right accounting software, for the business, to perform cash flow analysis, quick, efficient accounting software makes it cost effective to improving the cash flow of your small business.

Improving Cash Flow

Generating a good cash flow analysis using the right accounting software, enables the small business owner to assess whether the cash going into the business is healthy. Good accounting software enables the small business owner, to easily, generate financial statements help the small business management forecast future financial activities.

The accounting software should have functionality, which will enable the business owner to monitor useful factors, which affect the earnings of the small business. An instance would include monitoring whether there is an excess of products on the inventory or monitoring the business to ensure invoices sent to customers and paid on time.

Another aspect to consider would be the patterns in customer payments and quickly identify potential shortfalls. These aspects may appear small, but overlooked can have a big impact on the earnings of the business. The small business owner needs accounting software, which enables the business to have all the important information required for efficient business planning to hand.

Helpful Tips

The Small Business Software Guide offers the following tips on how to improve cash flow with 3 productive steps the small business can take today by choosing the right accounting software, to make changes for a better future.

Payment Control

This is the first and most important factor when considering cash flow improvements in the small business, invoicing on time and to be paid on time. Look through the list of your existing customers and isolate the slow payers. Contact them to assess the reason for slow payments, their reason could be genuine and will help the business understand, how best to deal with them in the future. Revise the method of payment to make it easier for the customers with different profiles. Another area would be to focus on devising strategies for increasing sales in cash payment areas and increasing prices for slow payers.

Inventory Control

The effective management of the inventory is one of the biggest challenges for a small business, which puts a heavy drain on the cash flow. The inventory represents the cash of the small business, which is tied up and cannot be used until sold. Reducing the inventory leads to an increase in cash available to run the small business. This can be achieved by using accounting software, which works with demand driven functionality.

Purchasing Control

It is important to ensure that the business has established the purchasing terms at the start of the business relationship. Review the purchasing arrangements, where necessary and supplier relationships, to evaluate alternative payment terms. Renegotiate terms where necessary for more flexible terms and take advantage of any offers, which identify potential areas for savings.

Finally, always inform your suppliers and bank at an early stage when “warning signs” start to show.

Points to Keep in Mind When You Compare Accounting Software

Purchasing accounting software represents a major commitment and investment. The first thing to be considered in purchasing accounting software is to determine your budget – how much money are you able to spend on an accounting software package. This will limit your choices, since in general the accounting software with the most capabilities will carry a higher price tag.

Since this is such a very important business decision, you should be sure of the facts and compare accounting software before you make your purchase. You certainly don’t want to buy accounting software and then discover, a few months later, that the software is unable to handle your business as it grows. Nor do you want to be fooled into purchasing cheap software and then discovering that you need to make upgrades to get it to the level of effectiveness your business requires. And of course you wouldn’t want to buy software which comes with little or no support backup.

In researching some of the options available we went to a website which has accounting software comparison of various popular accounting software packages for small businesses, and we learned the following. The most inexpensive software sold for $90, and the most expensive cost $1500. However the three most popular systems were by no means the most expensive, selling for $250 to $300. Most software packages offer the most important accounting capabilities; however it was interesting to see that the most expensive software package did not contain some of the capabilities offered in less expensive software. You might be surprised, however, to learn that there is some excellent, inexpensive accounting software out there designed expressly for small businesses. For example, Access accounting software is both inexpensive yet has a rather complete set of modules including financials, manufacturing and job costing, customer relationship management, POS, ERP, Stock, Business Intelligence, CIS, and payroll capabilities.

Another question to ask is whether the software is user friendly. In order to curtail the downtime involved in training your staff to operate the software, it has to be simple to use in the first place. Check for simplicity regarding initial installation; setting up; and navigation. The next consideration is asking whether the software has all the accounting and reporting modules which your business will need now and in the future as it grows. The basic modules include accounts payable and accounts receivable; and also modules which enable you to easily create and print out reports such as receivables reports, forecast reports, cash flow reports, etc. But it is often wise to invest in a more expensive software package which has expandable features which make for easy adjustment as your business grows, such as adding new product lines or more employees to the payroll.

Product Review DIY Accounting Small Business Accounting Software UK

Accounting Software Strengths

Easy to use by non accountants requiring no previous accounting knowledge and is basically a list of sales and a list of purchases on preset excel spreadsheets. Each workbook is arranged as 12 monthly spreadsheets with preset columns and uses an entry code letter to analyse both sales and expenditure.

Cash and bank spreadsheets are included as optional extras for those businesses that require them with a built in automated bank reconciliation. The sheet is designed to be completed by copying the figures from the bank statement into the bank spreadsheet and the bank reconciliation is achieved by also entering the statement total which is automatically checked against the entries made.

Monthly profit and loss account also includes a financial health check based upon an automated tax forecast to enable businesses to monitor their financial performance. By entering drawings the package then compares the net profit made with the likely tax liability plus the drawings.

Quarterly vat returns are generated for vat registered business and is also suitable for non vat registered business. To produce a vat return clients simply go to the vat file and select the quarter end date from a drop down menu and the figures for the vat return are automatically generated.

The vat calculations can be disabled by non vat registered small businesses by simply changing the standard vat rate from 17.5 to zero making the accounting software suitable for both vat registered and non vat registered businesses.

The accounting package includes a stand alone sales invoice generator which requires invoices generated to be manually input into the sales sheet.

The fixed asset schedule is preset with the capital allowance tax rates to automatically calculate capital allowances when fixed assets are entered. Depreciation is also automatically calculated with preset percentages that can be changed as required.

A major benefit of using this small business bookkeeping software is the templates are arranged in such a way to automatically generate an excel copy of the self assessment tax return. The excel self assessment tax return is arranged in the same layout as the official inland revenue form with the same box numbers making it easy to copy the figures from one to the other for submission.

Accounting Software Weaknesses

The Self-employed accounting software UK is based upon single entry of transactions and does not produce a balance sheet which is an optional requirement for self employed and therefore not a problem for the vast majority of businesses. DIY Accounting actually recommend clients who are self employed and wish to produce a balance sheet to use their Limited Company accounts package which does produce a balance sheet being based not on single entry but on double entry principles. The small business accounting software is suitable for a single tax year, the latest being 2007-08 and does not cater for accounting periods other than April to April. There are benefits in anyone self employed adopting the standard April to April financial year as this avoids tax allowances from two separate years being a feature of the accounts. When used by small businesses using the cash accounting system the bookkeeping entries to the sales and purchase sheets must be entered according to the dates money is paid or received rather than the dates invoices were issued. At the end of the financial year any invoices not yet entered require to be listed to adjust the final profit and loss account figures. This a major disadvantage if using the vat cash accounting scheme rather than the Accounting Software being reviewed.

Very Low Priced

At £12.99 the accounting software is basically available for loose change and will save many businesses the need to employ an accountant potentially saving hundreds of pounds in professional fees. For the financial year 2006-07 the basic package for non vat registered business is available at just £9.99 and the standard accounting software for vat registered small business is £12.99.

Other Features

The product has a stock control feature to monitor any stock losses. The small business accounting software contains a wages interface that fully integrates the DIY Accounting Payroll Software when those files are saved into the same folder as the accounting software files. Being written on excel spreadsheets all transactions are visible and capable of being changed by for example overwriting any errors as opposed to a database system that requires new transactions to be entered to reverse previous entries. The sales and purchase spreadsheets include columns for entering CIS tax deductions and payments and the certificate numbers. The CIS tax being then automatically entered on the self assessment tax return. As the small business accounting software is written on excel spreadsheets then it is essential that users have a version of excel from 1998 onwards installed to use the program. The accounting software also works fine with an Open Source spreadsheet package.

Conclusion: to Buy or not to Buy

Exceptionally good value, very easy to use and produces exactly what every small business requires, automated accounts requiring no bookkeeping skills and no previous accounting experience with the valuable end product of a fully automated self assessment tax return.