Financial record systems range from a box to a complete accounting department with computerized databases.
The Shoebox System is a longstanding term given to the collector box method where the very small business operator throws all documents related to money transactions into a box and once a year takes the contents to a bookkeeper or accountant for preparing financial statements. Once a common practice it's rarely used today.
The Classified Box is an advanced version of the Shoebox. This could be a tote box with file folders for separating such documents as bank statements, cheque stubs, deposit books, cash receipts, credit card slips and statements, work orders, etc. This is toted to a bookkeeper or accountant for statement preparation. The independent (stubborn) owner/manager will still use this upon the insistence of the accountant. The sorting saves time and accounting charges. The source documents are input to the accountants preferred computerized system.
The Spreadsheet method is ideal for a simple operation with very few revenue and expense classifications. If you can follow a financial statement layout, you can produce your statements from the totals at the bottom of each column. All you need is a little time to periodically load data from your Shoebox and enough savvy to setup and alter a spreadsheet.
A Bookkeeper could be a person employed on a full-time or part-time basis located in your office. The function could be contracted out to a service or freelance person. Equipment and software used ranges from manual to computerized accounting systems producing daily, weekly, monthly or annual statements. This person may be capable of producing management analyses, budget controls or other reports extracted from source documents. A bookkeeper involves engaging an extra person and all that entails. When you hire an extra hand there's a person attached.
Accounting software that can be installed on your personal computer and interfaced with by following a small simplified manual or Help Menu. Almost all have audit trails that allow them to be recognized by many tax and regulating authorities. These programs receive your input of transactions and produce reports and financial statements. If you're not computer shy it's the most common method for small businesses today.
Integrated database is a computerized system that can be accessed by one or more persons. The systems can be programmed on a relational basis so transactions in different functions (sales, manufacturing, accounts payable and receivable, inventory control, budgeting, etc.) specific to your business involve one single input that is captured by accounting and other departments. Programmers can design any report or statement to your specifications. This can be accomplished on one or two PC computers.
Accounting department comprising some of the above systems with people fulfilling one or more functions such as an Accounts Receivable clerk.
Your selection depends on the nature of your day-to-day business, the operation costs and the statements required.
An immigrant form Europe with very little language facility began washing windows in a large metropolitan city. His business grew to include a large crew of fellow immigrants.
Whenever someone asked for information about his business he would lean over to remove his large cap. Inside was a stack of documents filed chronologically from the top layer. His fingers would walk through the layers until he found the requested information. He appeared like a street beggar with a place-holding finger in his upturned cap as he waited for the document to be returned to its proper place.
When his sons graduated from B-School they developed the business into a nationwide cleaning service for high-rise office buildings. One day I was visiting one of the sons in the home office. As he was showing his latest installation of a huge mainframe computer system his father shuffled up, still wearing that peaked cloth hat. His son told him of some problems with the cleaners in a particular building. Father muttered some indiscernible words and shuffled away. My friend explained how valuable he was as a trouble shooter concluding with, "That's the last I'll hear of that problem."
On my visits to our friends' house we would invariably see the teenaged son at his computer in a room off the entrance.
On a few occasions I would glance at his screen to see some strange programs or some complex programming list. No great surprise – both parents were quite intelligent.
When he completed high school and entered a computer course at the local university I asked him if he would be interested in doing some work for me.
His first assignment was to construct the accounting module of a planned integrated relational database. It was to be programmed in a computer language I could understand and could perform alterations after he left university. He sat at one of our work stations about eight hours a week pecking away at the keyboard. After several months he showed the first draft of a completed module.
I noted a few superficial misplacement of accounts on the financial statements. He said, "If I had been able to find my accounting text, I wouldn't have made that mistake." He had designed a module complete with journals, ledgers, chart of accounts, search screens, statements and connection points for other modules – ALL FROM EXISTING KNOWLEDGE IN HIS HEAD gained during a high school accounting course.
He led us to the discover the smart young people with little or no experience we now call Wizards, valuable contributions to our operation.
Stories from members will add great value to these maxims
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