When many people start their first small business they are excited and often overlook some key things that will make a difference between your business thriving or struggling. One of the most common areas overlooked is the accounting package that is used to manage the business finances. In this article I will look at five key things you should consider before buying an accounting package.
Top 1. What Business Are You In?
Sounds like a strange question and in away it is but it is actually important to know. For example if you were starting your business to operate on the internet with an eCommerce store, then choosing an accounting package like MYOB would not be as effective as its competitor program Quickbooks.
The reason MYOB would not be the best choice is that there are very few third-party programs that attach MYOB to an eCommerce site. Therefore if you were to use MYOB you would most likely have to manually extract sales from the eCommerce site and re-enter them into the accounting package.
Where as Quickbooks has a number of third party partners that have attachment programs that will connect the accounting program to the eCommerce site and easily share the invoicing and inventory.
Top 2. Ensure What You Choose Works with the Accountants Software
Accountants will generally have a preference to a certain type of accounting program so you need to ensure that you talk to the accountant to find out what they recommend. You should also ask them whether any of their other clients with a similar business to yours, actually uses the accounting program they recommend.
Top 3. Know What Type of Entity You Will Operate
In Australia, we have a number of different entity types, such as sole trader, partnership, company, trust and so forth. Each of these types of entities has their own advantage and disadvantages. You will find that if you are trading as a sole trader or partnership than an accounting program like MYOB is more effective, because it is a relatively straightforward and easy program to use. Where as Quickbooks is a more effective program for large small businesses because of the well developed reporting system.
Top 4. Will You Be Registered for Sales Tax or GST
There are often a number of different versions and types of accounting programs available from a supplier. For example MYOB and Quickbooks have simple versions like my MYOB Cashbook that have limited functionality for certain types of businesses. These types of versions are often great for the first few weeks of operation or for hobby businesses but most people find within a month that they need to upgrade to a full version.
Some of the simple versions don't allow you to be registered for GST and don't track tax effectively and as such you will find that very quickly you will have to buy a new version that does. In the end this will cost you money you didn't need to spend.
Top 5. Is the Accounting Package Right for Your Country
Many accounting packages like Quickbooks, MYOB, Sage have been developed in one country and then modified to suit another. This can have some inherent problems for you and your staff. For example, Quickbooks is written for the United States of America but has been modified for use in Australia. However what we find is that the terminology for the US version can be incompatible for Australia and can cause confusion.
Further to this, I have seen that some of the specific country versions may not calculate tax items like sales tax, GST or Payroll tax appropriately if used in another country. For example, I would never recommend buying Quickbooks from the USA and then trying to use it here in Australia.
The key with buying the right accounting package is to do two key things:
1. Talk to your accountant 2. Talk to other business owners in your line of work.
Doing these two things can save your many years of pain and suffering in your small business.
Chris Le Roy is the Managing Director of the One-on-One Professional Business Training Centre. Our company provides a MYOB courses and Quickbooks courses and can help you in selecting the right version for your business.
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