Advantages and Disadvantages of Bookkeeping Quicken Business Vs Quickbooks PDF

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Advantages and Disadvantages of Bookkeeping Quicken Business Vs Quickbooks...

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Advantages and Disadvantages of Bookkeeping  Tracking cash flows, billing and lines of credit all relate to bookkeeping.  Bookkeepers must resolve discrepancies occurring in company accounts and facilitate finance-related communication between other staff members to ensure that information is being fully and accurately funneled into the company ledger.  While there are some clear advantages to bookkeeping, the practice has drawbacks that can affect company efficiency and profitability.

Legal Obligation 

One of the advantages to bookkeeping is that you’re meeting a legal obligation to maintain financial reports for your company.

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Businesses aren’t legally permitted to operate “under the table,” so to speak. You must track and document revenue and expenditures in order to pay appropriate taxes each year.

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Not maintaining company books can result in government penalties if you are audited and asked to produce evidence of your company’s business transactions.

Accountability and Transparency 

Another advantage to bookkeeping is accountability and transparency. Bookkeeping creates accountability with customers, since you’re able to look up previous transactions to verify prices or payments made.

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It also creates accountability among business partners, since authorized partners may access the company books to review revenues and expenditures, or to scan for signals that money is being used or reported inappropriately.

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Bookkeeping creates greater transparency; companies can open their books to potential investors interested in documentation of the business’ financial health.

Data 

Bookkeeping creates hard data that business owners can use to make informed decisions about expanding, trimming costs or taking out additional lines of credit.

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Rather than make generalized, subjective opinions about whether the company is “doing well” or “slowing down,” relevant parties can point to upward or downward trends using bottom-line examples and profit tracking.

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Data from bookkeeping can be used to justify closing a store location, hiring an additional employee or expanding to include additional products.

Time  One disadvantage related to bookkeeping is time. Collecting financial records, researching ledger discrepancies and tracking down errors can take hours, even with automated computer software.  It takes time to maintain the books by adding new information, and it also takes time to effectively analyze bookkeeping records in order to make financial decisions.

Cost  Cost is another disadvantage related to bookkeeping. Hiring an external bookkeeping service can be costly for smaller companies, although it may be cheaper than hiring a designated full-time bookkeeper. 

Purchasing bookkeeping software for your company can also be costly, especially since these need to be updated and replaced as newer versions become available.

Inaccuracies 

Another disadvantage to bookkeeping relates to inaccuracies.

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Accidental inaccuracies can still result in lost time and money because they must be identified and corrected. Intentional inaccuracies from untrustworthy employees or business partners can result in “cooked books” that may be viewed

as business fraud or tax evasion by the government. Hiring an auditor to review your bookkeeping records can help identify these problems.

Various Types of Accounting Systems  As a business owner, it's your responsibility to keep track of your finances and pay taxes on time. Depending on your preferences, you can do your own accounting, hire a professional or designate someone in your organization to handle this job.  No matter what option you choose, take the time to familiarize yourself with the various accounting systems out there. Make sure you have a clear understanding of the differences between single-entry systems and double-entry systems in addition to manual and computerized accounting software programs.

Accounting System 

There are different types of accounting systems, and each has distinctive features. However, they all have a common purpose: to manage the financial activities of a business, such as its revenue, expenses and liabilities.

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In this digital age, most accountants use sophisticated systems featuring overdue payment reminders, advanced reporting capabilities, automated data backups, cloud-based services and more.

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Without an accounting system in place, you'd find it difficult to get your books ready for monthly and yearly reporting, keep track of your day-to-day expenses and assess your company's financial performance. Manual calculations are obsolete and prone to human error.

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Computerized accounting systems, on the other hand, are accurate and make everything a lot easier. You or your team will save time and money while preventing costly mistakes.

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These programs can handle all types of accounting information and generate detailed reports. You can use them to calculate the wages paid and payable to employees, record transactions, check credit turnover ratios and process data related to sales, payroll, inventory and other key aspects of your business.

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Some accounting systems are designed for small businesses and freelancers, while others appeal to large enterprises, government agencies or specific industries.

Types of Accounting Software    

Single-entry systems Double-entry systems Manual accounting systems Computerized accounting systems

Manual vs. Computerized Accounting Systems  Computerized systems, on the other hand, record financial transactions electronically and can streamline your operations.  Users can choose to view data in different formats, store it in the cloud and access it on the go. Examples include:  Fresh Books  Zoho Books  FreeAgent  QuickBooks  Xero  ActivityHD

Quicken Business Vs. QuickBooks  Using the right software to manage the finances of your business can simplify everything from paying taxes to recording inventory.  The software you choose for your business should have scalability that allows you to upgrade anytime your business exceeds the capacities of your current software.  A primary benefit of using software from one company such as Intuit the developer of both Quicken and QuickBooks is the ability to upgrade from one software to another seamlessly.

Quicken 

Intuit designed Quicken Home and Business for sole proprietors or owner operators of small businesses.

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This basic business software package is not compatible with businesses that have multiple employees and require a software application with full payroll capacity.

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Quicken Home and Business also allows you to manage both your personal and business financial separately records with a single software application.

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Quicken is more effective than QuickBooks at managing your personal investments and finances. Additionally, Quicken is a simpler program to learn and use than QuickBooks.

Investments  Quicken Home and Business allows you to control your and manage your business and personal investments with detailed information.  The application features the ability to download transactions from your bank, credit card companies and access your investment accounts. 

This also integrates your ability to determine your tax liabilities for gains and loses. Additionally, Intuit recommends Quicken Home and Business for single users.

QuickBooks  Unlike Quicken, QuickBooks features many types of business tools designed to manage varied businesses of different sizes.  QuickBooks allows your business to input debits and credits, prepare cash flow statements, track profits and loses, print checks, track sales tax receipts and payments, create balance sheets and sales invoices with reports.  Intuit also offers different versions of this software depending on the specific needs of your business.

QuickBook Options 

QuickBooks also has many accounting features that make this software application useful for small and medium businesses. Although QuickBooks is more difficult to use than Quicken, Intuit offers free tutorials when you purchase the software that allow you to quickly learn the basic features of this software application. QuickBooks also allows businesses to use either a single or double entry bookkeeping system.

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Additionally, QuickBooks has a greater capability to generate reports than quicken and allows up to five simultaneous users. Further, QuickBooks can prepare estimates for bidding projects, track payroll, and export information to other software applications such as Microsoft Excel.

The Importance of Computers in the Accounting Field  Computers are a fact of everyday life. It is hard to think of a business that does not use a computer.  Computers have made things easier for many in the accounting profession. But there are also areas of concern that the user should be aware of.

Accounting Before Computers  Before the advent of computers, accounting work was manually entered into ledgers. Separate journals were kept for the different accounts, including receivables, accounts payable, inventory records, and so on. It was an expensive, laborious, and slow process.  Later, calculators were used to help with the tabulating of numbers and billings. But the methods were still slow and fraught with errors. Many errors were made simply because of bad penmanship or faulty calculations.

Use of Computers in Accounting  Today businesses run at a breakneck speed. A global business climate demands even faster data processing. Both large and small companies benefit from accounting software programs.

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Computerized spreadsheets allow users to have real-time instant access to general ledger information concerning accounts receivable, accounts payable, inventory levels, purchase order status, sales, and labor costs.

Advantages of Computers  Two advantages computers offer businesses are speed and flexibility. Accounting functions are much easier to complete and require less labor when done by computer.  Repetitive double entry accounting functions are accurate and accomplished quickly and easily. If a manager wants to try out a specific business strategy, such as expanding a production line, he can run quickly run different scenarios using a computer program and analyze his options.

Disadvantages of Computers  While using computers offers speed and ease, there are some disadvantages. Computers are only as good as the information they are given and may not discern errors in input or logic.  Users can easily manipulate computers to embezzle from the company. Accountants need to take steps to protect company data from misuse, damage or hacking.

How to Prepare to Switch From Manual to Computerized Accounting  Switching from manual to computerized accounting is a step-by-step process that can be accomplished easily and efficiently. If it is the end of the fiscal year, you can start with the beginning of the new fiscal year. 

There is no need to input data from prior periods, except for the year-end financial statements. If it is not the end of the year, you need to decide if you

want to wait until the end of the year or input into the system all of the detailed data up to that point in the year.  Research and decide on the computer equipment that you will need for your computerized accounting system. Most PCs today have the capacity for an offthe-shelf accounting package for a small business. Make sure that your computer has a hard drive with several gigabytes of storage space.  As time goes on your computerized records will grow and you want the computer to last a few years. You also will want word processing and spreadsheet programs, as well as Internet and email capability.  Set up your computer equipment and establish your Internet connection. This step is important because all accounting software packages will have online help available if you run into a problem. Also as part of your computer setup establish a means of backing up your files. You should backup your data every day or even more often when you work on something critical.  Files can be easily backed up on portable drives. It is important to realize that an accounting system is a database from which information is retrieved when needed.  Research and decide which accounting software package is best for your business. Most small companies do fine with an out-of-the-box software package, such as QuickBooks or Peachtree.  Set up the software package by following the built-in menus. Establish a chart of accounts for your general ledger. Set up your bank accounts and add any necessary information about your vendors and your customers.  Enter the detailed transaction data necessary to bring the computerized books up to date. You will need to enter the end-of-year financial statements from the prior year as your beginning balances for the current year. Then key in the detailed transaction data for each month of the current year until you are up to date. If it is the end of the year, simply set up the beginning balances for the new year and work forward, entering accounting data as transactions and events occur. You are now operating on a computerized accounting system.  Decide if you want prior year financial statements entered into the system. In order to provide history in the computerized records, you can add the financial statements from prior years. You can do this monthly, quarterly or annually going back several years. There is no need to add the detailed transaction data to the history but there should be a trail going back to the manual records....