Where Do I Record This Information?

Whether you use a manual accounting system or a computerized accounting system, the following information applies. The only difference is that with a computerized system, much of the actual debits and credits are done in the background behind the scenes and may be transparent to you. It's important, however, that you first get a solid understanding of the mechanics of book­keeping so that you will be able to troubleshoot any out-of-balance or other annoying problems.

Computerized bookkeeping systems

If you go into any office supply store, you will find many accounting packages for small businesses. Three of the largest international players in the small business software arena are MYOB (Mind Your Own Business), QuickBooks, and Simply Accounting. There are dozens of others, each with benefits and drawbacks, but these three are the big ones. How do you know which will be the best for your business?

There are a few things you can do to minimize the risk of choosing a program that doesn't meet your needs:

• Read the back of the software box to learn about the main features of each program.

• Talk to other business owners in your industry. Some software works better for certain industries than for others.

• Talk to your accountant. Accountants are often familiar with the benefits and downfalls of many of the popular programs. However, make sure that your accountant is familiar with multiple systems; people sometimes simply recommend the only system with which they are familiar.

• Try demonstration versions. Go onto each software developer's Web site. Many developers have demo versions that you can try, or at least have screen shots of the program's main features. This information will give you a feel for what the program does, before you invest in it.

• Make sure that you understand whether or not the program will require you to upgrade every year. Some of the popular programs require that you keep current with the new payroll tables (which they sell you every six months to a year) or other features. Other programs will allow you to override outdated functionality. Be certain that you know how much upgrades will cost you so that you have no surprises later.

• Make sure that the company that produces the software is large enough and stable enough to be around five years from now. You do not want to discover that you have tracked all your business transactions in a program that no longer exists and which cannot be exported to another program. Manual conversion can be costly.

The main drawback of computerized systems is the cost. Not only do you have to purchase the software program (and perhaps upgrade frequently), but you also need to make sure that you have an adequate computer system and a printer to print out your reports.