Software decisions – which cashbook software is best for your business?

For an owner of a small or medium sized business, the days of “shoebox record keeping” are long gone. There are several good quality, low cost accounting packages to suit every kind of business, ranging from simple cashbook systems to Enterprise Resourse Planning (ERP) systems capable of handling not just accounting information, but also human resources, customer relationship management and a wide range of other tasks. Most SME businesses will be looking at the generic, low cost systems that are readily available. Broadly these can be divided between cashbook software, which keeps track of the bank transactions but does not keep track of debtors and creditors, and General Ledger software, which typically has accounts receivable and accounts payable modules and will often also have the capability of keeping track of stock and fixed assets. Most readers will also be aware that there is a slow shift towards internet based or “cloud” software. Today I’ll be looking just at cashbook systems. For my next blog post I will look at the different options for general ledger systems.

Cashbook Systems

Cashbook software is for businesses who just need to categorise the transactions that go through the business bank account and who do not need to use the invoicing or stock functions that a general ledger system typically has. Cashbook software can suit businesses ranging from the very smallest micro business such as a trademe store run as a business on the side, to retail outlets with one or two million dollars in turnover.

The advantages of these systems are that they are not keep track for you of the amounts that your customers owe you, or the amount that your business owes suppliers. Cashbook software usually has very limited reporting. This reporting is only suitable for showing how the business on a cash basis, whereas the IRD and your bank will need to know how your business is going on an accruals.

There are several good examples of cashbook software in the NZ market. The options include offerings from MYOB, Cashmanager, Banklink and Xero as well as several others including the humble Excel spreadsheet. These options can broadly be grouped into two categories, owner managed and accountant managed.

Options like MYOB Cashbook and Cashmanager (as well as the Excel spreadsheet) sit on the business owner’s computer (or server). When the time comes to prepare annual accounts, the owner will send either a backup of the software, or printouts from the software, to their accountant. The accountant will then import that data into their system, where they will make accruals for accounts receivable and accounts payable and make other adjustments.

Bankink and Xero have cashbook products that are available from your accountant. These products sit (in the case of Banklink) on your accountant’s server or, in for Xero, on the internet. Rather than importing bank statement transactions from the bank or entering transactions in manually, Banklink and Xero automatically get data direct from the bank. Of the two, Banklink has the advantage of being slightly cheaper. Xero Cashbook on the other hand costs slightly more but has some key advantages that make it very efficient. The main advantage is that your accountant does not have to move the data from your Xero Cashbook file to complete your annual accounts, but can prepare your accounts using extra functionality that Xero gives to its partnering accountants. Another advantage is that the business owner and the client can look at the same data at the same time, which can help in moving away from a once annually accounting model to a model which includes more regular information flow between the accountant and the business owner.

The right option for you will depend on the volume of transactions that you have and on whether you want to look after the bookkeeping function yourself, or work with your accountant to do this. Here at The Accounting Hub, we are big fans of the efficiencies that can be gained using Xero software and the opportunities for improving information flow that it gives. However, the other software available is also good. The key point is that however small your business is, it is important to have a system for recording your financial information rather than leaving a mess of receipts and bank statements that will have to be tidied up later!

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