Starting a business is a heady time with many things happening so fast that systems get thrown together out of necessity rather than careful planning. All too soon, they become unwieldy. But who has time to stop and change now?? The good news is that there is a Panama Canal on your timeline where its a whole lot easier to cross into a better system.
The start of your accounting year is the best time to upgrade your accounting system.
Why? A business owner may notice no perceptible change from trading on the last day of their accounting period to the first day of their new accounting year. Quotes and invoices still need generating, and outgoings still need recording. From the business owner’s point of view, it will most likely pass by entirely unnoticed. From your accountant’s and accounting system’s point of view, however, this is a key date where a lot of things get ‘closed off’ . Changing systems at accounting year end reduces the workload considerably. How? Basically if you change your accounting system mid year, you have to do a year end mid year. and then another one at the real year end. And then cobble them together to produce a complete Revenue ready year end for that year. This can prove costly and error prone. Grabbing your chance to change over at actual year end saves you time AND money.
One more advantage: Changing at year end actually gives you more flexibility. What I mean by that is that there is very little initial preparation required to kick off straight away at the start of your new accounting year entering quotes, invoices, purchases, payments etc. You have the ability to fill in the blanks at your leisure over the course of the initial months. Not so when switching mid year. In that case you have to be very precise about the cut off between the old system and the new system to avoid loss or duplication of information leading to incorrect customer / supplier balances and profit and tax calculations.
Example of an accounting system changeover:
Things to note:
So here is your 3 step task list:
Task 1: Get the information below from your old accounting system in spreadsheet or CSV format. The good news is that items 1 to 4 are all you need to get off the starting blocks. Isn’t that easy?
* If you cannot find this easily, a printout of your Trial Balance or at least Profit and Loss will also do as the Chart of Accounts items will be listed there.
Task 2: Gather your bank statements, chequebooks and books. You will not need these immediately, but most likely by the end of your first month, for example, before you send out your first customer statement, or check your supplier balances for payment.
Task 3: You will want to get these items below from your accountants when they are finished with your last year’s accounts. You do not need them straight away to get your system up and running. However the sooner you get them, the easier your next year end will be.
Are you starting to get the shakes and are thinking its all too much trouble?
Think about why you want to change, for example:
Well what are you waiting for? Give it a try now, or suffer on until next year! It’s up to you.