Making sense of your dollars; how to pick the best personal finance or accounting software to keep the books - includes related articles on functions of an accounting system; pros and cons of bookkeeping systems; bookkeeping and accounting software - Buyers Guide - Tutorial

Home Office Computing, Nov, 1993 by Linda Stern

How to Pick the Best Personal Finance or Accounting Software To Keep the Books

There rarely are "books," of course, in modern bookkeeping. Personal computers and a sea of software have replaced the leather-bound ledgers, manila cards, and one-write systems that businesses used even 10 years ago. Soon they will be relics, living on, like slide rules, as memories of a time gone by.

"There are no new companies starting out that keep their records purely on paper," flatly states Joel Levy, a Manhattan accounting and computer consultant who helps businesses set up financial-reporting systems. Unfortunately, he's wrong. Up to 40 percent of small businesses don't use computers. And while many of them undoubtedly have their books done by someone who does use a computer, there are still some holdouts.

Perhaps these businesses are overwhelmed. Levy's clients and the rest of us grapple with a daunting array of accounting choices. The software shelves are stretched to overcapacity with bookkeeping products that all seem to do slightly different things in slightly different ways. For those of us who are not trained accountants, even knowing what you want your program to do can be a tough first step.

Know, at least, that you're not making a once-in-a-life-time decision. Your bookkeeping system is bound to change as your business does. Many of the business owners interviewed for this story have changed the way that they keep their books more than once, and yet they still find themselves on a quest for profit-and-loss perfection.

Such constant switching carries disadvantages: Unless you can get a new program to seamlessly import data from your last program, you might end up losing your institutional memory or rekeying a lot of details, which takes time and expands the possibilities for error. On the other hand, no one program fits any business forever, as both the businesses and the programs change rapidly. It's not worth using high-end, complex, and time-consuming software if your needs are simple. And it's even worse to squeeze a financially complex business into a bare-bones checkbook program.

Perhaps the coming years will bring consolidation. But for now, know that there are almost as many software solutions as there are small businesses. Here, offered in the shop-at-home spirit, are a few examples of what companies are doing to keep their books.

THE SPREADSHEET SOLUTION

Debra Goldentyer and Mark Schaeffer are partners in marriage, business, and budgets in their Oakland, California, home. "I keep the books, he sends the bills, I get the checks," explain Goldentyer. And he writes the checks, she gets the receipts, he sees the reports.

Their corporate video-production business is not a financially complicated one; both their sales and purchases tend to be big ticket, so they don't have a high volume of transactions. "Maybe we have four or five invoices out at any one time," says Goldentyer, who devised a system that is as simple and direct as her business.

Goldentyer set up a Lotus 1-2-3 spreadsheet and four paper files--accounts payable, accounts receivable, business expenses, and business income. Schaeffer keeps an invoice form using 1-2-3. When he sends an invoice, he gives a copy to Goldentyer, who puts it in her accounts receivable file. All other bills and receipts go into those paper files; quarterly, "or when I'm bored or need a break from the creative work," Goldentyer enters the income and expenses into her spreadsheet.

She tracks each expense using four columns on the spreadsheet for date, description, amount, and tax category expense code. Off to the right on the spreadsheet are 12 more columns that correspond to those codes: one column for each type of expense, such as supplies or equipment. When Goldentyer enters a new expense by date, description, amount, and code, the spreadsheet automatically posts the expense to the correct column by category code and then sums each category automatically. So at tax time, all she has to do is print ot a category summary report for her accountant, who does the couple's taxes.

That's about all Goldentyer asks of her system. It consumes about four hours a month, works out of a program she and Schaeffer both are comfortable with, and gives regular bottom-line reports of how the company is doing. "If we were to add employees or incorporate, I'd look for something a little more sophisticated," she concedes.

LISTEN TO YOUR CPA

Adam and Sara Viener are both 24. They recently quit their jobs to start a computer bulletin board system from their York, Pennsylvania, home. They were learning about everything all at once when they went to the accountants Adam's father uses and asked about setting up a financial system.

"They said they would give us a discount if we used Quicken, and so we do," says Adam. The Vieners' accountant can import their data directly from Quicken into his software; he also uses the year-end report that Quicken generates.

Even though Quicken is a basic checkbook program (for DOS, Windows, or the Mac) that any people use to track their personal finances, it also offers a list of preset but customizable categories for small businesses, including such obvious items as supplies or rent. Adam added a few categories specific to his business, such as subscriptions and online services.