Small Business vs Big Business
There are two certainties in life – death and taxes. While both are unavoidable, at least the taxes issue can be managed. But managing taxes, and business finances in general, takes detailed information. Considering how most small businesses get their start in accounting for their business operations, it is not surprising that information gathering becomes one of the most time -consuming and frustrating tasks around tax time.
Fixing the problem from the beginning and keeping a system with the detailed data you need on an ongoing basis is the key to avoiding the rush and to building a business information framework that spans the life of the business entity. In order to understand how to solve the problem, it is important to understand the evolution of business accounting. Not how the concepts or practices have evolved, but how technology has (or has not) been applied to certain problems, and where the gaps are. Just starting out – the business in infancy
The first things a new business owner generally does is get a business license, get a computer, and run down to the discount store to buy a copy of QuickBooks or maybe Microsoft Excel. Now, this business owner isn’t necessarily prepared
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But the focus on the checkbook frequently causes the business to postpone implementing deeper, more beneficial processes. With a focus on the checkbook, the business manages cash by counting payments out and receipts in. But the nature of the payment or the receipt is the true question that must be answered and accounted for. It is surprising how many businesses still keep ledger cards – those manual 3×5’s in a box – where customer and vendor information is kept. It is a simple method, and provides the business a way to keep individual account records.
But the fact that this detail information is not part of an integrated system creates a greater potential for lost or inaccurate data. Further, the greater the volume the more difficult and error-prone managing the information becomes. © InsynQ, Inc. 2005 Page 1 of 5 Appgen Business Software It is at this point that the business seeks to find a more comprehensive means to manage the additional business data. This is another buying decision the business owner must m ake, introducing a new system which can handle the additional activities around accounts receivable, accounts payable, inventory and sales orders, etc.
The business was already keeping track of products or services, customers and vendors. But here we are at a step where new systems and processes must be introduced. A belated effort, this after-the-fact implementation of customer, vendor and item tracking, establishes the means to manage more business activities as part of an integrated system. The difficulty comes in loading the historic information and learning new systems . Depending on volume, the quality of the manually-kept data, etc. , it may be determined that historic transaction details are not to be entered.
So, the business moves forward with a better system for managing business activities and data, but loses the value of the early transaction detail. The next steps – handling volume and growth The business has implemented an accounting system which helps to keep track of customers, vendors, items, and cash. More detailed processes are introduced as the business requirement grows – offering perhaps more specific information on costs of certain products, or summaries of customer purchases or item sales activity.
This data provides a much mo re informed basis for business decision- making, but also impacts the systems as the volume of data to be managed grows. Growth may present itself in many ways – growth in the number of products or services offered, growth in the number of transactions processed regularly, growth in the dollar value of transactions, or growth in the number of employees who need access to the system. All of these areas impact the ability of the system to continue to support the business requirements.
Quite frequently, a certain “density of data” is reached and the current system is not able to efficiently manipulate and manage the volume. Here again is another buying decision. Can the existing system be expanded to handle the additional volume? Or must a new system yet again be introduced? The business process requirements may not have changed, but the earlier choice of systems may cause a forced change simply due to business volume or number of users. The frustrations of changing business systems are compounded the further into the business lifecycle the change comes.