by Marnie Pehrson
This is an interview I conducted with Ellen DePasquale, a nationally recognized expert in small business financial automation and founder of Small Office Success.
Q: What is the most common mistake that small businesses make when purchasing accounting software?
A: The most common mistake is purchasing the software on someone else's recommendation without taking the time to evaluate the needs of your business.
There are several popular small business accounting programs that repeatedly receive *Editor's Choice* awards in the computer magazines. Before running out and buying that software, the small business owner needs to understand how that software was judged, and what their business needs to obtain from the software. For example, we all know that Intuit's QuickBooks is the best selling small business accounting software. It is a great software program and offers good functionality. It is easy to setup and use which is why it is so popular. However, it lacks good inventory functions so it would not be good for a retail company, or even a handmade crafts business that required heavy inventory controls. On the other hand, QuickBooks Pro offers good time and billing features, which makes it a program worth a look for service-oriented businesses.
Q. At what point in your business growth cycle is it wise to hire an outside accountant?
A. My advice is to obtain an accountant as soon as you can afford one. An accountant is a valuable asset to a small business because s/he offers experience and may help a small business grow around some of the growing pains it would have encountered without the accountant's assistance. Accountants do more than reconcile the checkbook. A good accountant will help a client's business grow through financial advice and business strategies.
Q. What are the benefits of incorporation? What must a small business do to incorporate?
A. A small business should weigh incorporating very carefully. Two important issues to consider are liability and taxes. In NYC, corporate taxes are more complicated to deal with than unincorporated taxes. Also, if you have a sole proprietorship, and you do the work yourself, then you are still liable -- personally -- for any problems with your work, not the corporation. It is best to seek the advice of an accountant on this issue, or at least do some extensive homework on the Internet.
Q. What is the best accounting software for a consulting firm?
A. The *best* accounting software is the one that fits the needs of the business. Not all consulting firms are operated the same way, but there are standards in the industry that should be included in the software. Since consulting is a service-oriented business, software that efficiently tracks time is important. The software should also produce *professional* invoices and group transactions by job/project. Programs to consider include QuickBooks Pro, Peachtree Complete Accounting for Windows Plus Time and Billing and Timeslips.
Q. What's the best accounting software for a retailer of computer hardware/software?
A. Again, the *best* is the one that fits the needs of the business. Retail businesses, if they have a physical storefront will need a *point of sale* (POS) system that ties into the cash register and a bar coding system. If they have a *virtual* storefront, then POS is not necessary.
Retail businesses also need good inventory features that include reorder levels and backorder tracking. Another requirement is an invoicing program that can handle separate ship to and bill to addresses. The complexity of these features depends on the individual business. Cougar Mountain has a POS module that ties into their accounting software, but most POS software is stand-alone. MYOB, Proven Edge Professional Edition, BusinessWorks and three different Peachtree programs will all handle the inventory and shipping requirements.
Q. What are some ways that you can qualify your client's credit worthiness before doing business with them?
A. A small business extending credit should develop their own credit checking procedure. Their clients should fill out a credit application that includes references. Of course, good credit references are never a guarantee that this client will pay all of their bills on time, but they do lower the risks. Find out the credit limit, how well they pay and how often they buy. Other available information is what kind of balance they have in the bank. A bank will give you an answer such as *low five figures* so you can get an idea of how much cash they have on hand. Also, check with the local Better Business Bureau to see if anyone has filed a grievance about your client. Lastly, you may want the initial sale to be cash and then offer a small credit limit to start the ball rolling.
Q. What are some effective accounts receivable collection practices?
A. The best practice is to stay on top of your receivables. You need to know when a client is late and contact them immediately. Stay professional and be very nice, but firm to your clients. You have a higher chance of getting paid in full within the first 30 days than if you wait any longer. And the longer you wait the worse your chances of getting paid at all.
In most cases, it is an oversight, or a backup of paperwork. Offer to resend the invoice if necessary. Once you tolerate a late payment you are setting a precedent for future collections struggles. Make sure your clients know you expect them to pay promptly and most of them will.
If you want information about going into a legal battle with a client, check out the horror story on my site at www.smallofficesuccess.com/soscreditstory.html. This is a long-winded story and takes a few minutes to load, but it is very enlightening.
References
* SOS Financial Journal - www.smallofficesuccess.com/sosjournal.htm has many links to valuable small business financial sites.
* BizTalk (www.biztalk.com/bizfinance.shtml),
* Quicken.com,
* SBA (http://www.sba.gov/financing).
Founder of Small Office Success, a small business financial advice and information service company, Ellen DePasquale is a nationally recognized expert in small business financial automation. She designs and publishes the Small Office Success Financial Journal (www.smallofficesuccess.com/sosjournal.htm), an Internet E-zine that includes original content and links to additional small business financial information. She has also written and published a series of *how to* booklets on small business financial automation.
Ms. DePasquale may be contacted by phone at 718-217-4522 or fax at 718-217-4394 or e-mail at ellend@smallofficesuccess.com .
Marnie Pehrson is an author, creator of www.IdeaMarketers.com, www.LocateACoach.com, www.SheLovesGod.com, www.BelieversAtWork.com and more. She is the author of inspirational books like Lord, Are You Sure? and historical fiction such as The Patriot Wore Petticoats. She also helps people earn money from home. For more information on her projects, visit http://www.pwgroup.com.
Marnie Pehrson may be contacted at http://www.MarniePehrson.com or marnie@pwgroup.com
