The end of the fiscal year brings a time of reflection for businesses to not only see how they performed, but also evaluate how they manage financial records. More and more operations are looking at simplifying their financial management with software, like QuickBooks. There are some common questions that arise when making the switch to a new system but addressing those concerns can help simplify your financial records process.
Is it easy to switch my reports between Cash and Accrual basis?
First, what is a cash- or accrual-based report. Cash-based reports include all transactions based on when money is exchanged (i.e. a bill is paid, or a check is deposited). An accrual report would include all transactions when they happen (i.e. when the bill is due, even if it’s not paid). Just because some systems allow you to toggle between cash and accrual reports, it doesn’t guarantee the reports are actual cash- and accrual-based. If you are only entering data on a cash basis, then you won’t be able to generate accrual-based reports. The best thing to remember is how you are entering the data, and set the default report settings as such.
Where does this go?
There will be times that you may have an entry that you just don’t know where it goes. Instead of guessing and trying to remember to ask the accountant later, why not try using an account called “Ask about this”. It is much easier for someone to come in and look at these transactions when they are in one account. This can save your accountant time, which will save you money. Not to mention, you will hopefully remember to ask about these transactions. One caution is you may need more than one of these accounts depending on the type of transaction (income, expense, liability, etc.).
It is also vital to have a good working relationship with your accountant. You are their customers, so be open with them to ensure timely and efficient use of your data and their time.
Can I use a Miscellaneous Category?
The question of categories or accounts called Miscellaneous or “Other” are very common. They do have their purpose in a chart of accounts. One thing to consider, is how much do you use such an account? If you see that Miscellaneous is accounting for more and more of your entries, it is time to review the entries and see if there are some commonalities. It may be time to add an additional account to house some of these transactions.
Sometimes it may be useful to include these accounts as sub-accounts under another account. For example, you could split miscellaneous between direct crop expenses and dairy expenses. Allocating the costs to their appropriate areas benefits various financial record needs: calculating cost of production, cash flow planning, and others.
How to I safeguard my electronic financial data?
Safeguarding financial data is critical, not only for the business and its owners, but all of its employees. Simple things to do are keeping your computer systems and virus-scanning software up to date. Also, having firewall protection if your computer is continually connected to the internet is crucial. When storing backups, it may be a physical location on a flash drive or external hard drive, or some people choose online storage systems. Regardless of method used, be sure there is encryption for security purposes involved.
A second consideration in safeguarding financial records is to limit the number of people accessing the data. Most financial systems currently have the capability to create multiple user accounts, and the ability to restrict level of access for various users. Identify those that need to enter data, and those that just need access to reports and limit their abilities accordingly. This helps reduce potential errors in input or unknown entries from occurring and frustrating other users.
There is great potential in using software to help manage and decipher a business’ financial data. It is important to remember that all systems are slightly different, but there are key concepts agricultural businesses can consider to simplify the process. Safeguarding data, using the chart of accounts properly, identifying transactions that need clarification, all contribute to that simplification.