Getting Started in Small Business for Dummies

Question: Discuss about the Getting Started in Small Business for Dummies. Answer: Introduction The activities such as data collection, recording the transactions in the books, and preparation of the financial statements were used to be done manually when the automated accounting systems were not developed. With the increased business complexities, it was perceived difficult to maintain the accounting records manually and thus, the automated accounting systems were developed (Gelinas, Dull, Wheeler, 2014). Today, there are many accounting software programs being developed, among them MYOB is the one that is popular all around the world. MYOB provides solution to the problems of manual accounting system by automating the business processes such as accounting, financial reporting, and human resource functions. MYOB helps in integrated the core business function and make them work on real time basis (Curtis, 2012). In this context, the report presented here focuses on identifying the problems with the manual system being used by I SEE Company and provides solution to those problem s. Summary Table: Difficulties/Inefficiencies in Manual System and Benefits of MYOB S. No. Before MYOB (Manual System) Difficulties/Inefficiencies Benefits of MYOB 1. The booking process was time consuming Booking process became speedy (MYOB, 2017). 2. The calculations were prone to mistakes The calculations became accurate (MYOB, 2017). 3. The integration between different departments such as accounting and sales was missing or ineffective The integration between different departments such as sales, HR, and accounting became effective (MYOB, 2017). 4. The financial information could not be extracted on a real time basis The extraction of financial information became on a real time basis (MYOB, 2017). Economic Transactions in Small Business The small business would have simple economic transitions related to purchase and sales of goods and assets like office, furniture, and store items etc. Further, the economic transactions related to expense payments such as rent, salary, and utility bills will also be there in the small business. The complex transactions related to financial instruments might not be there in the small business. However, the simple economic transactions also become complex when the volume of transactions increases. With the increase in the size of business, the volume of transactions increases which makes the accounting and booking process complex appealing for automation of the processes (Taylor, 2003). In the current case of I SEE Company, there were not much problems when the company was operating with one store. However, as soon as, the company expanded business by opening three new stores, the problems in handing the business affairs started creeping in. Benefits of Using an Online Accounting Software Tool Implementing the use of online accounting software tool helps in automating the essential functions and business processes of a firm. The business processes related to bookkeeping, financial reporting, sales and marketing, human resource and administration are automated by implementing the use of online accounting software. The automation of the business processes is advantageous as it leads to speedy and accurate working (Siddiqui, 2011). The activities such as invoicing, journalizing the transitions, preparing income statement and balance sheet, budget forecasts, costing estimations, all become effective and less time consuming. Further, the overall managerial decision making process is also improved with the use of online accounting software. The information needs of the management can be accomplished on a real time basis in an effective manner through the use of online accounting software (Siddiqui, 2011). Problems Faced by Lydia and Sam in manual Accounting System Lydia and Sam manages a business of small sized business in the name of I SEE Company. I SEE engages in the business of purchase and sale of eyewear and eye care products. The company was running its business through one store till now, but looking at the increased demand, it has expanded by owning three more stores in the local area. The problem in front of Lydia and Sam is that they use manual accounting system and due to increase in business volume, it is proving to be inefficient and ineffective. With the use of manual accounting system, Lydia and Sam are not able to record the financial transactions on time basis. Further, they are also facing problems of inaccuracy in their work of transaction recording. Apart from this, the accounting records of each store are maintained separately leading to additional work of consolidation. Further, there is no integration of the accounting and bookkeeping processes with the other business processes such as stock maintenance, sales and marke ting. This is leading to delay in information extraction for different purposes like placing purchase orders and stock levels. Due to non availability of timely information, the problems are encountered in maintaining the stock levels in the cost effective manner. Use of MYOB in Recording Economic Transactions MYOB accounting system provides customer friendly solution to the bookkeeping and financial reporting related problems. In particular MYOB is considered to be the most useful accounting software for the small and medium sized business (MYOB, 2017). The accounting process in manual system is very time consuming because it involves many steps to be carried out manually. However, the company can use MYOB accounting software to perform multiple tasks at one time. The use of MYOB is demonstrated in the following three economic transactions to be undertaken by I SEE Company: Economic Transaction-1: Purchase of Material The company purchase material from the suppliers, which requires journal entry to record purchase and then posting the transaction to the purchase ledger, supplier ledger, and stock ledger. The company can perform the task of journal entry and posting to ledgers simultaneously by using MYOB. The accountant needs to enter the journal entry only and rest of the work i.e. posting to ledgers, updating the control accounts, trial balance, income statement, and balance sheet will automatically be done. Further, the stock balance would also be updated (MYOB, 2010). At the time of sale of goods, MYOB first can be used in preparing the invoice. Then after that journal entry to debit the customer account and credit the sales account would be made using accounting codes in MYOB. Further, the rest of tasks such as posting to ledgers and control accounts, update in trial balance, income statement, and balance sheet would automatically be made. Further, MYOB will also update the stock account (MYOB, 2010). The calculation of payroll can be done automatically in MYOB by putting the basic data such as wages rates and hour worked etc. Further, payroll taxes would also get adjusted using MYOB (MYOB, 2010). Limitations or Risks in Implementing MYOB First of all implementing MYOB in I SEE would be a challenging task because it would bring changes in the processes within the company. Generally, employees are found resist to change, thus, managing that change adequately and persuading the employees to adopt the changes would the biggest challenge. Further, the company would be required to arrange IT infrastructure to implement MYOB because till now they are working with manual system (Fick and Sprague, 2013). Arranging the IT hardware and software resources would also be a challenging task for the management of the company. Further, there are certain limitations of MYOB that the company will have to face as listed below: Skilled and trained Staff is required to operate MYOB. MYOB increases the cost of the company that may reduce the profits initially (Youraccountant, 2017). MYOB is suitable to the small and medium sized businesses only. As the size of business enhances the utility of MYOB decreases. It is the fact that advent of the information technology has brought significant positive changes in every sphere of life, but at the same time, it has also given rise many risks. Using the automated accounting systems is advantageous to the business in many ways, but it exposes the business to the risk of data theft and manipulations (Anthony, 2007). Thus, there exists a risk of information loss if the computerized information system is used for accounting and maintaining records. The Company I SEE will be required to have in place stringent mechanism to prevent the data from unauthorized access. Further, the risk of manipulations in the books of accounts has also increased due to the use of computerized accounting environment. It is easier to change the data in the computer systems as compared to the manual system, thus, it increases the risk of manipulations in the financial statements (Anthony, 2007). Conclusion The discussion in this report revolves around the use of computerized accounting systems over the manual accounting systems. From the discussion, it can be observed that the manual accounting system creates many problems when the size of business increases. The increase in the size of business increases the complexities in accounting processes. Thus, switching to the computerized accounting systems is necessary to make the processes effective and efficient. There are many advantages of using computer based accounting system like MYOB. The bookkeeping and financial reporting process becomes speedier and accurate that increases the employees efficiency. However, the organization has to face challenges in implementing the computer based accounting system such as managing the change and cost effectiveness. Further, there will be requirement to protect the data from unauthorized access. References Anthony. 2007. Accounting - Text Cases 12E. Tata McGraw-Hill Education. Curtis, V. 2012. Getting Started in Small Business for Dummies. John Wiley Sons. Fick, G. and Sprague, R.H. 2013. Decision Support Systems: Issues and Challenges: Proceedings of an International Task Force Meeting June 23-25, 1980. Elsevier. Gelinas, U.J., Dull, R.B., Wheeler, P. 2014. Accounting Information Systems. Cengage Learning. MYOB. 2010. User Guide. [Online]. Available at: https://www.myob.com/content/dam/myob-redesign/nz/docs/NZ_PremEnt_UserGuide.pdf [Accessed on: 23 March 2017]. MYOB. 2017. 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