Buyer’s guide to…money-management software – includes related article on software selection – buyers guide

Stephen L. Nelson

Sure, your didn’t go into business to do bookkeeping. But you need to manage your money wisely if you want to make a profit. This buyer’s guide will help you do just that.

First, we’ll review the basic financial-record-keeping needs of small businesses and how you can use money-management software to meet those needs. Then, you’ll get to choose the best money-management package for your business based on descriptions and appraisals of more than two dozen programs for IBM compatibles and the Macintosh.


When you strip away all the clutter, there are just four basic things that you do to manage money in your business: generate forms (including checks and invoices), track income and expenses for tax purposes, keep records of assets and liabilities, and measure business performance and health.

Not every business needs to worry about all four activities when selecting software for bookkeeping; but if you start by thinking about which activities you want to address with a money-management program, you’ll be light-years ahead of the person who trots down to the software store and begins comparing product features. In fact, with a little effort on your part, you should end up with a solution that fits your business rather than one that does too little or too much.

Generate checks and other forms. Printing out checks and other business forms–like invoices and customer statements–is the first activity you’ll want to consider. Whether you need to generate such documents, of course, depends on the specifics of your business. Nearly all businesses write checks to pay bills. Most businesses need to prepare invoices. And there are other common forms as well, such as customer statements and purchase orders.

Why prepare these forms with your computer? There are three basic reasons. The computer typically makes it a lot easier to collect the information you need to put on the form. The computer prints forms a lot faster than you can type or write. And much of the information the computer prints on a form–such as your name and address, the other business’s name and address, and sometimes even the dollar amount–is the same from one time to the next. So your computer can, in effect, reuse with information.

Richard Hicks, a Seattle attorney, decided to use Timeslips III for all three of these reasons. He explained, “Unless I want to spend hours each month manually preparing invoices–something that cuts into my billable time and, therefore, my profits–I have to use my computer and Timeslips.”

Two caveats, however: Some business forms are relatively expensive. For instance, an order of standard personal checks might cost you around $10, but the same quantity of computer checks can easily run $50 or more. And you also have to make sure the checks are compatible with the program.

Track finances for taxes. To really appreciate the time savings you’ll enjoy by using a money-management program for tracking tax-based financial information, consider the alternative: If you don’t use such software, you’ll need to collect income and expense receipts over the year. So, at the end of the year, you’ll segregate the receipts into little piles: one pile for sales receipts, another for supplies receipts, still another for parking receipts, and so on. Then you’ll add up each pile so you can enter the totals on the appropriate line of your income tax return. If that doesn’t sound like your idea of fun, consider this: With the right software, you can turn a task that would otherwise require hours into one that takes only a few minutes.

Don Hughes, a Montana wheat farmer, uses one of the more popular money-management programs, Quicken, to record his farming income and expenses. At the end of the year, he simply prints a report that lists his income and expense totals for each category. Hughes says, “My needs are pretty simple. Essentially, I’m just using Quicken to keep my checkbook. But by doing so, I automatically collect the data I need to do my taxes.” Several of the money-management programs, including Quicken, even let you export data into tax-preparation programs.

Keep records of assets and liabilities. A third activity that many small businesses need to perform is keeping accurate records of assets like customer receivables and inventory and liabilities like payables, loans, and credit-card debts. It shouldn’t be a surprise, but if you have ever-changing lists or balances to track–such as inventory you’re holding or current loan balances–your computer’s computational and data-management power can make the job much easier.

How can you tell if a money-management package performs the detailed record-keeping you need? The best way is to see a demonstration of the program or thumb through the documentation. In general, an accounts-payable module keeps detailed records of how much you owe. An inventory module keeps detailed records of the products you hold for resale. An accounts-receivable module, as mentioned, keeps track of unpaid customer invoices. A purchasing module keeps detailed records of your unfilled purchase orders. A job-cost module keeps detailed records of the costs related to a particular project. Finally, a fixed-assets module keeps detailed records of the assets you depreciate.

Measure business performance and health. So far, you’ve read about the sort of money-management tasks you absolutely have to do. You must, for example, pay your bills. By law, you must track certain income and expense amounts for income taxes. And, as a practical matter, you must keep some record, however crude, of assets like customer receivables and inventory. There is, however, another basic fiscal task: measuring the performance and health of your business. Actually, what you’re really trying to do is answer two questions about your business: How well or poorly amd I doing? and How strong or weak am I?

Traditionally, the way you answer these two questions is by preparing and then reviewing three financial reports: an income statement, a balance sheet, and a cash-flow statement. And, in fact, this is how midsize and large businesses answer these questions. On a monthly basis, the accounting department prepares an income statement that summarizes the sales and expenses for the month, a balance sheet that lists the assets and the liabilities of the business as of the end of the month, and a cash-flow statement that explains why the cash balance changed over the month.

Some businesses even calculate data called financial ratios that quantify certain performance or condition characteristics. There are, for example, business-performance financial ratios that express the relationship between the business’s interest expense and its profits and business-health financial ratios that quantify the relationship between a business’s assets and its debts.



Now, make no mistake, the traditional approach to measuring your financial performance and condition is extremely good. Professional managers, banks, leasing companies, and anyone else who’s sophisticated in business finance look at your operation this way. But it’s probably more than most small businesses want. To construct meaningful financial reports, whoever prepares the reports needs to understand double-entry bookkeeping-debits, credits, and the like. They also need to know generally accepted accounting principles, like accrual accounting and the rules for recognizing revenue. Chances are, unless you’re an accountant, that you will have to hire someone else to do the work.

The irony is that these tasks are usually what the software marketed as “small-business accounting packages” are best at. So, how does all this affect the type of money-management program you select? Well, if you want to use the traditional approach to measuring your business’s performance and health, you’ll want a standard, full-featured accounting package that has a general ledger and supports double-entry bookkeeping. Alternatively, if you want to forgo the benefits of the traditional approach, you don’t want a full-featured accounting package. It’s that simple.

If you choose to forgo the traditional approach, though, you’ll need to find other ways to keep your fingers on the financial pulse of your business. Some accountants and professional managers might sniff about this and call it “flying by the seat of your pants,” but in my opinion you can often find other ways to measure your performance and business health. For example, say you’re a consultant who bills by the hour. You could probably keep pretty close track of how you were doing just by monitoring the hours you work each week. And you could probably gauge your financial health by looking at your bank balance. However, here’s a tip if you go with the seat-of-your-pants approach: Keep your financial affairs as simple as possible. That way, you won’t have complex or tricky transactions muddying things up.

Now that we’ve gone through the basic financial record-keeping needs and benefits for any business, let’s see how to choose the right software that fits your bookkeeping skills and requirements.




Once you’ve spent some time thinking about the four basic activities involved in managing your money, it’s pretty easy to narrow the field of choices down to a handful of programs. There are several ways you could do this, but what we’ve done here is chart a path through the money-management maze by having you answer three questions: What are your bigges money-management tasks? Do you know double-entry bookkeeping? Do you want a low-cost solution? The accompanying chart graphically shows this narrowing-down process, pointing you in the direction of specific software packages. Then, once you’ve made your choices, turn to our reviews.

Step 1

The first step in narrowing the field of choices is to identify your biggest bookkeeping tasks. The chart lists only five choices, so if your biggest task doesn’t appear, pick the most important ones of those listed. After you identify those tasks, follow the arrow from each task to the first branch.

Step 2

At the first branch, you’ll need to make a decision about how you want to measure your business’s financial performance and condition. By definition, standard accounting software requires you to know traditional accounting procedures, such as double-entry bookkeeping. So follow the branch marked “yes” if you want a package that relies on a general ledger and double-entry bookkeeping, or follow the branch marked “no” if you don’t know (or don’t want to learn) standard accounting. After you answer, go to the second branch.

Step 3

As a final differentiating factor, narrow down the field of choices by using a budget. Sure, this is somewhat subjective. But you may need a good money-management program long before you’ve made much money. Rather arbitrarily, I divided the universe of money-management programs into those that retail for $200 or less and those that sell for more than $200. Follow the branch marked “yes” if you want a lower-priced money-management program, or the branch marked “no” if you don’t want to be limited to just inexpensive programs.

A couple of notes on price: Even if you aren’t on a budget, you might not want to rule out the lower-priced packages, because many are just as good as their more costly cousins. Also, the prices listed are suggested retail prices–discounts are available.

Step 4

Review the product descriptions for those programs that appear at the end of one of the paths. Then select the product that best meets your particular requirements in light of the five basic business money-management activities described earlier, remembering to focus on your needs and not the product features. By the way, you’ll notice that money-management programs sometimes appear at the end of more than one path. This isn’t a mistake–some of these programs meet more than one set of criteria. Note, though, that some of the full-featured systems may give you a lot more functionality than you actually need. That may not sound like a real problem, but it can make for a bookkeeping system that’s unwieldy to use in your daily operations.

STEPHEN L. NELSON–a Seattle-based CPA and former senior consultant for Arthur Andersen & Company–provides financial advice and computer-based financial-management services for small businesses. He has written more than a dozen books on small-business accounting and financial management.

COPYRIGHT 1991 Freedom Technology Media Group

COPYRIGHT 2004 Gale Group

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