Using Accounting Software

5. Monitoring Performance

Using accounting software makes it easier to see how well your business is doing overall, and how well individual parts are performing.

5.1 You can establish a monitoring system to show how well each individual area is performing against budget, or against other comparable periods.

• You will be able to identify problem areas and probably pinpoint the reasons for poor performance. For example, if your sales are falling short of forecast, you may be able to trace this back to an underspend on marketing.
• You will also be able to take remedial action sooner, rather than later.

5.2 You can use the software to determine the real performance of each department.

• The software should allow you to break down your costs for different departments, products and individuals. You can match costs with income to determine how much each activity earns you.
• More advanced software will allow you to integrate information from different departments to determine the real costs of a project.
• The software should allow you to measure the worth of a product or division, in terms of its ability to generate cash.For example, it may be worth maintaining a low-profit product with no long-term future if it generates enough cash to enable you to develop other products.

5.3 You can easily get an overview of the key performance indicators for your business through a 'dashboard'.

• This is displayed graphically and easy to understand. It can be made available throughout your company, so all employees understand how the business is performing.

5.4 The software should help you produce management accounts which will enable you to see how well you are doing overall.

• If you produce management accounts monthly, you will have a good idea of how well your company is performing against targets. Some fast-moving companies may want to produce them more often.
• The accounts should cover the latest accounting period, and also show the picture for the year to date.
• The software will enable you to check the performance of each part of the company, and produce a 'profit and loss' account, summarising overall performance. Check that it can handle non-cash items, such as depreciation, and pre-payments and accruals.
• You may use it to produce a cashflow breakdown by division.
• It should also permit you to produce a 'trial balance', totalling all debit and credit balances. It should check for any mismatches.
• You can use it to produce a balance sheet showing your assets and liabilities.

5.5 If you need to do so, the software will permit you to update your budgets and forecasts easily.

• You will be able to feed in the performance to date to amend your forecast for the year.