You need to determine what standards are necessary for you to have a good accounting system, it will help you a lot in business management. Here are detailed instructions.
The accounting system is a grid of numbers that provide feedback about your business. An accounting system is needed for external purposes, to keep track of information that you must include in tax reporting forms. An accounting system is needed for internal purposes, allowing you to assess whether your business model is cost-effective and identify factors that are succeeding or failing. For an accounting system to be said to work properly, it needs to provide useful information organized in a way that can be easily understood.
5 elements that a good accounting system must have #
1. Accuracy #
A good accounting system must be accurate as it is legally required for your company to report financial information to your knowledge. Accuracy is important for internal purposes: the better the information provided, the more effectively you can respond or respond.
Accuracy in accounting systems involves establishing protocols to ensure that all information is collected and recorded into the accounting system. For example, the process of collecting expenses may involve reviewing purchase invoices and bank statements or paying via credit card.
An inaccurate accounting system is an unreliable system that can lead to bad business decisions.
2. Clarity #
A good accounting system presents information clearly, so you can find what you need when you need it, and you can easily understand the information the system tracks as a reflection of your business activities. How is your day.
You need to avoid ambiguity, now you need to add something else to explain the data you have, unless this is important data, you tend to ignore it, and it become a blind spot in your accounting system. Accidents usually happen in blind spots.
3. Being usable #
You need to make a clear distinction between Data and Information.
| What is data? | What is information? |
Data are raw, unorganized facts and details such as numbers, symbols, and descriptions of things. In other words, the data does not carry any particular purpose and by itself has no meaning. Furthermore, data is measured in terms of bits and bytes – which are fundamental units of information in the context of computer storage and processing. | Information is data that has been processed, organized, and structured. It provides context to the data and enables decision making. For example, a customer's sales at a restaurant is data – this data becomes information when a business can determine the most popular or least popular dish. |
The data entered into the accounting system should be linked together, thus creating easy to understand reports by collation and arrangement of the figures in the way required by external reporting regulations or reports. internal data you need with enough data depth to provide you with management information and enable you to make decisions.
You need to avoid having an accounting system that only collects raw data but doesn't provide the information needed for decision making. Low availability means data collection becomes wasteful.
4. Relevance #
A good accounting system must provide really useful information. For example, if you own a shirt factory, your accounting system can provide useful information by keeping track of the amount of time and cost of materials needed to produce each shirt. Shirts.
In addition, the information in your accounting system must correspond to the fields on the tax form that you must file with the local tax authorities. These fields include total revenue, payroll expenses, and total expenses in deductible expense categories like rent and auto expenses.
You need to avoid organizing an accounting system that lacks relevance, as it will bring the risk of gaps between the types of information you disclose.
5. Flexible adaptability #
Your business is a living entity, constantly adapting to opportunities and problems that arise. Your accounting system should reflect these ongoing changes by allowing you to conveniently add, remove, and move instead of having to rebuild from scratch to accommodate the changes.
In fact, it is often the case that businesses will try to use alternative and tolerance measures, although this reduces management efficiency due to increased processing time and increased data risk. Until the costs incurred and the processing time become too great for the benefits of the current accounting system, you are forced to make the decision to replace the current accounting system with a new one. more compatible. This causes a series of major problems such as: Disruption, personnel not used to change, change costs are usually high.
