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If your accountant surprised you this tax season with a few disturbing tidbits about your numbers, it probably wasn't the first time. But with the past year of corporate scandals bringing billion-dollar companies to their knees, most business owners are realizing that not having a handle on the company's financial inner workings can lead to disastrous consequences for companies both big and small.
For most entrepreneurs, accounting is hardly a favorite task. According to an August 2002 Greenfield Online survey, one-third of small-business owners find accounting to be the most intimidating part of managing their businesses-not surprising, given that more than half reported having no formal accounting training at all.
That's where automating properly can make a huge difference, and the latest versions of the most popular software can vastly improve your accounting IQ. The new version of Intuit's Quickbooks Pro ($300 or $180 for upgrade; http://quickbooks.intuit.com), for example, allows business owners to restrict access to parts of the program using a password system. It also lets you turn on an audit trail, which records changes to any financial transactions as well as who made the change. That's a key improvement, says Kevin Pianko, audit partner with accounting and advisory firm Eisner LLPin New York City. "In the past, you've been able to make adjustments to historical data," he says. "Obviously, that impedes the integrity of the data, which makes it useless to someone running a business."
Microsoft's Small Business Manager 7.0 ($995 for single user or $2,495 for up to five concurrent users; www. microsoft.com/businesssolutions) includes a cash-flow calendar to help businesses see on a daily basis the expected cash inflow and outflow. You can set it up to tell you which customers are not paying on time and why your balances may have fallen below what you expected them to be, says Karen Engel, lead global product manager for Microsoft Business Solutions Small Business Manager.
Peachtree's 2003 upgrade to its Complete Accounting software ($300 or $220 for upgrade; www. peachtree.com) offers a Daily Register Report, which shows daily transaction summaries and lets you drill down to a detailed report. Peachtree also improved its reporting tool by offering Crystal Reports for Peachtree as an add-on module for customized, detailed financial reports.
Because accounting soft-ware has grown so sophisticated, you must do more than meet with a sales rep or view a live demo if you're shopping for a new package, advises Sheldon Needle, president of Rockville, Maryland-based CTS Inc.and editor of the CTS Guide to Small Business Accounting Software. "You have to do what we call a 'scripted demo,'" says Needle, where you enter your data and run through test scenarios specific to your business's transactions. "You need to know what happens if you post something wrong or how you edit standing orders." That may be time-consuming on the front end, but if you buy the wrong software, it will be more costly later. "There's no such thing as a throwaway solution," says Needle. You may spend $499 on software, he says, "but you'll spend $49,000 of people's time trying to get it to work."
One way to avoid that problem is to hire an IT professional to examine your system and business needs and tell you whether you even need to upgrade, says Pianko, whose firm does such evaluations as a free service to new clients. "Rather than scrapping the system and spending another $50,000 to $75,000 to bring a new system in, [experts might say] why not look at a Crystal Report writer or an upgraded module to your software package that might cost you anywhere from $2,000 to $7,000 and get a higher return on your investment?"
Getting an expert opinion can be a money-saving move for small-business owners who would prefer to spend a lot more time keeping up on the latest developments in their industries than on the latest in software. "If we're not up on the newest software," notes Pianko, "we'll be out of business tomorrow."
C.J. Princeis executive editor of CEO Magazine.