Let's take a brief look at accounting software. Now, in the old days, accounting was all done on paper. You can get accounting books, ledger books, that are lined in a certain way to make accounting easy to record on paper, and still many businesses will continue to record their accounting on paper, but technology, computers, smartphones, and tablets have made recording you accounting and managing your accounting much easier. If you use software, it IS easier. Why? Well, for a number of reasons! It can help identify mistakes before you make those mistakes as you're inputting your double-entry accounting postings. But the most efficient thing about accounting software is that it generates reports instantly, one click of a button and you can have a balance sheet, and income statement of cash flow. You can have your bills and your invoices so it makes generating the financial reports, which are really part of accounting much easier to do, and it does them instantly, whereas on paper you'd have to do it all manually so you definitely want to move to electronic accounting systems. There are various options available. Some people will use spreadsheets and do everything manually in a spreadsheet, which is probably a little bit better than paper but you still have the trouble of generating reports from those spreadsheets You probably want to move to full accounting software. Now accounting software is both simple and a little difficult. It's difficult if you don't understand the fundamentals of accounting, and by taking this course you are going ot understand those fundamentals so it'll be a lot easier for you and once you understand the basics it's pretty easy to navigate and use. What I'm about to show you an example of a software application for accounting. There are many to choose from, but I'm not going to recommend any in this video I'm just going to show you but I want to show you the menu systems and the basics of the software. So I remember the fundamentals of accounting is all about accounts, and the accounts are used to track financial transactions so one of the things that you have to do when you first set up accounting software comes with a predetermined list of accounts. So you can see here there's expenses Bank service charges and freight or shipping or insurance. There's a scrollbar to the top here you can see assets like cash on hand and accounts receivable and liabilities like loans. You can customize these accounts by deleting the ones that you know may not be relevant to your business and that'll help simplify your accounting for you, and you can add new ones that may be more specific to your business. That's the first step is to create your chart of accounts that match your business and these programs all have templates so if you were running a food business they probably have a food business template that you can start with that makes things a little bit easier for you once you have your chart of accounts. There are some setup decisions you have to make as well like the name of your business and so on. You can even connect your banking systems to the accounting software so that it automatically updates certain things. I'm not going to review that because it's a bit more of a complex topic, I'm just going to show you the basics so once you have your accounts they can do things like post transactions to those accounts so you have accounts and then you have business and so on. You can even connect your banking systems to the accounting software so that automatically updates certain things. I'm not gonna review that because it's a bit more of a complex topic, I'm just going ot show you the basics. So once you have your chart of accounts they can do things like post transactions to those accounts. So you have accounts and then you have to post transactions to a particular key, so for example you can add an expense. Let's say I'm gonna click on the expense and I can enter the date of that expense and maybe I'm gonna buy some office supplies. So I type office supplies in description and let's say I spent $50 on office supplies. I can categorize them under different expense accounts. So I probably have in my list of expenses here, let's see...we're going to where we're gonna find office supplies, and this is one of the reasons that you may want to customize and simplify the chart of accounts. It makes it a little bit easier to identify expenses you want to keep. I'm just going to choose this option here, and then it asks me how I am going to pay for that or how I did pay for that in this cash, I'll say cash on hand and then I can record that transaction. I can also bring up a little bit more details about the transaction so if I want to record purchases made from a particular vendor or supplier that I often purchase from, I can set them up as a vendor supplier in the system and then identify every time I purchase from them. That's helpful because it allows you to track how much money you're spending with each particular supplier or vendor. I also have the option of different currencies as well, so if you're doing business in different currencies you can choose a different currency. You can set up taxes so if every time you're making your purchase there's tax and you have to try and government requires businesses to track their taxes. THis is another benefit of using accounting software. You can very easily track the taxes. This is another benefit of using accounting software. You can very easily track the taxes that you're paying on your purchases and in taxes that you're collecting from your customers as well and then make it easy to see how much you owe or how much of a refund you may be due.
So this is an example of posting a transaction, there's other types of transactions you can post. For example, you can post purchases as bills and you may recall we learned the difference between a bill and an invoice. An invoice is something that we would issue and we can see here under sales we can set up invoices and with our accounting software you can actually customize invoices and add your logo and choose colors for your invoice to make it match your particular brand. So you can issue invoices to your customers,and then once your customers pay on those invoices you can go to the payments section here in your accounting system and actually identify the invoice and how the payment was made on that invoice and to keep track of all those payments. If you make purchases we also have the option of bills.
So you know when you receive an invoice from somebody, you purchase from from it's a bill to you, and when you're sending an invoice to a customer to be paid it's an invoice for you, so that's the difference between bills and invoices. You may recall you can generate receipts and record receipts or if you actually have receipts a lot of software nowadays lets you use your smartphone to take pictures of your receipts and keep track of them and so on.
This is the benefit of accounting software. It's all automated, you can use a computer tablet, or a smartphone to actually do your accounting or details of your account reports. There's lots of benefits to using accounting software once you understand the fundamentals of counting and follow the directions, it's pretty simple to set up the software with your accounts, vendors, suppliers, and customers. Then you just keep repeating that process and you know, once you figure it out you'll have very clean accounting which will be very beneficial for your business. Good luck!