Accounting General Ledger Management

Small Business Software and GL Account Flexibility

Sep 26, 2009

Choosing accounting software for a business is an important decision. Flexibility with general ledgers is one important aspect for choosing small business software.

Looking for small business management software can be a frustrating endeavor. The accounting requirements from one business to another can have extreme variations. Some of the basic considerations is how it controls financial statements, invoicing, inventory control, account receivables and accounts payables. Another important aspect for any business management software is general ledger (GL) flexibility.

Why is General Ledger Flexibility Important for Accounting Software?

The profit and loss statement, balance sheet and cash flow analysis all start with the GL accounts. These 3 financial statements are all indicators of the profitability and net worth of the business. They allow the business to stop at a given point in time (usually month end) and paint a picture of how well (or poor) the business is operating. When a certain trend develops on a financial statement, the business entrepreneur naturally should analyze the trend and take appropriate action.

In order to help the entrepreneur get to the root cause of any trends in the financial statements, the first step is to look at the general ledger(s). If the accounting software has poor GL flexibility it would be much more difficult to determine where the trend originated.

As a simplistic example let’s say that expenses are trending upwards. The bookkeeping software only allows for a general expense GL. Trying to pinpoint where the trend occurred could be tedious and time consuming. If the accounting software allowed for multiple GL expense accounts, the business owner would be able to pinpoint the trend much more easily.

Accounting Software – Journal Transactions to General Leger

Business management software should be able to display journal transactions from the GL with a simple keystroke or a simple click of the mouse. In the above example if a business owner is looking into a trend, they will first look at the GL on a printed report or from the computers monitor. From the computers monitor, the software should be able to show each days posting to the GL.

If an error occurred or some type of aberration on a given day, it will probably be easy to spot it on the computer monitor. To further investigate a trend, the software should allow the user to display a given days journal transactions directly from the general ledger with a keystroke or click of a mouse.

Business Accounting Software General Ledger Summary

The financial statements should be considered more than just a report for taxes and profits. The financial statements should be used as tool to analyze and make corrections to help increase profitability. Accounting software that has general ledger flexibility is important for the profitability of any small business.

The copyright of the article Accounting General Ledger Management in Accounting is owned by James Clausen. Permission to republish Accounting General Ledger Management in print or online must be granted by the author in writing.