When you are in business you will need to have information at your fingertips that allow you to make decisions. There is a wealth of information contained in the data of your company that you may not be using to the full. Accounting Information Systems add value to companies who know how to mine their data and use it for strategic growth.
There are three major types of accounting information systems used by small business owners. These include manual or paper-based systems, spreadsheet accounting systems, and accounting software. Each of these systems is unique in the level of information that it provides to users. There is no one choice that is right for everyone however make sure that the one you select is one that will meet the needs of your company. The more complex your reporting requirements become the more robust your accounting systems should be.
An accounting information system is made up of tools such as accounting software that you use to track financial activities. It also includes information about your customers and vendors. The goal of the system is to give companies accurate and timely financial reporting, analysis, and forecasting capability. Managers can use this system to identify trends in the business. For example, sales reports created with accounting information systems make it easy to see which items are selling best. It also helps managers take advantage of opportunities to expand by having reports that show new trends in sales that can add to future expansion.
The accounting information system also provides data about expenses. Any cost that is incurred to operate a business is considered an expense. Update your system frequently in order to keep an eye on the costs that may impact profits. Use the system to help you become familiar with how to spot trends and what important changes are occurring to affect your bottom line. This will enable you to proactively plan for changes and grow your company. For example, when rolling out a new project you will want to look at the growth trend in sales. Does your business model indicate that a change in programs will add to sales? If so, for each additional sale that you generate by how much will you need to increase expenses? If you increase expenses, will you still be able to reach target profit goals?
Accounting Information Systems are tools that every business owner should have in their company. Over time you may need to update them as your need for information changes. A good rule of thumb is to chart out what your reporting needs are prior to making your initial investment in an accounting system. You will want one that is easy to learn, quick to implement, and flexible enough to expand.
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