Objective:
The primary objective of the software is to provide a simplified financial system which can be handled by anyone who knows the typical operations of the business. Up-to-date information necessary for the daily operations of the business will be available on-demand (subjected to up-to-date data entry). No accounting is required.
Accountant or Accounts Clerk is not necessary to handle the system, only a typical staff or anyone interested in getting up-to-date financial information.
Critical Financial Information – Required on demand:
· Bank available balance
· Total outstanding clients invoices
o Who are the clients with outstanding balances
o How much is outstanding
o How long it has been outstanding (aging)
o Which invoices have been paid / have not been paid
· Total outstanding suppliers invoices
o Who are the suppliers with outstanding balances
o How much is outstanding
o How long it has been outstanding (aging)
o Which invoices have been paid / have not been paid
Of course there will be other questions as well, but the above are the most common and important questions to answer.
Business Concept:
It is very important to understand the concept of business (be it small or large). We are now concern only with the Financial Information. In a nutshell it will be divided into two parts:
1. Sales – Regardless of what business it is, the company must generate SALES (can be product or services).
2. Purchases / Expenses – This is concerning the money that the company will have to pay out. For example, in case of a product, the company must purchase it first before it can sell (this is called purchase). The company will also pay out money not directly related to purchases e.g Rental, Salary, Stationeries etc.. necessary for the normal operations of the company.
The company must have a least one Banking Account; for depositing money received and payout dues.
Illustration of what happen when a SALES is generated.
1. Prepare and send out invoice to the CLIENT.
2. Once the invoice is due, must collect payment from CLIENT. The money received (typically a CHEQUE) is then bank-in into the company’s BANK
This concluded the sales process of that particular invoice i.e the invoice is no more outstanding. Invoices are issued repeatedly for as long as there are sales. The processes 1. & 2. above are repeated over and over for as long as the company is in operation.
Therefore the tasks 1. & 2. above are quite trivial and can be performed by almost anybody. This section will provide the CASH IN FLOW for the company.
Illustration of what happen when a PURCHASE is made. This is typical of a trading company, since it will purchase a product and then sells it (the difference between Sales Price and Purchase Price will be the GROSS PROFIT). Note that this is exactly the opposite of SALES.
a. Received Invoice from SUPPLIER for the Product Purchased.
b. Pay the Supplier Invoice when due – normally by issuing Payment Voucher. Typically by issuing a CHEQUE to the Supllier.
This concluded the purchase process of that particular supplier invoice i.e the supplier invoice is no more outstanding. Supplier invoices are received repeatedly for as long as there are purchases. The processes a. & b. above are repeated over and over for as long as the company in operation.
Therefore the tasks a. & b. above are quite trivial and can be performed by almost anybody. This section will form the CASH OUT FLOW for the company.
Diagramatically It Can Be Represented As Follows:
1. Sales (IN FLOW)
2. Purchases (OUT FLOW)
In accounting terms:
- CLIENTS = DEBTORS
- SUPPLIERS = CREDITORS
DATA ENTRY TO BE DONE BY USER
1. Sales Invoice
2. Payment In (money received)
3. Supplier Invoice
4. Payment Voucher (making payment out)
These are the critical data entry that need to be done which form 95% of the data entries. The other 5% is Non-Cash transactions which normally can be adjusted at year end (does not involve real money – only conform to accounting principles)
All Necessary Documents Are Generated By The Systems
- Sales Invoice – Using standard A4 paper
- Receipt (if requested by the client)
- Payment Voucher
