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Small business accounting software / Small business bookkeeping software — How to buy.

There are lot of small business accounting / bookkeeping softwares out there. If you are a small business owner looking for a good software, you are bound to get overwhelmed by the endless list pretty quickly. Which one to buy? What features do they come with? Should I get all the features or just the ones I need? The questions go on and on without answer. If this is what is happening to you, don’t despair. There is hope. Read on. By the time you are done reading this short post you will be armed with all the knowledge you need to make an informed buying decision. First some questions about you.

How big is your business?
Small business as defined by Small Business Administration is any business that is privately owned and employs less than 100 employees. Good enough. If we analyze this definition a bit closely we will quickly see that 100 employees is a big number. Assuming that you are paying $3000/month to each employee you are paying out $300,000/month as salary. If you own a business this big chances are you will not be looking for an accounting / bookkeeping software via internet. Sales agents from software companies will be waiting at your door to sell their software to you. Going by the fact that you are searching for a small business software on the internet you probably own a much smaller business. How much smaller? I think you own a business that has less than 5 employees. Most probably even less. Just one employee. Yourself.
What are you selling?
Are you selling a material product? or just services? Do you make the product or just buy it pre-made? Do you have a real store or you are selling via your web site? How do you find your customers?
How much is your data volume?
If you have a thriving business then you will have good data volume. How much it it? How many orders per month? How many new customers per month? How do store the data? How much data? What is expected growth rate of the data
Do you have a web site?
Nearly all businesses, big or small have web sites these days. Do you have one? If not your should get one. Would you like your software to integrate seamlessly with your web site? Would you like to be able to access your small business accounting / bookkeeping software via the internet?

Your choice of small business accounting / bookkeeping software will depend upon the answers to above questions. Assuming that you have one person company you want something that is easy to use, some that can be accessed remotely form anywhere and it can grow with your company. Right? … Right!

OK, one more thing that we did not discuss. Underlying technology. Even though it may not be visible, it is very important to know what kind of technology your small business software is using. After all it is the bed rock on which the software is built. Things may get a little complicated here but I will try to make them as simple as I can.

Every small business accounting / bookkeeping software essentially does one thing. It store data. Data is information about your business. Customer names, addresses, products, orders, invoices … all are examples of data. So for a small business software to work efficiently it should be able to store data efficiently. Not only that, it should also be able to modify and retrieve data efficiently when you need it. After all what is the use of a black box software that cannot provide you the data when you need it. You still with me? Good.

There are two ways to store data.

Flat file
Relational
Flat file method uses flat text files, much like notepad files, to store data. It is old and archaic.
The reason: it cannot hold any relationships among data entities. e.g. you want to store customers name and their invoices. You know that one customer can have many invoices. So to store customers and their invoices you will have to repeat customer name each time you store an invoice. Just like below.

customer1 — invoice1

customer1 — invoice2

Problem with this approach is that you have to repeat the customer name every time you want to store an invoice. This is not efficient.

Relational method uses relationships to store data. It is more efficient. Look at the same example that uses relational method. It uses customer name only once.

customer1

– invoice1

– invoice2

Elegant isn’t it? You bet. It is much cleaner, more efficient and easier to read. If you are still with me we are almost done. The whole point of the above song and dance was to show you that relational storage method is superior to flat file storage method. It should be an important factor to consider when you buy your small business computer software. Now, there are five major small business accounting / bookkeeping software.

Quickbooks from Intuit , Simply Accounting, Peachtree (again from Intuit), Sage and Microsoft Small Business Accounting Software. Agreed?

Now the bombshell. None of these small business software use relational storage method! Can you imagine? Wait there is more. All these are propriety software written by the big companies who use large scale ERP (Enterprise Resource Planning) software that runs on unix (not windows or mac) and uses relational database (relational storage method) to run their own businesses. Did you get what I just said. Let me rephrase. All these so called best small business software companies DO NOT USE THEIR OWN SOFTWARE. They use relational storage software, but they sell you non relational storage software in the name of small business software. The reason? Relation storage method is very expensive. Well not any more!