You need an accounting system that’s the right size to handle the demands of your business. It also has to be well designed so that it gives you the information you need. Many businesses can be managed successfully with nothing more complicated than a checkbook register. As volume increases, however, you may go to a manual system or a computer spreadsheet. Higher volumes and more transactions demand a computerized system. These systems range in price from under $500 to well into seven figures for large organizations.

To start another image in your mind, your accounting system is the plumbing of your business. It is the way you direct, match, and track your resources. What were the sales of Product X? How much time did Bob spend on Project Y? Am I over my travel budget for the year? These answers come from your accounting system. The plumbing in a pup tent is pretty basic. As you move up in complexity, the plumbing in a 1000-square-foot house with one bathroom and one kitchen is simpler than in a mansion with a dozen bathrooms and several kitchens. You want an accounting system that meets your needs.

The information an accounting system provides has two faces—external and internal. To provide these two different views, your accounting system divides into two parts—financial accounting and management accounting. Each of these areas is a separate discipline in its own right.

Financial accounting is the face your business shows the outside world. Here the daily “gozinta” and “gozouta” become the financial statements that you present to your bank, your stockholders and investors, and taxing authorities. These financial statements are basically historical records that cover a particular time period. It could be yesterday or a year. Each has certain valuable information to help managers make decisions.

Management accounting can be thought of as real-time accounting. It provides the information you need to run your business, and it begins with day-to-day record keeping. Gathering this information on the “gozinta” and “gozouta” forms the basis for many of your managerial decisions. These numbers can be sliced and diced many ways to help you do your job

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