Help in new business handling !!!

[BeL@L]

Last month My elder brother died by heart attack, I came Pakistan and due to family situation i quit from study of my ACCA and took initiative to help father and family business. Because it was their wish, i stay with them.

After joining, I realize there is a lot of potential to expand it in near future. But right now I am facing few problems like most of data is in old form of account.

I want to change it in computerize way. I would like to follow IAS (International accounting standard) or at least Pakistan accounting standard to get a true picture of business.
<b>
Let me tell you some bird eye view about business, and then you can suggest me how I can improve it or should I use traditional or existing accounting methods.</b>

Well business is related with Distribution of Cement in a whole District. We directly buy from manufacturer and further sale it to small shop keepers. And 2nd type of work is sale of all building material construction items in our 7 shops in one location.

<b>Should I use Excel/spread sheet or Sage 5.0? </b>
<b>Benefit</b> I can easily present my family about Excel, and about Sage I have done work on it.
<b>Drawback</b> Excel is less analytical and advance. Sage is complicated sometimes for new users/family members


<b>I explain you flow of our work then you can understand and suggest me in more depth</b>

<b>Flow of work</b>

Type of sales
Cement sale is totally on credit, where as other products are are on cash sale.

<b>Credit Sales </b>
Manufacturer /Company head office > we buy it > Sale it to shop keepers.

We pay company their amounts in Advance, where as Debtors pay us Weekly, twice in month or some pay once in month.

<b>Other key points</b>
*Booking differences like number of tons booked and number of tons distribute by us
*Company sends us month end report
*we just make accounts don't send debtors month end reports?shoud we?
*Collection from debtors once in week.

<b>
Creditors</b>
We have 3-4 main creditors, whom we paid weekly, monthly or yearly. No stocks valuation because there are plenty of small items. So it sounds hard to make stock valuation system except 2-3 main items.

<b>Expenditure side,</b>
No record of expenditure except bigger amounts.


<b><font color="red">My questions</font id="red"></b>

<b>1)</b>Does accounting system may help me or in future to understand more in depth or in such business we use traditional methods of accounts?
<b>2)</b>What is best way for collection from debtors? weekly or twice in a week.
<b>3)</b>Should I start full record of expenditure and outgoing for home use from business or simply no record like in the past? Except bigger amounts.
<b>4)</b>Should I write down even cash sales? Right now we have fully record of Credit sales only.
<b>5)</b> How many books/files needs to make a system to cover all these transaction, or simple one spreadsheet for one work?
<b>6)</b> Which is more usefull <b>Excel or Sage</b> or other <b>programme</b> to handle such business where alot of debtors involve?

[kamranACA]

Dear Bilal,

It is severely painful to hear the news of sad demise of yor brother.

Inna Lillah-e-Wa Inna Aleh-e-Raajeoon !!!

May Allah rest the departed soul in eternal peace and give fortitude and strength to the family members and other related ones to bear this untimely loss.

Where do you live by the way? I mean the city where you have established the above business.

My explanation will start after having answer to this question.


Regards,



Kamran.

[BeL@L]

Thanks for reply Kamran.
Well, our business is established in Narowal (it is a district of Pakistan 37 KM away from Sialkot Road) Our main Debtors and business activities happen on same area. Most of our customers 'r not educated. But from where we purchase, all products head offices based in Lahore. Yesterday i met their Marketing Manager/ Area Managers.
They promised now they will help in regarding any issues. Because all of them were friends of my brother and he maintained high relations with manufactuers. Let see how much input i can do for my family.
Regards
Muhammad Bilal

[kamranACA]

Dear Bilal,

Thank you for the reply. It's very nice to have a quest for helping the family specially when they are broken and need your help. Family is the basic unit of the society and we can strengthen the society as a whole if we succeed strengthening our own family. I believe it.

Prologue

Coming to ur quesries. I will reply them one by one. Here these go

Question

1)Does accounting system may help me or in future to understand more in depth or in such business we use traditional methods of accounts?

Answer

It would be helpful to use the computerized accounting system providing you various reports and record like

-general ledger,

-debtors detail and creditors detail (with outstanding period / age analysis) through integrated sub-ledgers and modules,-

-generation of follow-up lists for debtors whose age is beyond the target date posted in the system,

-creditors payment alert reports, where creditors age go beyond the agreed date posted in the system

-master file of vendors,

-reporting like cash and credit sales and cash and credit purchases,

-ratios,

-bank and cash position for managing working capital (current and upcoming forecast)

-payment scheduling for creditors/vendors (as per agreement/PO)

-recovery scheduling as per agreed terms,

-detail of ur assets being used in business,

-incomes and expenditures including business expenses and household expenses (no expense or income to be kept out of books),

-receiables and payables to entraprenure (where it is not to be charged to expenses and is to be considered as advance or drawing),

-taxes paid or payable,

-cash and bank books,

-purchase day book (cash and credit)

-sales day book (Cash and credit)

and other such reports which may be obtained from the software just by having one time development of master scheme of codifictaion and consistently following the input data requirement of the system.

It would appear that this would be a time consuming and more than enough exercise, but in fact it is not. It is one time effort which will relieve you from all worries of pilferages, unseen losses based upon assessments and estimations, misuse of assets and resources, mis-handling of debtors balances resulting delayed recoveries and dis-reputing the business by inadvertently delaying the payments, non-estimation of actual expenditures of business and household resulting wrong assessment of profit/loss etc etc.

It will carry enormous benefits, but you and your staff will have to be adoptable. You will have to customize ur habits strictly in accordance with the requirements of the software. This is the basic point. People obtain high value software but mis-handle them and ignore the basic data input requirements which leads to incorrect information, and in their opinion, failure of the software.

Question

2)What is best way for collection from debtors? weekly or twice in a week.

Answer

It is best to collect Debtors as earlier as possible. Reduce the debtors collection period to the minimum if you want a relaxed liquidity. Now you have to decide how much you can reduce it. It may be weekly for practical reasons but not beyond the agreed dates.


Question

3)Should I start full record of expenditure and outgoing for home use from business or simply no record like in the past? Except bigger amounts.

Answer

Record means accountability. In fact no one is going to embezzle from his own business, but still, record should always be clean and complete. Charge what has to be charged to expenses either to business expenses category or household expenses category and debit what has to be received back by business even from the business owners. There is no question of leaving even a single rupees expense or receivable un-accounted for. Note this point strictly. This again requires acceptability and adoptibility by owners. It is hard for people and they feel it as if they are treated as dishonest. But still, record means accountability.

Question

4)Should I write down even cash sales? Right now we have fully record of Credit sales only.


Answer

My reply at point 3 has clarified this question as well. However, in cash sales you need not to record the account of customers. You can simply pass a collective entry after the day-end through cash sales day book by debiting the cash account and by crediting cash sales account for total of the cash sales made during the day. However, in credit sales, you will have to vouch the customerwise credit sales form the credit sales day book to record your debtors.

Question

5) How many books/files needs to make a system to cover all these transaction, or simple one spreadsheet for one work?

Answer

You need a software. Physical Files could be determined by your own requirement for placing vouchers, documents and statements / printouts.

Question

6) Which is more usefull Excel or Sage or other programme to handle such business where alot of debtors involve?

Answer

Software absolutely. Whether or not sage is dependent upon ur requirements. You should consult some software developer and get developed software as per requirements of ur business. Preparation of reporting framework and codification scheme for MIS (account codes, stock codes, asset codes, location codes, sub-account codes and cost centers etc) is the most specialised task. Involvement of some accounting specilist with software developer is vital for having desired results.

Finale

Where I have to send my consultancy fee invoice?


Hope the above will be beneficial.

Regards,

Khudai Khidmatgaar,


Kamran.

[BeL@L]

Thanks Kamran, I will pay your Consultancy fees when i will start my next business unit within 1 year INSHALLAH. Thanks this will help me alot.
Regards
Muhammad Bilal

[kamranACA]

Never mind dear brother.

I was just kidding.

Regards,


Kamran.

[kamranACA]

Dear Bilal,

Did any suggestion work practically? Whats update? Please apprise.

Have you started your new business unit. What business it is supposed to indulge in?


Regards,


KAMRAN,

[BeL@L]

Hello Kamran bhai, Replying almost after a year over here. Well i was very busy in business. I gave too much time to it. Well we didn't start any kind of new unit but we invest some money in vehicles/transport. Because carriage cost was also a issue. Anyhow, Few days back Dad told me business going smooth, I thought it was great step when you sign in and started work with us in such a tense enviornment.
But i feel you should complete your studies too, I thought the same because business is not running anywhere. So with detail discussion i started ACCA again from where i left it in Part2.
So right now i 'm just waiting for jan classes and will appear in June for my attempt. Meanwhile i 'm looking for interns too, I hope it will help me as well.
Thanks your words.
Regards
Bilal
Lhr