Moving From Manual To Computerized Accounting For A Bakery Business Essay.

Available Accounting Software Choices

Question:

Discuss About The Moving From Manual Computerized Accounting?

Bakery is engaged in selling bread and confectionary items. The business has so far relied on manual accounting. It is considering buying an accounting software. The following report discusses what are the accounting software choices available to the business. It is advised that the business adopts accounting software Xero. This would also result in better inventory control and costs would be brought down.

A bakery business involves making and selling items like cakes, donuts, muffins, desserts, biscuits and breads along with other confectionary items like toffees and chocolates (Dawn, 2017). A bakery business can be started from home or a rented place. A kitchen is needed to make bakery products. The kitchen should contain an oven, mixers and grinders, central table, pans and other utensils. There is a need for a Chef to make the bakery products. The ingredients like flour, dry fruits, eggs, milk and creams along with chocolates are needed.

At the time of starting a bakery it has to be decided how much would be the capital of the business, what are the products that would be sold, who would be the customers of the business  and how many people would be employed in the bakery (Nerdwallet, 2017).

There are different types of bakery businesses. One is the counter service where the customers come to the bakery and collect bakery products from the counter (Bplans, 2017). They do not stay in the bakery premises for long. In this case the bakery would not need much space. Another type of bakery is where the customers can sit on the seats which are there in the bakery. In this case the bakery has to invest more in furniture. More space is needed. Another type of bakery is online where orders are booked on the internet and delivery is made at the residence of the customers by the baker (Bplans, 2017). This helps to save the capital costs for the bakery owners.

The location of the bakery is very important. It should be located where people live. The surroundings of the bakery should be clean and spacious. If well to do people live in the area, it would be easier to market the products. The bakery has to decide what sort of products to make. There is need for some market research . The bakery should be able to capitalize on the festival season like Christmas and New Year when the sales should be more. The bakery can supply cakes on weddings and birthdays of customers. The baker need to have good marketing skills in order to beat the competition as there would be more bakers in the area (Eliott, Thiele and Waller, 2014).

Why Xero is Recommended

The baker should know a number of recipes and should be able to come up with new recipes  from time to time (Chron, 2017). The bakery owner should know how to source raw materials. Further accounting has to be done regarding the purchases and sales along with different expenses.  

It would be needed to register the business of bakery. The kind of business entity to be formed is to be decided. The business formed could be sole proprietorship, partnership or a company (Chron, 2017). 

A bakery cannot be run without people. The bakery would have to recruit people with diverse qualifications (Nel, 2012). A bakery would need a Chef who would make different bakery products. Chef is a person with specialized knowledge. The number of good Chefs is limited. The bakery would have to give an advertisement for hiring a Chef or the owner of the bakery would have certain contacts with people who would recommend a Chef or a baker. The bakery would enquire where the candidate has worked before and what kind of products like cakes, bread and biscuits the individual has been making in auditing past. Some assistants to the baker would also need to be recruited in certain cases.

Similarly sales staff who would be working at the counter would also need to be recruited (Eliott, Thiele and Waller, 2014). Such a person would have to be honest as the individual would be taking payments from the customers. The person would have to be trained regarding how to complete the billing process. There would be need for certain internal controls in this regard. An accountant would also need to be hired a proper record of all sales and expenses has to be made.

Another activity which the bakery cannot do without is procurement of raw materials which are needed for making bakery products (Dawn, 2017). Things could be bought from retail outlets or directly from farmers or also online.

Proper inventory management is needed. The production at the bakery should not stop because there are no sufficient raw materials in stock. Only quality raw materials should be procured. If the raw materials are not good, the end products would not be good and this would harm the reputation of the bakery. The sales would then go down. A large bakery would have a specialized purchase officer who would look after the procurement of materials.

Starting and Running a Successful Bakery Business

If a bakery follows a proper recruitment process, it would be able to hire a good Chef which can do wonders for a bakery (Nel, 2012). Such an individual would know the art of developing new recipes. Customers get bored with eating same food. The Chef would know the art of baking. The individual would know how to operate the oven well, the time that should be taken to keep the bread in the oven. The cakes and biscuits would look good and smell well. They would have more shelf life. The Chef would follow quality control. New shapes would be given to cakes and pastries. Customers would be attracted by looking at the cakes in the shelf. In the end it is the product that matters especially if the customer takes it away to its home.

The bakery would do well if the sales staff is good and knows about the positives of different products of the bakery. If the sales people have good communication skills, they would know more about the art of customer relationship management (Buttle and Maklan, 2015). There would be repeat customers of the bakery who would be attracted by the good service of the sales staff who would promptly serve their orders in a good mood without getting irritated by the work load due to more customers. If the bakery is small and growing there is need for good service. If proper cleaning of bakery is done regularly, good people would come to it.

If there is proper accounting, no money would be wasted. The management would be able to know what are the expenses and take steps to control them. There would be good management information system (Gray, 2014). Management would know the current stock of various items in the inventory and take steps to replenish depleting stocks. If the raw materials procured are of good quality, the end products would also taste and smell good.

Any business would like to know the result of the business operations at the end of the financial year. The result might be profit or loss. Nowadays accounting software have become very advanced. The bakery business would like the accounting software to make the profit and loss statement at the end of the year. This statement should show opening stock of raw materials, purchases, expenses like rent, electricity, transport, telephone, wages and salaries. It should show closing stock, sales and other items like profit or loss from sale of any fixed asset (Mattison et al., 2015).

Factors to Consider

The accounting software in present times show profit and loss statements instantly as voucher entries are made daily. In manual accounting journal entries are made. They are then posted in ledger accounts. These ledger accounts are balanced and these balances are then used to make trial balance. From this trial balance final accounts profit and loss account and balance sheet are made (Curtis and Averis, 2014). In the case of accounting software voucher entries are to be made and ledger accounts are automatically made and trial balance is also made instantly automatically. The bakery would like the accounting software to provide this facility. The accounting process is shown below:

The bakery has many big buyers. It would like to keep track of the amount that these buyers owe to the bakery at any point of time. This helps in customer relationship management (Buttle and Maklan, 2015). The accounting software should provide this facility. In this way all debtors would be known. The bakery would thus make efforts to collect payments from them. This would mean better cash position for the company as it would have more funds. These funds could be used to buy more raw materials and pay for other expenses incurred.

Inventory is an important aspect for the bakery.  It procures raw materials for production. There should be enough raw materials in the stores to support production. The accounting software should create separate accounts for each material in the inventory. The balance of a material if it falls below a certain minimum amount the bakery can order the same keeping the lead time in mind. As an item of inventory is being used up, the entry is made in the software by the accountant and instant balance of the account should be shown by the software.  

The accounting software must make accurate calculations with speed. The accounting software should be easy to operate and should not be complicated. The accounting software should calculate the balance sheet automatically to show the financial position of the bakery at any time. All the current and fixed assets and liabilities should be shown in the balance sheet (Deegan, 2012). The accounting software should also make cash flow statement and do ratio analysis also calculating various ratios. The cash flow statement would show inflow and outflow of cash. The bakery would be able to keep track of the movement of cash which is the most important element of the business. A firm which can control cash would not suffer misappropriation of cash. It would be able to make use of the available cash in an efficient manner.

Procuring and Managing Raw Materials

Bakery should adopt medium end accounting software. It has sufficient amount of sales. Low end software should not be adopted as they do not have enough features although they are simple to understand. In this case spreadsheets might have to be added to the low end software to make it useful. High end software are adopted by big companies which have several layers of management and large number of employees (Fitrix, 2017). In this case accounting work is complex and more advanced and specialized software is required. More controls are needed by the company.

The bakery is comparatively smaller in size than a big firm. If too complex software is taken, the accountant and employees of the company would get confused and daunted. Higher end software has features like multicurrency transactions can be recorded. Accounting data from multiple locations is consolidated. Such features are not of much use to Bakery at present so there is no need to buy expensive software which is not completely used. It is better to opt for medium end which is sophisticated to a certain degree.

The users of accounting software can do lot of things with the accounting software Myob and Xero. The Myob software can do lot of things like prepare general ledger. This would contain different accounts relating to expenses, income, assets and liabilities. The personal accounts of customers of the company are also calculated. In Myob bank reconciliation statement is also automatically made. This statement shows the reasons why there is a difference in the cash balance as per the cash book of the company and the bank statement. There was a time when this statement was made manually by the accountants of companies but now this statement is calculated by the accounting software as few entries are made in the accounting software.  This facility is also there in Xero.

Myob helps the companies in creating invoices of customers. Different details of the customers are fed into the computer in the given proforma or design. The amount owed by the customer is automatically calculated. If any particular invoice is needed from the past, it can be obtained after a few clicks. The records of customer invoices has been already made in the computer. They can be referred to any time. This helps in customer relationship management. Xero provides facility for customized invoices that can be made by the company. The other option for the company is to add its logo to the design made by Xero (Etaxlocal, 2017). This helps the company to create an identity among the customers through invoices.

Recruiting Qualified Personnel

 Myob provides facility for inventory control. The balance of any material in the inventory can be found instantly. Both the quantity and the value of a material in the inventory are shown instantly.

Myob provides the facility for budgeting and forecasting in the software. Production budgets can be made where cost of production is estimated. The material, labour and overheads estimates are put in the computer and projections for the future are made by the software. Balance sheet and profit and loss statement are made by both Myob and Xero as accounting data is fed into the computer (GetApp, 2017). Myob also provides for sales tax management. When invoices are made sales tax is also computed and included. The total amount of sales tax is also shown by the software. Xero also helps in payroll accounting. The amount of salary that the company has to pay to each employee is calculated by the computer. The data regarding hundreds of workers is kept in the software. The amount owing to any worker can be instantly found with the use of the software.

The bakery business should adopt Xero software which enables professional invoices to be made. In the formation of invoices the software helps avoid repetitive data entry with different tools in the software. Invoices are created quickly with this software (Xero, 2017). This means more work gets done in less time. As less data is to be fed while making invoices, there are less chances of an error taking place. Xero also provides the facility of customized invoices. The software provides the facility to convert purchase orders from customers to invoices with speed. The bakery business has difficulty in selling products at competitive prices. If it can keep the costs under control, it can charge better price.

Xero software provides simple inventory tracking that is good for single location retailers and wholesalers. The business can keep track of various items in the stock with the help of the software. The firm can calculate the profit margins on the products moving in and out of inventory with the help of the software conveniently (Horngren, 2013). The business can know which are the items moving out of the inventory with speed and what the company is earning on these items. The items which are moving fast need to be replenished with speed and orders are to be placed with the suppliers. The company can make purchase orders in time with the help of the software.

Implementing Inventory Control

The software also allows the purchase orders to be tracked, that is, what are the orders that have been placed with the suppliers, the cost at which they have been made and when the delivery is expected (Xero, 2017). All this information is represented in an organized way in the software. There are other facilities in the software which can quickly import large numbers of inventory items from a spreadsheet. In this way work of different people can be integrated with convenience.

Another feature of the software is that one can attach files and documents to accounting transactions so that related information is stored in one place for reference. For example in the case of record of purchases, the delivery note and bills from suppliers can be attached. This acts as an internal control system. Payment would be made for only those purchase orders for which delivery has been made. Apart from this the payroll management can be done in a better way with this software than Myob. Similarly expense claims are also better accounted for with this software.  

Conclusion

Any company which has been doing manual accounting would think hard before buying an accounting software. It is not just the expenses involved in adopting such software, but the impact on business operations that is important. The accounting software Myob and Xero, both are capable of organizing the accounting system and result in speedier accounting process. These software are also very accurate. Both these software have common features and perform almost similar tasks. But Xero has an edge over Myob especially in invoicing and tracking purchase orders.

References

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Buttle, F. and Maklan, S. (2015) Customer relationship management: concepts and technologies. Australia: Taylor & Francis Ltd.

Chron (2017) How to open a bakery : step by step instructions. Available at: https://smallbusiness.chron.com/open-bakery-stepbystep-instructions-11543.html (Accessed: 8 September 2017).

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