Regardless of whether you have a full-time controller or a bookkeeper that works with an external CPA, you need someone to ensure that you follow good accounting procedures.
General Accepted Accounting Procedures
GAAP is the term used to refer to the standard framework of guidelines for financial accounting used in any given jurisdiction. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements.
Good accounting packages for the system integration business are hard to find (or expensive). Some that are specifically designed for service-oriented businesses are:
Cash vs. Accural
There are two common accounting methods:
- Cash method – You record a financial transaction only when you receive or make a payment. This method is common for personal finances because it is less time-consuming, but it is limited. And, you can distort your income if you use credit or have inventory.
- Accrual method – You record when you sell or receive a part or service, not just when the payment is made. The method is more common in businesses because it provides a more accurate financial picture – by reflecting when value is created/transferred. Then, you can match income earned with expenses during a specific period.
While a lone consultant may find the cash method sufficient to run his business, most Alliance Partners quickly move to the accrual method as they begin to growth their business to handle the complexity of multiple projects by a staff of developers.