Windows or Linux?

A fair question to ask when overhauling your company’s computer system is: Do we buy a Windows or a Linux server?

The answer: Depends on your needs.

A Linux server is the popular choice when running web-related applications such as html and php-based websites. More often large-scale web hosting companies promote their linux-based servers as very reliable and they usually are.  Sites that use ASP script programming and .Net languages generally use Windows Servers.

Most web-based open source applications, though, are written in PHP. This usually refers to readily available, non-fee licensed programs that can be taken and enhanced as required. There are many software programming  entities that distribute open source products and charge only for the assistance with installing and tweaking the programs. After all, nobody provides service for free.

Office productivity software such as word processing, spreadsheet and presentation applications are designed with the Windows operating system in mind. There are variations of these products that run on Linux but don’t have anywhere near the market share.

In a business where there is not a staff of computer engineers or technicians available to deal with the immediacy of day-to-day issues, it probably makes more sense to stick to a Windows server.

Today’s accounting systems utilize built-in emailing functionality, saving reports and documents to archive folders along with the need for frequently reading and writing to specific files in a designated folder. These are better managed as Windows services than as Linux services.

There are more tech savvy personnel out there who are experienced and readily available to do the necessary forensics in a Windows server environment than in a Linux environment, especially for heavy user-dominated applications. Additional layers of  configuration are required for Windows workstations to communicate with a Linux server as opposed to the more shared history of Windows workstations to Windows servers.

If something needs attention on a website, most users expect that the webmaster’s team of Linux professionals will take care of the problem. But in a wordprocessing or spreadsheet emergency, most users don’t want to deal with and wait for a high level techie. They expect someone in their own workgroup to be able to see what is happening on the server. This is so much easier to do when action on the server looks pretty much like working on one’s own workstation. On a linux box, most often the user must go to a # prompt and enter arcane commands such as grep, ls -l, and chmod.

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Customer File Format

A customer master record in an accounting system should at a minimum contain the following:

id, company name, address1, address2, address3, city, state, zip, phone, fax, contact, terms, taxable, taxing authority, tax exempt id, credit limit, credit hold and sales rep.

Each of the above fields should be assigned a maximum number of characters so that it is easier to plot reporting as well as accesibility and readability outside the system. The id field should be a fixed length capable of accepting alphanumeric characters.

A search on a customer should be available by: id, company name, phone number.   Low cost accounting software solutions such as QuickBooks tend to downplay the need for using a customer id thinking that most users prefer the name lookup. It is better, though, to have an id with a fixed length to make record extraction outside the system easier to coordinate. Low cost solutions, however, tend to discourage accessing data outside the system. Use of a shortened specific customer id makes it easier to link customers to open invoice and sales history records for quicker access on reports and screen inquiries as well as taking up less data storage space as a field in those related records.

Text in some acounting systems are case sensitive. For example, a search on Alpha Baking Company is not the same as ALPHA BAKING COMPANY. There may be only one customer record as such, but the software user may be forced to try variations on mixed case and spelling to find the customer.

A good system should also allow for user defined fields that may be added and reported on.

A business needs to weigh the limitations of low cost software solutions against the need to be flexible with system reporting.

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Annual Inventory Turns

A standard feature on the Inventory Sales Analysis Report is the Annual Turns calculation. It represents how many times an item turns over its stock in a year’s sequence.

The formula usually used is: cost of goods sold divided by  inventory value.  In other words, if you have sold $50000 worth of your entire goods and its average cost value is $25000, then you have turned it over twice. If this represents only the first 4 months of the year, then it is interpolated to mean that for the entire year, it will be three times that or an annual turn of 6.  A company that has a higher annual inventory turnover than a competing company is naturally valued higher.

Some businesses tend to overlook this piece of data and focus more narrowly at the quantity sold year-to-date on an item or product line compared to the previous year. There may also be quarter to quarter comparisons in order to determine which items are fast or slow movers that are not seasonally affected.

Annual turns help a business determine how often they need to make sure the product is purchased or made. It is important that there be someone in your organization that takes the time to examine the analytic reports and use them as a tool to benefit the company.

In any event, make sure your accounting system contains annual turns on the standard sales analysis report.

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Accounts Aging Reporting

The backbone of a computerized accounting system is the access to immediate reporting on customer and vendor balances. A good system allows you to control the reporting on both customer and vendor aged balances by the selection of cutoff dates. You should be able to reconstruct aging reports from previous periods and prior years as far back as necessary. A good system will accommodate this by allowing you to select how far back you retain paid-up invoices.

In an audit, it is not enough to be able to show the A/R or A/P balance in a GL Trial Balance. You may also be required to show the detail of invoices still open until the end of the selected GL period to validate the GL figures. Most businesses will keep no more than a year of paid invoices in case it is required to reconstruct earlier Aging Reports. Relying on a hard copy or PDF version of a aging report at the time the given month is closed may not be enough. Why? Because sometimes back posting of adjustments to earlier balances may make these “closed” reports obsolete.

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Payroll Service or In-House?

Should a business process their payroll using a service or in-house? I’ve observed that it has less to do with cost but rather preference. Some businesses do not want the bother of hiring qualified personnel who can manage the payroll and validate the computer calculations and keep them up to date. Others prefer to keep it in-house with total control and immediate access to dispensing checks or submitting direct deposit.

For some businesses, it is important to collect time ticket data and apply it to work performed for billing purposes. In these instances, some form of payroll needs to be used in-house. Despite this, I’ve seen where businesses take the time ticket information and still pass it on to a payroll service for processing. I’ve also seen businesses decide to just keep the entire process in-house.

Just because a business maintains the payroll in the accounting system doesn’t automatically mean that withholding checks are generated through the A/P module to submit to the various taxing authorities. More often than not, this type of linkage requires an enhancement to the software.

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Converting Credits into Refund

A client recently asked if there is an easy way to convert a customer’s credit balance into a refund check. I explained that most accounting systems are not written to cross the lines between applications that normally do not interface. It is rare to find a built-in function to take an A/R credit balance and have it generate all the necessary steps in A/P such as:
1) create debit memo to reverse the balance back to zero;
2) create an A/P invoice payable to the customer;
3) assign the appropriate GL accounts so that the end result is a credit to cash and a debit to the sales account.

A very common scenario that leads a credit balance to be refunded is where the customer pays for a product and subsequently returns it for the refund. In these situations, reversing the payment must also be accounted for. As you can understand, there are multiple courses of possible action required when a refund is processed. It necessitates customization. Otherwise, accounting system users will be obligated to manually complete the various tasks (cleaning up the A/R, etc.) or end up with a general ledger full of misrepresentations.

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Invoice File Format

Two popular approaches to A/R open invoice file formats:

1) Master record with current balance and subordinate transaction records that total to the balance.

2) Record for each action to the open invoice file

Format one is easier for reporting. When printing an A/R aging report, the system scans each master record for non-zero balances and ages them. With a system utilizing format two, the programming behind the scenes is trickier as the system must total up all records of a common invoice number, determine which have a zero balance and use the date from the earliest non-payment transaction.

Each format has their own advantages and disadvantages for programmers but the end results are transparent to the user. Its main consequence is trying to read data from the outside looking into the system using various reporting and extract tools.

There is also the issue of purging paid up invoices after a certain amount of time has elapsed. Format one will require deleting records from two files while format two necessitates removing data from only one file.

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Document Management Options

Today’s accounting systems usually have some form of document management built into it. This includes:

1) PDF generated customer invoices and statements, vendor purchase orders and payment vouchers.

2) PDF generated documents saved into designated archive folders.

3) Optional linkage of document attachments to customer, vendor, employee and item master records.

A pdf generated invoice or statement paints the look of that form onto plain white paper and includes different size fonts, bold and italic attributes, shading, boxes, and clip art such as a logo.

Accounting software users have always had screen recall and printed hard-copy of data related to customer and vendor information in report format. Today, computer savvy users expect to see pdf formatted accounting software-generated documents organized by transaction date or document type and indexed by master id such as customer, vendor, employee or item number.

An accounting system that does not offer this may require extensive customization.

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Accounting System Reporting

Current accounting systems should provide the following options for report generation:

1) PDF

2) Text Format

3) Drill-down Print Preview

4) Excel spreadsheet

To accomplish this, many accounting software products are now re-tooled to use external report generators. Some make the process look transparent. Others do not show report options on menus but rather instruct you to use an external report generator to create the report you want and save it to the menu for repeated use.

Some accounting systems have combined the latest programming technologies to make it that when you generate a print preview version of a report, you may drill down on clickable cells to see the detail behind summary values.

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Allocate Inventory in Sales Order

When entering an item into a sales order-

is it enough to commit quantity in general or is it as important to allocate and lock in the committed quantity from a specific warehouse bin?

By allocating, you are making sure that the quantity cannot be grabbed by another order. This comes into place especially in an environment where an order can be put on hold for delivery a week or two later. Without allocation, an order for the same item that can be shipped in the next day or two will grab the quantity, possibly leaving a shortage to fill the other order when the release date comes up.

You may counter that allocation doesn’t matter because you don’t allow a sale if quantity is not available. However, without locking the bin location, especially if the item may be found in multiple bins- there is no easy audit to determine what goes wrong when the computer indicates there is stock on hand but the order cannot be filled.

Furthermore, some businesses do permit items to be sold even when there is zero or negative available and will hold the order until the item has been restocked. With order allocation, the items are locked in for specific orders and orders entered when stock is not available will have to wait. The downside is that you may be protecting an order that has a customer requested hold date for a few weeks.

Order allocation is not a standard feature in most accounting
software systems and may require customization.

 

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