Welcome to our April 2005 newsletter. It's amazing how fast the year has gone. The budget has been presented and there is slight relief for small businesses. Year-end for many of you has also happened, in most cases without a hitch.

We will be down in Durban between 13 April and 15 April. If there is anyone in Durban who would like to meet with us please contact us and schedule a meeting.

The current version is 2.0.8. The latest version will be available within the next few days and will be downloadable from www.econoaccounting.co.za. As always, it is only necessary to update to the latest version if you want some of the newer features. Any new version automatically updates you from all previous versions.

We also have the full version up for download. To get that, you need to request a trial and the link will be e-mailed to you.

Support

Our support forum is constantly being updated.

A commonly asked question is:
I use ABSA (or Standard Bank) and cannot save my downloads.
Answer:
This is a known problem with Windows XP service pack 2 and Internet Explorer.
We have 2 possible solutions.
1) Change to Mozilla Firefox from Internet Explorer.
2) Please follow the steps outlined to solve this problem.

Knowledge Base

Why it is important to do your accounts.
How to read a simple balance sheet and income statement.
Your Business and Debtors

Business Warriors

We are members of an excellent on-line networking group called Business Warriors, run by Peter Carruthers. There is a small monthly cost, but you will probably recoup the cost during your first visit to the site. He also publishes a free newsletter containing really useful information.

Users Website

It is our intention to provide a free page for each registered EconoAccounting user on our web site. This will give you some publicity and hopefully some business. All businesses will be listed by categories and by name to make it easy to find you on the web. For more information contact Gavin.

Win with Using EconoAccounting

We know our users enjoy using the package and have solved various business problems. We'd like to hear about it and tell all other users about your success. Write a 300 word paragraph describing your usage and if we use it we will give you a free 128mg Flash drive (a really useful tool). Send your submissions to This email address is being protected from spam bots, you need Javascript enabled to view it

Ask the Accountant/Tax Consultant

We are not accountants or tax consultants, but we will endeavour to get your questions answered via our network of excellent consultants. If you have a question, please email This email address is being protected from spam bots, you need Javascript enabled to view it and we will try to get it answered and publish it in next month's newsletter.

Why reconciling a bank account is so important.

EconoAccounting's key feature is reconciling the bank account. Many people wonder at our fixation on this point.
Simple:
A reconciled bank account is the starting point of doing your accounts. If your accounting system does not fully reconcile your bank account, then it means that there are financial transactions gong through your bank account that are not recorded in your accounting system. This implies that there are either expenses or deposits that have not yet been recorded. At the same time there could be VAT implications - VAT on expenses is not being captured and your VAT report will be wrong.

EconoAccounting requires you to reconcile the bank account before proceeding further. At least we then know that all bank transactions are captured correctly, no typos, no forgetting to capture one line of data. The balance sheet we produce proves that the bank account value is exactly what the bank says it is. This gives extra credibility to your accounts - allows you to know that your data is accurate.

Another key reason for reconciling your bank account is to check your bank. You need to ensure that no unauthorised transactions go through your bank account. Do you remember a couple of couple of years ago there was a hacker in Cape Town? He stole someone's password and then proceeded to remove about R450 000 from the company's ABSA bank account (it was actually a law firm). He used the money to pay for computer equipment. This fraud was only picked up by the company's bookkeeper/accountant SIX weeks after it had occurred. In the end ABSA did pay back the money, but I wonder how a company could have not missed nearly half a million Rands from its bank account! It is obvious they did not reconcile their bank account, and they were not users of EconoAccounting! Had they been they would have instantly seen the transfer, and they would have had to allocate that expense to the right account. Had they allocated this expense, even if to computer purchases, and then used EconoAccounting to produce a balance sheet, surely someone would have asked about an extra R450 000 appearing in their income statement?

Why petty cash is so important

How much money do you pay out of your own pocket each day? How much do you spend on small items such as parking fees, toll fees, even having coffee with clients? How often do you visit the local Postnet or print shop for a photocopy, or buy a newspaper or magazine at the airport? How often do you give money to a staff member to buy stamps or milk or sugar? How many times do you pay for expenses using your personal credit card?

Many small business owners spend way too much money on petty cash and then do not claim it back. We have seen businessmen/businesses spend up to R200 a day on 'petty items". One client had R14000 worth of slips from various shops - all genuine expenses that had never been claimed.

This is a total waste of money, and it affects you the business owner as well as your business. If you do not claim your expenses, you will be out of pocket. Your salary/drawings is still taxed by the taxman, and in addition you are paying out money to your business. From the business's viewpoint, it is showing higher profits (because it is recording lower expenses). This is BAD. The excess profits are being taxed at 29% or previously 30%, when the expenses should have been incurred in the business. At the same time, some of the petty cash items are VATable, bear input vat and could have been claimed in your VAT return. Again money is being lost for no good reason.

Is petty cash so difficult to manage? YEs, if you do it once a year. NO, if you do it once a day, just as you should be doing your accounts every day for 5 minutes. EconoAccounting makes it so easy to capture your petty cash. Unfortunately you cannot import your petty cash expenses, like you do your bank statements!

The procedure is as follows:
Create a petty cash account in the chart of accounts. Make this account a Bank Account. (It is a bank account - you, the owner are bank rolling your own business.) Choose Petty cash account as the type of bank account. Yyou are ready to begin recording your petty cash and save thousands per month. Incidentally we sometimes like naming this account "Loan from owner" rather than "Petty cash" as this is really what it is - you are financing your business, and eventually you want to get that money back! At the worst you want to record that the business does owe you the money.
You obviously need to keep all your receipts and invoices proving the expense. Every day when you do your accounts, you should go to the Cashbook, choose the petty cash account - or loan from owner account - and add the few transactions in that you have made the previous or even the current day. To add say three transactions and allocate them to the rightful expense and include VAT where relevant each day will take you no more than 90 seconds!
Is it worthwhile spending 90 seconds ensuring the accuracy of your petty cash, ensuring that your own claims are accurate and the business has correct accounts? Even if you are only claiming a R10 parking voucher, it IS worthwhile doing it.

All the very best

The EconoAccounting Team