Tell me more about Cash Accounting...


T

Troy Steadman

Keith said:
Not 'wrong'. Merely inappropriate in the current climate of squeezed
margins, credit assessment/evaluation and institutional interference.

Unless you're a cash business without payables, receivables, bank loans,
heat, power, telephone, insurances, rates and staff of course.
In today's barcode driven, data
efficient society - where cashflow is king - such methods must be
consigned with the quill pens and sand shaker to the museum.


I repeat - any fule can analyse historical data. It's using it to
improve efficiencies and pre-guess the future that's important imo.
I have been pondering this all week. Ledger Bookkeeping obviously has
its advantages, but so does Cash Accounting - the principal being that
there is (scale charge etc aside) no need to reconcile the VAT
Control.

Suppose for simplicity:

1) When an invoice is raised it is posted *net* into the system:
CR Sales DR Debtors.

2) When it is Settled it is *copied* into to a Cash Book, grossed up
for VAT, and the original entry deleted.

What efficiencies are being compromised? Are you saying that because
Receivables and Payables are Net instead of Gross, that the accounts
no longer forecast the future Cash Flows?
 
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T

Troy Steadman

Troy Steadman said:
What efficiencies are being compromised? Are you saying that because
Receivables and Payables are Net instead of Gross, that the accounts
no longer forecast the future Cash Flows?
[talking to himself as per usual]

....if so, then just as a Purchase Order grows seamlessly into a
Sales Invoice, so a Cash Flow forecast can mature seamlessly through
Payables and Receivables (monthly for the forthcoming year, weekly for
the forthcoming month) into the P&L.




--
 
T

Troy Steadman

Troy Steadman said:
What efficiencies are being compromised? Are you saying that because
Receivables and Payables are Net instead of Gross, that the accounts
no longer forecast the future Cash Flows?
[talking to himself as per usual]

...if so, then just as a Purchase Order grows seamlessly into a
Sales Invoice, so a Cash Flow forecast can mature seamlessly through
Payables and Receivables (monthly for the forthcoming year, weekly for
the forthcoming month) into the P&L.
"Purchase Order grows seamlessly into a Sales Invoice" may seem like a
stupid thing to say.

It *is* a stupid thing to say, *Sales* Orders grow seamlessly into Sales
Invoices. But Sales Orders generate Purchase Orders which are part of
the transaction and yet another level of analysis that *must* be
retained within the ultimate bookkeeping system.

Phew!


--
 
K

Keith

Troy said:
I have been pondering this all week. Ledger Bookkeeping obviously has
its advantages, but so does Cash Accounting - the principal being that
there is (scale charge etc aside) no need to reconcile the VAT
Control.
Can you explain that for me?
Suppose for simplicity:

1) When an invoice is raised it is posted *net* into the system:
CR Sales DR Debtors.

2) When it is Settled it is *copied* into to a Cash Book, grossed up
for VAT, and the original entry deleted.

What efficiencies are being compromised? Are you saying that because
Receivables and Payables are Net instead of Gross, that the accounts
no longer forecast the future Cash Flows?
Apart from a duplication of effort - deleting previous entries - the
accounts can no longer be used to forecast cashflows.

Simplistically your cashflow projection will be light by 17.5%. Now,
I'll agree that it's a relatively simple job to add 17.5% to your
Receivables/Payables but I would see that as yet another time-consuming
effort and errors increase exponentially with data input. YMMV.
 
K

Keith

In message
Troy said:
"Purchase Order grows seamlessly into a Sales Invoice" may seem like a
stupid thing to say.

It *is* a stupid thing to say, *Sales* Orders grow seamlessly into Sales
Invoices.
(Off to the Out tray...)
But Sales Orders generate Purchase Orders which are part of
the transaction and yet another level of analysis that *must* be
retained within the ultimate bookkeeping system.
What if the Sales are from stock? Integrating Stock Control is, imo,
more important than SOP or POP.
 
T

Troy Steadman

Keith said:
What if the Sales are from stock? Integrating Stock Control is, imo,
more important than SOP or POP.
Indeed. This gives me a chance to explain to Ronald what "dynamic"
means:

The Sales Orders / Sales Invoices are merely lists of data and can sit
safely in Excel, be analysed and summarised, but can do nothing else.

Let's look at what "dynamic" can do (this is Fourth Shift integrated
manufacturing software when a Sales Order is entered):

1) The "recipe" for each product is listed in the system, what materials
are needed, how much labour and which skills.

2) A diary of production is maintained so Fourth Shift knows when the
next available slot will be.

3) It looks in the future stock bins and shelves and works out which
stocks must be ordered. It prepares (future) purchase orders so the
stock will (ideally) come through the door on the morning of each stage
of production.

4) It tracks the progress of the product through the building,
maintaining a map of its physical location(s).

5) Raises Sales Invoices, processes VAT, produces Accounts.

Now *that* is dynamic!



--
 
K

Keith

In message
Troy said:
Indeed. This gives me a chance to explain to Ronald what "dynamic"
means:
5) Raises Sales Invoices, processes VAT, produces Accounts.

Now *that* is dynamic!
Yes. Are you not re-inventing the wheel? Everything you list is
available from off-the-shelf software. Even BOM bolt-ons are available
for Sage (not sure about QB).

As an exercise your efforts are commendable.
 
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T

Troy Steadman

Yes. Are you not re-inventing the wheel? Everything you list is
available from off-the-shelf software. Even BOM bolt-ons are available
for Sage (not sure about QB).
My system will never replicate Fourth Shift. In fact Fourth Shift is so
clumsy that all the advantages it should be delivering get lost in the
beurocracy of maintaining it. The system churns out components that can
never be used because nobody understands or questions the system.

"Raises Sales Invoices, processes VAT, produces Accounts"

....is all unnecessary. The Sales Day Book *is* the Invoice to the
extent that any invoice can be re-generated from it, the VAT will flow
Quarterly or monthly from a VAT column (once I have figured out where
the VAT column should be - if you can convince me that S/Ledger B/Ledger
is compatible with Cash Accouting for VAT I will be eternally
grateful!), the accounts *are* the sum total of the [talking to Ronald
again] highest 4 columns in the heirarchy:

Field name Data type Data
========== ========= ====
Report Text "P&L","BSheet" ...the two main reports
NL code Numerical 0-999 ...ensure P&L & BSheet sequence correctly
NL text Text "Sales","Motor Expenses", etc etc
MA code Numerical 0-999 ...management accounts by dept etc

Yes it is "reinventing the wheel" to the extent that all accounting
systems use these fields, but the only reason I got involved
with this is because Sage and the rest are *hopeless* at analysis, and
merely make difficult something which (like a difficult jigsaw puzzle)
is actually very simple. You just need to know where to put the pieces.


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