on any of the topics in the Table of Contents listed below to go directly
to that discussion.
Press "Home" to return to top.
How To Set One Up That Best Meets Your Needs
|Thinking of computerizing your business, or expanding your
computer operations? The accelerating advances in technology are
increasingly expanding the choices available to the small business
owner. This Guide provides a roadmap to determining what needs your
computer system must meet and to finding a system that will meet
TABLE OF CONTENTS
What Can Computerization Do For
What Not To Expect
How To Determine Your Requirements
Evaluate Your Choices
What The Hardware Is And Does
What To Look For In A Customized
The rapidly increasing power and swiftly decreasing costs of
computers are making it economical to use them for a growing number of
business functions. The purpose of this Financial Guide, which is
directed toward the user with limited computer experience,
is to help you forecast your computer needs, evaluate the alternatives,
and select the right system. Professional guidance will be helpful in
helping you reach the right decisions.
For the small business thinking of computerizing its operation, the
basic question is what can computerization offer. To answer this
question, you must have a clear understanding of your long- and
short-range goals, the advantages and disadvantages of the various
alternatives to a computer and, specifically, what you want to
accomplish with a computer.
Before buying a computer, you should compare the best manual
(non-computerized) system you can develop with the computer system you
hope to get. It may be possible to improve your existing manual system
enough to accomplish your goals.
Business Applications Performed by Computers
A computer's multiple capabilities can, of course, solve many
business problems. Some of the most common applications are keeping
accounting records (such as a cash receipts journal, receivables ledger,
and general journal) and preparing accounting statements and reports
(such as a balance sheet, income statement or inventory status report).
Other equally important tasks include maintaining customer and lead
lists, creating brochures and paying employees.
A business that handles large volumes of detailed or repetitious
information in short periods of time will benefit from computerization.
A properly designed computer system can:
- Organize and store many similarly structured pieces of information
(e.g., addresses including name, street, city, state and zip code).
- Retrieve a single piece of information from many stored records
(e.g., the address of John Smith).
- Perform complicated mathematical computations quickly and
accurately (e.g., the terms of a loan amortized over many years).
- Print information quickly and accurately (e.g., a sales report).
- Perform the same activity almost indefinitely, in precisely the
same way each time (e.g., print a hundred copies of the same form
- Facilitate communications among individuals, departments and
branches (e.g., quickly transmit messages and/or documents that
require review or editing).
- Link the office to many sources of data available through the
Internet (as this program, Financial Strategies Online, helps you to
Improving Manual Business Operations
Consider the following manual operations that can be streamlined by
Accounts Receivable: Even if properly organized and
maintained, a large volume of active accounts can require many hours of
posting sales and receipts and, especially, of preparing statements.
Unfortunately, as the volume of information to be handled increases, the
number of errors often also increases. Don't forget, too, that if your
customer isn't billed on time, you'll wait longer to be paid.
Advertising: Using only manual systems,
it is costly and complicated to have special sales programs directed
toward particular customers. Manually prepared mass mailings are
time-consuming and expensive.
Inventory: A large number of items or
high-volume turnover can cause major errors in tracking inventory.
Errors in inventory control can result in lost sales and in the
maintenance of unnecessarily high quantities of slow-moving products.
Payroll: Calculating and writing
checks are tedious operations in payroll administration. It can also be
difficult to effectively implement an employee incentive plan using
Planning: Manual systems or procedures
make planning for the future time consuming and difficult. "What
if" situations, such as "If sales increase, to what extent
will expenses increase?" are not easy to simulate with a manual
Computer Business Applications
Computers also can perform more complicated operations, such as the
- Financial modeling programs can prepare and analyze financial
- Spreadsheet and accounting programs can compile statistics, plot
trends and markets and do market analysis, modeling, graphs and
forms. They can combine all these functions and can interchange and
evaluate data from four programs simultaneously.
- Word processing programs can produce typewritten documents and
provide text editing functions. Many offer options such as a
thesaurus, a speller, and punctuation and style checkers.
- Desktop publishing programs can enable you to create good quality
print materials on your computer.
- Critical path analysis programs can divide large projects into
smaller, more easily managed segments or steps. This helps to target
goals and set dates for completion.
- Legal programs can track cases and tap information from data
- Payroll system programs can keep all payroll records; calculate
pay, benefits and taxes; and prepare paychecks.
- File management programs can enable you to create and design
forms, then store and retrieve the forms and the information on
There are some things you should not expect your
computer to do.
- Don't expect a computer to clean up a mess in the office. The mess
must be organized before you can attempt to computerize, or you will
wind up with a computerized mess.
- Don't install a computer because you don't have the right people
to do the jobs in your organization. Initially, at least, the
computer will make more, not fewer, demands on your organization.
- Don't install a computer with the idea that any information you
want will be instantly available. Computers require structured,
formal processing that may not produce some information as fast as
an informal system could.
- Don't expect the installation of a computer to help define the
jobs that must be done. The computer is a tool to get those jobs
done, but the jobs must first be well-defined.
- Don't expect computer installation to occur like magic. Computer
selection and installation will be successful only through
- Don't expect any computer system to exactly fit your present
methods of completing jobs. If you are not willing to listen to new
ideas for solving problems, you will not be able to install a
computer successfully or at a reasonable cost.
- Don't acquire a computer to generate information you will not use.
Growing companies may benefit from structured management information
systems, but many owner-managers of small companies already have
their fingers on the pulse of their businesses and do not need a
formal, electronic system.
To determine your requirements, prepare a list of all functions in
your business in which speed and accuracy are needed for handling
volumes of information. These are called applications. For each of these
applications make a list of all reports that are currently (or will need
to be) produced. You should also include any preprinted forms such as
checks, billing statements or vouchers. If such forms don't exist,
develop a good idea of what you want - a hand-drawn version will help.
For each report list the frequency with which it is to be generated, who
will generate it and the number of copies needed.
In addition to printed matter, make a list of information you want
displayed on the computer monitor. Again, design a hand-drawn version.
List the circumstances under which you want this information displayed.
For each application make a list of all materials used as input into
your manual system. These may include items such as time cards, work
orders, receipts, etc. Describe the time period in which these items are
created, who creates them and how they get into the system. Also,
describe the maximum and average expected number of these items
generated in the appropriate time period. As with the reports,
include copies of the input items or drawn drafts.
For all files you are keeping manually or expect to computerize (such
as customer files or employee files), list the maximum and average
expected number of entries in a specific time period, such as 10
employees per year, 680 customers per year. Normally, a file, manual or
otherwise, is cleaned out after a specified time and the inactive
entries are removed.
Identify how you retrieve a particular entry. Do you use account
numbers or are they organized alphabetically by name? What other methods
would you like to use to retrieve a particular entry? Zip code? Product
||TIP: Decide on which of your requirements are a must and those on
which you can compromise. The more detailed you are, the better
your chance of finding programs compatible with your business. It
is also true that the more detailed you are, the more time it will
take to research and evaluate each alternative application
If, after compiling all of your information, you find your needs are
fairly complex, you may wish to engage the services of a
consultant to help evaluate your software requirements. If, however,
you are extremely knowledgeable about computer programs, you may be able
to make the choices yourself.
You should look for software packages that meet as many of your
requirements as possible. At this point you should review and compare
the software packages and verify the extent to which each meets your
needs. Consider these questions:
- Does it cover all of your "musts"?
- How many of your other requirements does it fulfill?
- Does it provide additional features you had not thought of earlier
but now believe to be important?
After you have identified one or more software packages fitting your
needs, examine other general features of the software. Consider these
- Does it come with effective documentation?
- Do you understand it?
- Is the operating manual written for the novice?
- Is the information organized so you can use it effectively after
you gain experience?
- How easy is the software to use?
- Does the information displayed on the monitor make sense?
- Is there a help facility?
- How flexible is the software package?
- Can you change data that have already been processed?
- Can you change the program instructions, such as payroll
withholding rates, or will you have to pay the vendor to change
these for you? If you must pay a vendor, what will it cost?
- Will you be required to change any of your business practices? If
so, are these changes you should make anyway?
- Will the software provide the accounting and management
information you need?
- How well is the software documented? (You should be able to
understand the general flow of information, i.e., which program does
what and when.)
- Does the software have security features, such as passwords or
user identification codes? Can it prevent unauthorized access to
- Is it easy to increase the size of files?
- What kind of software support can I expect?
Choosing the software is by far the most difficult part of deciding
on the computer system that is right for you. However, you must also
make sure that the hardware is suited to your particular needs.
The computer and associated equipment known as hardware consist of a
number of components that do different jobs. They include:
- Processor - The thinking part of the computer, known as the processor or central processing unit
(CPU), is designed to execute software instructions and perform calculations.
This device will also control the flow of data, sending it to and
from the memory. The faster the CPU, the quicker you can work
with your data. Processors are measured in something called a
Megahertz (MHz). Today, the CPU can run as fast as 600 MHz.
Also, different processors are more expensive and run faster than
other brands. For example, a Pentium III and an AMD K63 w/ 3D
Now chips are considered equal in speed, yet not in price. The
AMD chip is approx. half the cost; Pentiums are simply more popular.
Pentium Pro's and Calderon's, no matter what the MHz indicates, will
not compete with an AMD or Pentium II or higher. The reason, chip
speed is generated by heat. Pro's and Caldron's are not capable of
getting as hot.
||Note: Despite the fact that processor chips need to get hot
in order run at an accelerated pace, the CPU still needs to be cooled
down. If it isn't, the computer may experience difficulties such as
a burnt out motor. To keep the CPU cool, a large fan is placed
inside the unit. The fan automatically gets activated whenever the
CPU gets too hot.
- Computer memory - Computer memory usually is
measured in bytes (which is a grouping of binary digits or bits).
Roughly speaking, each byte of memory holds one character of data,
either a letter or a number. A 2K (2,048 bytes) memory in practical
terms holds about one double-spaced, typed page. There are two
kinds of memory: ROM (read-only memory) and RAM (random access
memory). We are only concerned with RAM.
- ROM - Read-only memory is a program stored in the
computer memory that cannot be changed by the user or an externally
TYPES OF RAM- There are three types of RAM, which run on many types
- RAM - Random access memory is located in the CPU
and is normally measured in Ks or 1024s (64K = approximately 65,536
characters or about 32 pages of information). RAM is used to store
all the information necessary for the CPU to do its job: The more
RAM, the more programs you can open at one. Information
stored in RAM lasts only as long as the power is on. Once the power
is turned off, all RAM information is erased. Store your RAM-based
data on more permanent storage media, such as diskettes.
Programs today require no less than 8MB of RAM; Most systems utilize
between 32 and 128MB of RAM.
- DRAM- Pronounced "dee-ram," which stands for
Dynamic Random Access Memory. This type of memory is slower than SRAM,
but cheaper too; it must be consistently refreshed or it will lose its
- SRAM- Pronounced "ess-ram," standing for Static Random
Access Memory. This type of memory is faster than the more common
DRAM. Static meaning it does not have to be refreshed, and less
volatile; however, it requires more power to run and is also more expensive.
- SDRAM- Synchronous DRAM, a new type of DRAM that synchronizes
itself with the CPU's bus. This new memory is capable of running at
speeds up-to 100 MHz. SDRAM runs at much greater clock speeds than
conventional memory. Synchronous DRAM is replacing EDO DRAM.
||Note: Two new types of RAM, which will be coming out soon
and SLDRAM. Both types will be capable of running on bus speed of
200 MHz. Today's PC's top out at 100 MHz.
- DOS- The disk operating system (DOS) is software
that controls the interactions among the CPU, disk drive, keyboard,
video monitor and printer. DOS is the authentic operating
system. Windows 3x, 3V or Win98 is not the true operating
system, it's more like wallpaper or frosting that covers over a
cake. Windows is the frosting on the cake. Without DOS
your system will not run; even if you have Windows installed.
- Storage - Just as a company retains its
relatively permanent records in a file cabinet, a computer most
commonly retains relatively permanent information on disks. These
resemble small phonograph records and may be floppy or hard disk. A
floppy disk is single- or double-sided. Diskettes are made of soft,
thin plastic encased in a stiff 3-1/2 paper envelope. Hard
disks are encased in metal and have faster access and more storage
capacity than floppy disks. Hard disks are also much more expensive
than floppies, but their greater storage capacity defiantly make up
for the difference in cost. Every 1000 KB= 1MB. Therefore,
every 1000 MB= 1GB and 1000 GB=1 Terabyte; virtually unheard of.
- Floppy Disks
hold between 720K
to 1.44 MB. Hard Disks are nearly unlimited; they range anywhere
from 2 Gigabytes GB to 25 GBs. Information on a disk is recorded,
retrieved and erased through a disk drive, which is controlled by
the system and application software.
- Other devices
consist of Super
Disks, CDs, Zips and Jaz Drives.
- The Super Disk
is almost like a
floppy, except it holds 120MB of information opposed to the
- The CD
is able to hold 650 MB of
information, which is well over 450 floppy diskettes. The CD-ROM
that holds the CD operates in revolutions; the X indicates 150
revolutions per cycle. For example, a 40x CD-ROM is 6000
- Zip and Jaz Drives
are basically identical, they can be internal or external. Meaning
they are capable of being hooked-up to the printer port in back of
the computer or installed in the CPU just as the Floppy and CD ROM
are. The only differences are the size and storage space.
A Zip holds between 100 to 250 MB a Jaz holds 1 to 2 GB of
information. Also their diameter size in width is different.
- Terminal. - In order for a computer to perform
useful work, you must be able to communicate with it. Most often
this two-way communication is carried out through a keyboard, used
to enter data into the computer, and a display monitor. The monitor
(screen) should be able to display 24 lines of 80 characters at one
time. Some monitors can handle color and graphics. Color graphics
quality is determined by pixels or picture elements. If a display is
280 by 192 pixels, the screen is divided into 280 rows and 192
columns. The larger the number of pixels, the finer or more precise
the picture display will be. EGA or VGA monitors are your best
choice for color monitors.
- Printer. - The main output of a computer system
is usually printed material - reports, checks, invoices, etc. As
with all other hardware choices you make, choose a printer that can
accomplish your specific jobs. The print quality of various printers
ranges from dot matrix to letter quality. Laser printers have surged
in use because of their high quality print and speed and because of
lowering prices and increasing interest in desktop publishing.
If your computer needs are so complex that you need a
customized system (not too likely with today's sophisticated software
and hardware), then you and your consultant should consider:
- The software developer's past performance record.
Does the software developer have prior experience with similar
applications for the same equipment configuration as the one you are
- Commitment of the hardware vendor . Where will your
commission sales representative be after the contract is signed? How
many systems engineers does the vendor have in your area?
- Hardware capacity. Does the hardware have adequate
processing capability to meet your requirements within acceptable
- Quality of systems software. The quality of the
system software (operating systems and utilities) dramatically
affects how difficult the system is to program and use.
- Systems documentation. What kind of systems
documentation does the vendor provide and how is it updated? Can it
be understood at some basic level by the user? Is it designed so
other experts can understand how things were done and change them
- Service and maintenance support. When your system
breaks down, how long will it take to get it fixed? Who will do it?
Will it be subcontracted? Are there any provisions for backup during
- Expandability and compatibility. What are the
technical limits of your system and how close to those limits is
your current configuration? Is there software compatibility among
the vendor's product lines?
- Security. What security features will your system
have to prevent unauthorized use of the system or unauthorized
- Financial stability of vendors. Are the vendors
If you decide to purchase a complete hardware and software system
(turnkey system) rather than buying the software and hardware
separately, you should have a contract or agreement. Examine the
standard contract supplied by the vendor. Be aware it may not protect
your interests. If you have any questions, have your lawyer review the
contract and suggest changes to help you implement the system.
An important part of the contract is the payment schedule. Do you pay
before or after installation? Will you pay for the installation
periodically on a draw schedule? The more money held back until the
installation is complete, the more power you will have to ensure that
the vendor satisfactorily completes all that has been promised and
The contract should include detailed references to the following:
- Description of equipment and software.
- Installation responsibilities.
- Provisions for additional equipment.
- Performance guarantees.
- Responsibility for training.
- Software rights.
- Provisions for default, bankruptcy of vendor or termination of
- Software documentation.
- Systems documentation.
- Responsibility for hardware freight charges and sales tax.
- Acceptance testing.
- Conversion responsibilities (from manual system to computer).
- Upgrading privileges and trade-in rights.
- Restart (what is required to restart system from failure).
If the contract is for software developed especially for you, the
contract should specifically refer to your RFP and the vendor's
responding proposal. A good contract will help you prepare for the
system's installation and ensure a more satisfactory business
Factors to consider when selecting your computer system include:
- Reliability: How qualified are the
manufacturer and the vendor? What is their reputation? What is the
incidence of repair on the system equipment?
- Resources: How long have the
manufacturer and vendor been in business? How strong are their
financial positions and credit ratings?
- Services: Are ongoing consulting,
training, supply and repair available?
- Rates: Are charges competitive? What
terms are offered?
- Backup: What happens if your system
As suggested before, successful computer applications for your
business depend heavily on the implementation process. Problems are
inevitable but proper planning can help avoid some of them and mitigate
the effects of others.
- Employee involvement The success of a
new computer system will depend on the cooperation of your
employees; therefore, it is important to involve them as early as
possible in the implementation. Explain to each affected employee
how his or her position will change. To those not affected, explain
why their jobs will remain unchanged.
- Schedule for implementation Set target
dates for key phases of the implementation, especially the last date
for format changes.
- Installation site: Prepare the installation site. Check the
hardware manual to be sure the location for your new computer meets
the system's requirements for temperature, humidity and electrical
- Converting applications Prepare a
prioritized list of applications to be converted from manual to
computer systems. It is important to convert them one at a time, not
all at once. Prepare a list of all business procedures that will be
changed so the computer system will fit into the regular work flow.
Develop new manual procedures to interface with the computer system.
- Training Train everyone who will be
using the system.
When these steps are complete, the computer system can be installed.
Each application on the conversion list should be entered (files set up,
historical data entered and the system prepared for new transactions)
and run parallel with the preexisting, corresponding manual system for a
number of processing periods. This means that two complete systems will
be running, placing a great deal of pressure on your employees and on
you. However, until you have verified that the new system works, it will
be worth the effort.
||TIP: Be sure to insist on progress reports from everyone
involved in the changeover.
At the same time you are converting each application, you must begin
dealing with the long-term issues that will keep your computer operation
If you will have confidential information in your system, you will
want safeguards to keep unauthorized users from stealing, modifying or
destroying the data. You can simply lock up the equipment, or you can
install user identification and password software. You can also:
- Control access to your computer, disks and reports.
- Label all disks to identify their contents and verify correct
- Initiate original accounting transactions, adjustments or
- Rotate computer employees or schedule their vacations to expose
possible unauthorized practices.
- Require dual signature authorizations to control software
Data, confidential or otherwise, can be destroyed by unexpected
disasters (fire, water, power fluctuations, magnetic fields, etc.) or
through employee tampering, resulting in high replacement costs. The
best and cheapest insurance against lost data is to back-up information
on each diskette regularly. Copies should be kept in a safe place away
from the business site. Also, it is useful to
- Have and test a disaster recovery plan.
- Identify all data, programs and documents needed for essential
tasks during recovery from a disaster.
Just as with a manual system, it is important to have more than one
employee who knows how to operate the system. Once your business relies
on the computer system, the absence (sickness, termination, etc.) of a
computer operator can be devastating unless another person is prepared
to fill in.
Although computer systems allow small businesses to process more data
more accurately than ever before, there is a chance that the same system
can cause greater problems if left unsupervised. All systems, manual or
otherwise, must be continually monitored to ensure the quality of the
input and output data.
If all this seems like a lot of work, it is. The computer, like any
tool, requires learned skills in order to fulfill its purpose properly.
If you believe that you and your business need a computer, plan to spend
the time and the money it takes to make its installation and operation
of the system successful.
With little knowledge of computers, you can buy a personal computer
with applications for your business. With some guidance, study and
experience, you can develop computer-based management planning and
control expertise. By taking advantage of the speed and complex
capabilities of a computer, you can tap the potential for growth and
profit in yourself and your business.
Technology is continually evolving. Personalized guidance on the
state of current technology in choosing a system which will both meet
current needs and grow with your business, will be very helpful.
|Shows the due dates for filing tax returns, reporting tax information and taking certain actions to obtain a tax benefit.