Assess the viability of Companies using SMART Accounting

I am a Chartered Accountant qualified in South Africa and I have designed two Reports which are vital to me in order to assess the viability of Companies on behalf of clients.

These Reports are:

• Cashflow Statement
• Financial Analysis of Accounts

To produce these reports all one has to do is to take the company’s latest Trial Balance or Balance Sheet, as well as a summarised Income Statement and code the accounts, using the Smart Code Chart.

Thereafter, one process the transactions in form of journal entries on SMART Accounting, using the date of the latest document used.

After the transactions have been processed, one prepares a Trial Balance using the Special Reports Section.  The Trial Balance must be prepared using the same date as the transactions entries.

Print the following Special Reports after completing the Trial Balance:

• Cashflow Statement
• Financial Analysis of Accounts

This Cashflow Statement clearly shows the source of funds:

• Profit or Loss
• Use of Creditors’ Money
• Members’ Loans
• Bank Overdraft
• Share Capital
• Long Term Loan

• Investment in Debtors
• Investment in Stock
• Bank Overdraft Reduced
• Long Term Liabilities Reduced
• Acquisition of Assets

The Financial Analysis of Accounts Report will highlight the following which can then be interpreted to assess the liquidity of the Company.

• Return on Capital Employed
• Return on Equity
• Effective Rate on Bank Overdraft
• Effective Rate on Long-term Debts
• Liquidity Ratio
• Acid Test Ratio
• Debt Coverage Ratio
• Assets Ratios
• Protection of Shareholders
• Ratio of Earned Capital to Share Capital
• Management Data:
• • Gross Profit percentage of Sales
  • Net Loss Before Tax percentage on Sales
  • Operating Expenses percentage on Sales
  • Accounts payable months allowed
  • Accounts Receivable months allowed
  • Stock on Hand turnover

I found that by using these Reports it did not take very long to assess the liquidity of the Company as well as its good governance.  In my accounting practice I have help numerous clients in acquiring new companies, by assessing the position of these companies using these reports and advising them as to the good or poor running of such companies. I found this method to be quick and effective.