Even in an SME I would also need a system for accruals and prepayments as well.
Simple example
I need to know my profit this month. I have added up my cashbook for the month and it contains an entry for 3 months of rent in advance for my office. It is September and that is the rent for October, November, December. How do I get it out of my profit calculation for September and split into the correct months? This is important, my bonus is based on profit. My bank loan covenants are based on profit. My equity split with my investors is too, as is my tax payable. In double entry I would move this into my prepayments account and move it back in 3 tranches.
Simple example
I need to know my profit this month. I have added up my cashbook for the month and it contains an entry for 3 months of rent in advance for my office. It is September and that is the rent for October, November, December. How do I get it out of my profit calculation for September and split into the correct months? This is important, my bonus is based on profit. My bank loan covenants are based on profit. My equity split with my investors is too, as is my tax payable. In double entry I would move this into my prepayments account and move it back in 3 tranches.