Orax SDI Cloud Reference

Financial overview

The basis of good business is good accounting practices. The Orax SDI system allows you to manage your entire company, including its financials. To empower good business decisions, you need to get the basics right. This is a quick overview of how to setup and run your business on Orax SDI. It is meant to be read by business owners and managers.

Proper accounting and business management should give you several outcomes:

1. A sound Trial Balance that your auditor can use to create your year end financial statements.
2. An accurate General Ledger that can be used for Tax purposes (VAT returns, PAYE payments and other taxes).
3. Month-to-month and year-to-year financial performance overview for management purposes.
4. Budget variations on the Profit and Loss statement and budget management for expenses.
5. Checks and balances to ensure that the above is accurate.

Further important aspects of business health:

1. You need to manage your cashflows effectively by relying on your accounting information rather than bank balance.
2. Debtors and creditors should be managed effectively to ensure that all your efforts do not go unpaid.
3. Payroll should be efficient and form part of your accounting.
4. Inventory and production can account for large losses if mismanaged.


How to start and keep it healthy:

No matter how much you sell or enjoy your business, your financial health determines the viability of the business. You need to use checks and balances to ensure that all is healthy. Lets start from the bottom and work our way up.


1. General Ledger

All transactions should be balanced by having debit and credit entries in the General Ledger. The outcome is a balanced Trial Balance. This is done automatically for you based on the below activities. Ensure that you have a GL Account for all expenses and control accounts. Start simple (with the default set of accounts and only add as needed). Once you're happy, these do not change much over time.


2. Bank accounts (cashbooks)

This is 90% of your financials. You have to get this right. Create a "Bank Account" in Orax SDI for each physical bank account in the real world. Also create "bank accounts" for personal Credit Card Disbursements, Cashbooks, Cash registers and other cash related control activities. Import your bank statements at least once a month (or once every 2 to 3 weeks). Make sure your bank reconciles 100% (not one cent missing) after processing a bank statement import. This is a very important point. If your bank accounts do not reconcile 100% with your real world bank accounts your accounting is flawed. This single step is so important that it basically makes or breaks your financials.

Note that bank transactions are the "checks and balances" of your business activities. Eg. A sale should result in a receipt in your bank - immediately or over time. Once you understand the importance of having this your focus on accurate accounting will be much enhanced. It keeps you safe (not only from a tax perspective). It helps you discover losses and mistakes.


3. Source transactions

Bank transactions are a result of a business actions. These business actions are recorded in "source documents" like invoices and payslips. You can actually run a business without source transactions by only importing your bank statements, but its not a good idea. The following source transactions are typical and should probably be recorded in your business:

a. Sales Invoices - proof that services or products where delivered and that money should be received.
b. Purchase Invoices - proof that services or products were receive and that you need to pay money.
c. Payslips - proof that someone earned a salary and should be paid from the bank.
d. Journal Entries - accounting adjustments (not often used).

Source transactions are automatically written to the General Ledger (GL) by the system when you "Post to GL" in the Ledgers module.


4. Reports used for management

The following reports are very important and need to be used to ensure business health:

a. Customer statements (prepared in batch) to ensure you are receiving your promised income.
b. Creditor reports to ensure you pay on time.
c. VAT and PAYE reports to ensure you pay the correct taxes.
d. Inventory reports to ensure you are not losing assets.
e. Profit and Loss statement to ensure your effort makes money.
f. Trial balance to ensure your financial position is strong and healthy.
g. Budget variance report to ensure you are staying on target.


During the busy operational rush of a typical business its easy to neglect the administrative task of accounting. This is a high risk mistake and you will often find that after a busy year you spent a lot of time doing things that did not make money or lost money due to mismanagement of accounts or assets. Which basically means you were wearing yourself out for nothing. Configure routine tasks in Orax SDI to remind you and the persons responsible for your accounting activities to keep at it. Also consider keeping a close eye on the accounting health. Never make buying decisions based on your bank balance. Use your business accounting health.