To many people the idea of physically building a house themselves from scratch would also be a daunting task and many would say they couldn't do it.

If, however, I drew two parallel lines on the ground, gave you a ruler and shovel and said dig a trench between those lines 300mm deep you could conceive doing that. Then I said put these strips of steel in the bottom and fill the trench with the concrete that will be delivered by truck and level it out you would imagine that being quite within your reach. So the instructions go on - one step at a time, one brick at a time, one nail at a time until the house is built.

The concept of just having a plan and building the house without specific instructions, or having the task broken down into small manageable pieces, is the exact opposite and could be conceived as enormous. The concept of just digging the trench is simple. The concept of now adding the steel is simple - until the whole project is finished. Therefore the step by step approach and not worrying about what is to come later makes the whole project manageable and, who knows, could even be fun.

The concept of setting up accounting software should also be reasonably simple - if taken step by step, stage by stage.

Most accounting software packages will let you take this approach and, as with the house example, it is important that you set yourself a plan of implementation and don't move onto the next stage until you have perfected the stage you are working on. Don't start laying the bricks until you have finished, and are happy with, the foundations.

Some accounting software trainers and even some accountants will encourage you to get the whole thing, all modules, up and running from day one, or by some unrealistic date deadline.

Some will sit there for hour after hour, at your expense, training until your brain is totally numb and confused. Don't accept this. It is easy for them - they know what they are talking about - they have probably been there dozens and dozens of times before and know the thing inside out. You are fooling yourself and probably paying buckets of money out for training when most of it will be wasted, simply because you haven't given yourself a chance to understand the basics and work at your pace and level of understanding.

If you are paying someone to train you on accounting software make sure that the sessions are no longer than around two hours each. Much more than this and you are wasting your time and money and will in all probability end up discouraged, definitely confused and even disinterested. Don't let them push you onto something new until you fully understand the stage you are currently doing and, ideally, have had some practice at it and watched it interface into the ledger. Accounting software setup can be a complex issue with some packages but simply take it slowly - step by step.

Starting the actual setup

I am probably going to ask you now to understand and setup some things that you just don't understand. That's OK for the time being as my philosophy is for you to re-visit it until you do understand.

In most accounting software it is probably advisable to set up the general ledger first, or at least the different accounts in the general ledger for income and expenses as well as some simple balance sheet items like bank account, trade debtors, trade creditors etc. It is a good idea anyway as it shouldn't take that long and will give you the tools from the outset to follow the double entry bookkeeping principles from day one. There is a section on this site about double entry principles - if you don't understand then use it.

You probably don't even have to fully understand at this stage what you are doing or why. This is the only exception that I will agree to that you can setup something that you don't fully understand and then move on.

If you really and absolutely don't want to start with the ledger in your accounting software, and your accounting software will let you continue without it, is not the end of the world and can be done later. Go onto the next section - 'Setting Up sales and Customer Invoicing'. Having said that give this a go first it is probably worth it in the long run and probably not as hard as you imagine.

Remember - you must feel comfortable with whatever you are doing.

The Ledger - Setting Up

The list of accounts in the ledger is typically called the 'Chart of Accounts', with the accounts being grouped in their like categories i.e. sales, expenses, assets and liabilities.

You may decide to ask your accountants advice on what accounts are necessary but the following is a good guide and a start if you want to go it alone. Common sense will also help.

Almost all accounting software packages will require you to use a code for your ledger accounts and many will also have the option of having departments and, or, sub codes attached to each code or account. You almost certainly should ignore the departments and sub accounts at this stage if not forever. They are useful in large businesses but tend just to confuse the issue when you are starting out.

Some accounting software packages come with a chart of accounts already set up. That's OK, it may save you some work. If so print it out and relate to it.

Manyaccounting software packages will accept a numeric code only, some will accept alpha/numeric. I think numeric only is a good way to go if possible because it is a good way to group codes into categories. Many systems will allow up to twelve or more characters in the code and I have seen some small businesses use all twelve. This is a nonsense and, if you use numeric only, 4 numeric characters should be more than enough. There is a complete section on another page about charts of accounts and I suggest you have a read of that as well.

Now the ledger is set up what next

There are sections on my site that cover the following steps and they are probably the order in which you should proceed.

* Sales and Customer Invoicing

* Products

* Accounts Payable

I have been involved in all aspects of the accounting software industry for over 20 years. I run several websites that specialize in various subjects including http://www.diyaccounts.com.au that gives advice on all aspects of accounting software from choosing, setting up and using it. Amongst other sites that I run are http://www.sense-now.com that helps newbies understand what internet business will probably work for them and what won