What is a Computerised Accounting System? Pros & Cons
Introduction
Corporate lives have always been challenging, the only difference is that today we have a wide range of technological advancements at our service. Now have you ever come across a computerised accounting system? Well, as the name implies, these computerized accounting systems certainly surpass the conventional and boring accounting systems which were quite time-consuming and prone to errors. Not anymore with the inception of computerized accounting systems, the way for conducting business has improved to a great extent. Now the following post focuses on what a computerized accounting system is, how it is beneficial in the long run and what are its disadvantages.
What is a Computerized Accounting System?
Well, for starters it is a system that successfully evaluates profitability for different organizations. The system also succeeds in enhancing the overall financial performance. With seamless technological advancements, manual accounting seems to have become pretty redundant since it ensures human errors. As a result, businesses of all sizes tend to rely on accounting software and technologies just to ensure that businesses can check accounting tasks and their precision off their list.
Now a computerized accounting system is a software program that can be easily installed on your computing devices just so that you can take care of all the financial dealings, reports, data, and statements. Just so you know these computerised accounting software can be easily accessed remotely with the assistance of your mobile devices. All you require is a strong Wi-Fi or mobile connection.
What else can these systems do? Well, they can act as a primary tool for recording, and tracking as well as generating an insane amount of accounting transaction reports for every kind of business organization, small, medium, large, and so on. Some of the core modules of these computerized accounting systems include:
Bookkeeping for tracking as well as managing payments and collections
Generative accurate invoices for your customers
Taking care of the general ledger
Specific inventory module for taking care of products (right from purchase to sale)
Accounts that are highly payable for processing different vendor invoices
Accounts where customer invoices can be received
Purchase order module for monitoring as well as managing different inventory orders
A module for debt collection
However, all these mentioned above are just the basic ones, you will come across numerous computerized accounting systems featuring modules such as electronic payment processing which can assist you in conducting transactions using different electronic mediums. So are you sick and tired of using a manual accounting system? If so, a computerized accounting system can be your best bet here.
Additional Information
Some interesting facts about Computing Accounting systems one must know. For example, the concept of an advanced computerized accounting system came into existence in the 1950’s, yes it’s the same time when business computers first came on the market. So in other words, computerized accounting is way more high-tech, all thanks to ever-evolving smarter and faster operating systems, portable wireframes, and seamless accessibility due to numerous available cloud software. It is assumed that by the year 2026, the market of computerized accounting systems is expected to hit $20, 408 million. No kidding! At the same time, the demand for digital tools and technologies is assumed to reach an 8% compounded annual growth rate (CAGR).
What does accounting software do?
Accounting software successfully automates and streamlines all accounting procedures
Computing devices tend to record and track businesses' financial transactions
Software is pretty ideal for record-keeping and analyzing
It thoroughly records the purchase of goods and services, sales values as well as other financial transactions.
Accounting software eventually saves time, money, and other resources
The business tool works wonders for bookkeeping as well as other financial operations
All kinds of accounting tasks and financial transactions have become way more easier and accurate.
The key process of a Computerised Accounting System
Quick and accurate Recording - The first step in an accounting system is to successfully record all kinds of financial transactions such as sales, expenses, equipment purchases, loans as well as asset sales.
Classifying - The second process is regarding the classification of transactions. So what categories are considered here, it’s like revenue, expenses, assets, liabilities and so more?
Summarising - The next step to take into consideration is quick summarising. A computerized accounting system successfully summarises all kinds of transactions. Now this happens usually in the form of financial statements. Right from balance sheets to cash flow statements, and income statements, all these are included in a computerized accounting system.
Analyzing - Once all the statements are successfully summarised, it’s time to analyze each one of them and create appropriate reports. Business owners tend to successfully assess a company’s performance and look around for appropriate problem areas and ways to enhance their decision-making procedures.
Financial reporting - Last but certainly not least is financial reporting. Here all the necessary information is sent in the form of financial statements and analyses, to relevant stakeholders. Right from creditors to lenders, management, and tax regulators, everyone is involved in this stage of computerized accounting software.
Must-have Features of a Computerised Accounting System
Invoicing
This one is a pretty basic and must-have feature in any computerized accounting system. Here the system automatically sends out an invoice. The invoicing aspect successfully stores all customer data and generates accurate invoices for their valued clients. Here they tend to remind of outstanding bills and successfully help in effective billing and conducting appropriate invoicing practices under the updated industry standards.
Banking
Another outstanding feature to consider is banking. A robust, innovative, computerized accounting system successfully keeps full-fledged track of banking accounts and imports data from the bank into the system. It comprises automatic payment module prints that check and schedule bank payments and direct deposits ensuring seamless automation of bank payment procedures.
Reporting
The next feature of a computerized accounting system to consider is reporting. Here you will find a wide range of reporting options featuring balance sheets, income statements, highlighting profit and loss, cash flow statements, payroll summaries, and so more.
Here you will come across a wide range of customizable reporting features that successfully assist in generating reports right according to your preferences. Such a feature can successfully assist in understanding where your money is going.
Inventory Management
The next interesting feature to consider is inventory management. If you are looking for a billing software solution that seamlessly manages your stock. Not just that, the feature also assists in keeping tabs on the overall availability of the products so that it is possible to deal with delivery issues in no time.
Budgeting and Forecasting
The next feature to consider is budgeting and forecasting. This feature acts as a great tool that successfully calculates as well as depicts overall financial performance for the current as well as a few fiscal years down the line. In addition, a balance sheet is successfully summarised to portray how well your business is performing at the moment. Moreover, here it is possible to set up realistic sales targets.
Payroll
Accounting software packages mostly feature sophisticated payroll modules for managing all kinds of aspects of payroll. It is not possible to generate different payroll payments and successfully process different checks on time. This surely results in the simplification of managing variable pay schedules and enables businesses to stick to tax commitments.
Multi-functionality
Another intimidating feature of computerized accounting software is its high-end multi-functionality. Now we all are well aware of the fact that managing finances across multiple currencies can be quite tricky. However, the following feature assists computerized accounting systems in accumulating data from a wide range of business locations with the assistance of the right invoicing solution. Moreover, it is also now feasible to record and delineate financial dealings in various currencies.
Further below I would like to mention how a computerized accounting system is beneficial in the long run for your business or why more and more businesses are found trending towards the concept of computerized accounting systems.
Benefits of Considering a Computerised Accounting System
1. Automation
The first and foremost benefit to take into consideration is automation. Now, of course, manual accounting systems have been in vogue for a while. However, it came with lots and lots of issues such as being prone to human errors, time consumption, no time for innovation, costly ventures, and whatnot! Fortunately, with the inception of computerized accounting systems, the scope for automation has increased to a great extent and also resulted in the enhancement of efficiency, saving adequate time, minimizing errors, and whatnot! Let’s say if an insurance bank office incorporates computerized accounting software then translating quicker policies of the client, claims and financial transactions can amazingly streamline the workflow.
2. Real-time updates
The next benefit to take into account is real-time updates. Yes when you opt for a centralized accounting system, it is quite possible for real-time updates. In other words, an instant reflection of changes can be found in the financial data. Not to mention this benefit means your accounting system is pretty accurate and reflects the latest transaction as well as policy changes. Also, immediate insights can be gained and this applies everywhere even your current financial status which eventually results in quick and precise, and accurate decision-making. Now this feature is pretty much needed because timely responses to policy changes or financial transactions are important.
3. Speed
The next benefit of considering a computerized accounting system is speed. Yes, swiftness is pretty much crucial and beneficial in a computerized accounting system. Once data is successfully imputed in a connected module. All kinds of information and procedures can be well taken care of.
4. Cost-effective
The next benefit of a computerized accounting system is that it turns out to be way more cost-effective in comparison to hiring an in-house accountant. Yes, this could be way more expensive for small business owners. As soon as you happen to deploy a computerized billing system, it means you happen to pay for just purchasing and installing the accounting data software and an occasional software upgrade.
5. Advanced Security
The next benefit to take into account is advanced security. Advanced data security involves a wide range of features such as encryption and access controls. So this successfully protects sensitive information from unauthorised access and data breaches. Just whenever you look around for a computerized accounting system, make sure you are successfully compliant with data protection regulations as well as maintain significant trust with your customers.
Apart from these, other benefits include:
Computerized accounting systems turn out to be more reliable
Reduced human errors
Quick decision-making
Simplify tax compliance
Saves time
ERP and AMS integration
Data Accuracy
Now who says that a computerized accounting system doesn’t have a fair share of disadvantages? Further, I would like to mention certain disadvantages of computerized accounting systems.
#1 Learning Curve
One of the biggest disadvantages of considering a computerized accounting system is its learning curve. Transitioning to computerized accounting systems can be tough. Not to mention, this can successfully decrease the overall productivity of employees.
#2 Cybersecurity Threats
The next disadvantage is cybersecurity. You see security breaches keep on happening now and then. From ransomware attacks to breaches, and phishing attempts, these cybersecurity threats can be quite a disadvantage here.
#3 Limitations of Customization
Last but certainly not least we have limitations to customise. You see, different organizations tend to have different kinds of needs and requirements. So addressing specific needs can be a tough call.
Conclusion
And we are done for now! This is what a computerized accounting system is all about. No matter, if these systems seem to have undeniable advantages, computing accounting systems, are pretty important to cope with the modern financial scenarios. I hope you did find the post insightful.