- 9 Advantages of Computerized Accounting. An accounting system is a collection of processes, procedures and controls designed to collect, record, classify and summarize financial data for interpretation and management decision-making. Computerized Accounting involves making use of computers and accounting software to record.
- Advantages and disadvantages of using manual accounting system accounting? An advantage to using manual accounting systems is that there is a written record of transactions.
- Manual Vs Automated Accounting System
- Advantages Of Manual Accounting System Advantages And Disadvantages
- Key Advantages Of Automating A Manual Accounting System
Manual systems put pressure on people to be correct in all details of their work at all times, the problem being that people aren’t perfect, however much each of us wishes we were. With manual systems the level of service is dependent on individuals and this puts a requirement on management to run training continuously for staff to keep them motivated and to ensure they are following the correct procedures. It can be all to easy to accidentally switch details and end up with inconsistency in data entry or in hand written orders. This has the effect of not only causing problems with customer service but also making information unable be used for reporting or finding trends with data discovery. Reporting and checking that data is robust can be timely and expensive. This is often an area where significant money can be saved by automation.
The main advantages of a computerized accounting system are listed below: Speed – data entry onto the computer with its formatted screens and built-in databases of customers and supplier details and stock records can be carried out far more quickly than any manual processing.
It takes more effort and physical space to keep track of paper documents, to find information and to keep details secure. When mistakes are made or changes or corrections are needed, often a manual transaction must be completely redone rather than just updated. With manual or partially automated systems information often has to be written down and copied or entered more than once. Systemisation can reduce the amount of duplication of data entry.
Another impact of manual systems is on Customer service. Customer queries can be difficult to respond to as information is stored in different places and may even require that you find the right person before being able to respond. This is no good if they are out to lunch or only work part time.
- Inconsistency in data entry, room for errors, miskeying information.
- Large ongoing staff training cost.
- System is dependent on good individuals.
- Reduction in sharing information and customer services.
- Time consuming and costly to produce reports.
- Lack of security.
- Duplication of data entry.
Which raises the question if systemisation has such benefits, why aren’t all business running fully integrated systems. There is always the obvious balance of cost vs benefit, as an organisation grows and adds people and functions the benefits of systems increases. Often when an organisation is growing it’s the time that they need to put in a new system, however this is also the time that there is significant pressure on existing resources and it’s the hardest time to make a change.
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There's a thing about technology that's easy to forget: You don't always need to use it. You can still buy your groceries from a list on a notepad, you can still get where you're going with a paper map instead of a GPS and you can keep your company's books in actual books instead of an accounting program. It may seem counterintuitive, but for many small businesses, a manual accounting system is the practical, pragmatic option.
Ease of Setup and Entry
A traditional manual system would typically use one ledger each for receivables, payables and sales, and then consolidate those figures into one general ledger. You can either set them up yourself or have a bookkeeper do it for you, but either way, it can be done in an afternoon. Once everything is ready, you just need to sit down at closing time to enter the day's transactions, or – if you prefer – sit down the next morning to enter the previous day's transactions.
A computerized system can take longer to set up, although your accountant probably does it on a regular basis and can tweak a standardized set of accounts to fit your business's needs. Once the accounts are set up, you'll need to either learn how to use the software or hire someone who's got experience with it. Paper ledgers can potentially get you up and running more quickly, which is a small win for manual systems.
Transparent Error Correction
You can make a case for either manual or computerized systems when it comes to fixing errors in your books. With a paper ledger, you'll be able to simply erase and overwrite any inaccurate entries, or cover them with correction fluid. It's quick, it's easy and the corrections are self-evident. Computerized accounting systems don't show physical corrections and erasures like paper ledgers do, so instead, they have built-in safeguards to create an audit trail from any changes. That can make corrections more time-consuming, but it means you'll have a solid paper trail.
Everything at a Glance
Generating informative reports and graphs is one of the strengths of computerized accounting, but creating those reports and graphs isn't always the simplest process. With a paper ledger, remembering how to conjure up the figures you need is never a problem. Just open the appropriate ledger to its current page, and the numbers are right in front of your eyes. For a small business with modest numbers of transactions, a manual system can be simpler, but as you grow, you'll appreciate the more powerful reporting features of a software-based system.
Data Security and Access
How long has it been since you last read a news story about a company's data being stolen or compromised? A day? A week? If your accounting systems are connected to the internet, they're vulnerable to hacking, and even standalone computers can fail. Unless you back up your data diligently, either to other computers or the cloud, you could be in real trouble.
Paper ledgers can be less problematic. Data security is a simple matter of locking them up at night in a fireproof and waterproof safe, though it's still prudent to keep a second set of books in a separate location in case of a natural disaster or another catastrophe. That gives a slight security advantage to manual systems – you'll never get hacked – but with computerized systems, you'll have access to your accounting data even when you're on the road, which is a major advantage of automation.
Size Matters
The two big issues with manual accounting are accuracy and growth. When numbers have to be manually added to ledgers and then transferred between them, you're creating the potential for errors. You can minimize errors by using the so-called 'one write' systems, which copy your entries onto the underlying pages so you don't have to re-enter them, but mistakes will still creep in.
Time is another factor. Manual accounting is an efficient answer for small companies, but as your business grows, entering transactions manually will begin to sap more and more of your time. Even if a manual system makes the most sense for you today, you should keep one eye on the future and have a plan in place to transition to a computerized system when the time comes.
References (4)
Manual Vs Automated Accounting System
About the Author
Fred Decker learned business fundamentals at second hand as an insurance and mutual funds broker, and at firsthand as a retail store manager and the chef/proprietor of his own restaurants. He has written hundreds of business-related articles for sites including Zacks.com, Chron.com, Vitamix.com, Bizfluent and GoBankingRates and many others. He was educated at Memorial University of Newfoundland and the Northern Alberta Institute of Technology.
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Decker, Fred. 'The Advantages of Manual Vs. Computerized Accounting.' Small Business - Chron.com, http://smallbusiness.chron.com/advantages-manual-vs-computerized-accounting-4020.html. 01 March 2019.
Decker, Fred. (2019, March 01). The Advantages of Manual Vs. Computerized Accounting. Small Business - Chron.com. Retrieved from http://smallbusiness.chron.com/advantages-manual-vs-computerized-accounting-4020.html
Advantages Of Manual Accounting System Advantages And Disadvantages
Decker, Fred. 'The Advantages of Manual Vs. Computerized Accounting' last modified March 01, 2019. http://smallbusiness.chron.com/advantages-manual-vs-computerized-accounting-4020.html
Key Advantages Of Automating A Manual Accounting System
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