Many businesses now use computerized information accounts because they find them beneficial in terms of cost and the information they provide. For many businesses, and particularly smaller businesses, computerizing the accounts can be a marginal proposition. For example, a sole trader isn't going to have a computerized account system, as they are not big enough and won’t be able to afford it. As they do not operate in large markets and the system will be too expensive. With the advent of the PC and the user-friendly accounting packages, even the smallest of businesses may use a computer to record all their financial transactions.
By computerizing the businesses accounts, they will automatically save time, money and effort. Larger organizations invariably use computers and reap the benefits of efficiency and accessibility of information. The major advantage of a computer accounting system is that it is very accurate. This is because the data (for example, invoices, receipts, payments) are keyed in once, therefore avoiding any further opportunities for human error and once again increasing efficiency whereas a manual accounting system can produce errors when placing figures.
A computerized accounting system can be of a great benefit to a business; it will enable the owner to control the business better by streamlining procedures and providing more management information. If the computerized system is for a small business like a sole trader or a partnership, the decision is to whether to install the system, as it may be of much convenience, as it is too expensive, as they have not got the funds. When the system is introduced it must be chosen with great care and with proper professional advice, this is mainly because it has to be suited to the companies required needs and it must be easily operated by the intended workforce.
If a business wishes to cut the amount of work from that of a paper based system, a computer and printer will organize the business a substantial amount of time. The financial information is stored in exactly the same way as a paper based system. The main difference is that the computer makes all the entries for the business, based on the information entered, and then will prepare the accounts. There are fewer worries of the accounts balancing because each entry made will be automatically be entered into the right ledgers.
There are therefore some potential problems with a manual and computerized system. If used correctly and a careful eye for error is used, then the computer based system will save the user time in the long run compared to an manual accounting.
The benefits of a computerized computer system allows staff cuts to be made, as a book keeper will no longer be needed, but instead someone who is comfortable with the software. There will also be a large cut in paper-based records. All finances can be accessed through the computers memory. In essence a computer-based system will give the company more control whereas if using a paper based accounting method tracking transactions could take a long time.
All management information can be accessed, and analyzed. Within minutes it is possible to see how well the business is performing. This can be analyzed, daily, weekly, monthly, or annually, or whatever the company prefers. The user can analyze debtors and creditors with immediate reports. All this information is not readily available with a paper-based system. It could take several hours to prepare this sort of information with a paper-based system.
A computerized accounting system can be used to look after all your invoicing for the company. This saves duplication because in the event you need to enter all your sales into your records. Then all is needed is to access the software to produce the relevant invoice. Also if an invoice is not paid immediately a follow up invoice can be produced quickly. Accounting records are kept up to date, and will then spend less time on the accounts.
If the company is registered for VAT the company can calculate the VAT by a computerized accounting system. The price of the software is equaled out on the amount of time saved compiling the returns manually. These calculations would take several hours to do manually. In addition to the example above, the company can undertake a detailed analysis of the company's costs within minutes, comparing any number of comparing figures using the computer. These benefits offer more control that a manual based system.
In conclusion because of the minute-by-minute change in finances, accurate record keeping is critical. Computerizing accounting tasks increases efficiency. With a computer, you can request and receive accounting reports at a moment’s notice. The most important advantage of using the computer is the speed with which we can get accounting done. In addition, we find that it is very easy to do accounting functions. For example the task of doing double entry, when done from the accounts system it is automated which means the accounting system automatically performs the double entry.
However using computerised accounting may have drawbacks, it is possible that data can be lost because of hardware or software damage. Since the computer has no judgement of its own, it does not pick up on errors as a human being does. There can be loss of data due to accidents like fire etc. There can be loss of data or change of data due to fraud or embezzlement. There can be loss or unavailability of data due to loss of staff. Inaccurate data may be due to clerical error or mistakes in programming. Total security is unachievable and some failures must be expected. The right level of expenditure on security measures will minimize the sum of the cost of the measures and the expected loss. The package cost, although small in relation to your other costs, is higher than a paper-based system. Businesses may need to purchase yearly maintenance and support for the accounting package.
