In recent times, accounting software has become one of the most indispensable tools for all types and sizes of businesses.
As a business owner, you would know how difficult it is to manage all your finances through manual data entry. A standalone accounting system simplifies financial operations through strategic planning and control of business processes within an organization.
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However, integrated accounting systems are gaining much popularity. You may ask why. Integrated accounting software has a lot of benefits to offer that enable organizations to run and expand their businesses efficiently.
Before we delve further into its benefits, let’s try to understand its basics.
What Is An Integrated Accounting System?
An integrated accounting system is an upgraded version of accounting software that combines all the major financial functions into one application. In short, it eliminates the need to maintain separate books or records for management accounting purposes, such as ordering, costing, and much more.
An integrated system combines different software applications effortlessly without additional and expensive software or manual manipulation.
For instance, it will automatically re-key information from the order management system into the accounting software. It saves time and effort and reduces the chances of any human error. Plus, the system receives a constant flow of data, always up-to-date.
Features Of An Integrated Accounting System
It is crucial to have integrated accounting software tools to manage modern accounting tasks. Many systems combine customer relationship management software and full inventory management to form a fully integrated enterprise resource planning software. Therefore, finding an accounting system that you can easily customize to meet your needs is important. Here are five features to consider when choosing integrated accounting software:
Accounts Receivable & Accounts Payable
AP and AR departments assist firms in projecting their cash flow needs. Account Receivables handles customer payments, while Account Payable handles supplier payments. These teams use software to forecast the company’s cash inflows and outflows to minimize expenses and smooth working capital needs. For example, account payable software can notify teams when vendors offer discounts for early payments or bulk prices annually, reducing procurement costs.
Vendor Management
An automated accounting system generates and forwards purchase orders to the buyers’ accounts department, resolves any queries, and verifies receipt of goods to prevent scattered vendor data, unmanaged supply chains, and out-of-date invoice processing.
Reconciliation
Accounts teams find reconciliation to be the most difficult process. Matching invoices and payments helps keep track of cash flow, but sometimes they end up paying the same invoice twice. It is essential to use an automated system to avoid situations such as these. It ensures timely payments of dues and invoice reconciliation and prevents the cost of duplicate expenses.
Bookkeeping
Integrating software simplifies bookkeeping and reduces accounting statement preparation time by automating the flow of financial data like revenue and expense data into the proper accounts and creating appropriate journal entries.
General Ledger
Accountants use a general ledger to schedule statements and reconcile cash flows. The preparation of a GL becomes more difficult as a company grows. Multiple systems can create data silos that can lead to incorrect financial reporting. As a result of an integrated accounting system, all expense reporting and accounting is automated, which results in less manual work for accountants and more time to plan and analyze in-depth financial strategies.
Benefits Of An Integrated Accounting System
Accounting is as easy as processing orders when you have an integrated business management system.
An integrated accounting system automatically receives a constant flow of data from order management, which saves time and errors as opposed to manually rekeying information from order management into a standalone accounting system.
Here are the 10 main benefits of using an integrated accounting system.
Real-Time Transactions View
If you have standalone accounting software, it will require you to manually take all the information from the ordering system and enter it into the accounting one.
It not only invites human error, but there are chances that you might not have the updated financial information needed to make a quick and smart decision. It hampers business growth and requires an extra workforce to re-enter the data.
You can easily avoid this issue by using an integrated accounting system. Integrated accounting provides you with a real-time view of all the transactions related to business. The information automatically flows into the accounting system as the transactions occur.
Another plus point is that the cloud-based system has enabled users to easily carry their complete financial information on their devices wherever they go.
Accurate Job Costings & Commissions
The problem with standalone accounting is that it doesn’t directly integrate with the order management system. Thus, it doesn’t know which costs go with which jobs.
Effective integrated accounting software can smoothly perform processes like calculating job costs, sales commissions, and more.
Since all the postings are automatically made to the general ledgers, accounts receivables, and payables, accounting software has all the information needed to calculate the commissions and other job costs. The most significant advantage is that the calculation is entirely accurate, with no chance of error.
From another viewpoint, it also eliminates the need to process different costs manually. Otherwise, it would have become another manual process in itself.
Increases the Reliability of Data Entry
With standalone accounting software, you require to enter all your customers manually’ and vendors’ data from one application to another. It often results in duplication of data or incomplete entries. In short, there is no data reliability as these entries are prone to human error.
There is no denying that the data entry task requires extensive attention and time. The need for manually entering data gets eliminated by implementing the integrated accounting system.
An integrated accounting system removes challenges like double entries or the chances of missing an entry. In some cases, it also identifies duplicate entries, if any, and merges them into one.
Boosts Productivity at Work
Re-keying entries costs extra time and workforce. Besides, it invites human error and omission that might go unnoticed and results in miscalculation.
By using an integrated accounting system, business houses can efficiently use their time. An integrated accounting system with other business management system removes re-keying, freeing up extra time. You can then use this spare time to focus more on new opportunities or other business development activities.
Furthermore, integrating systems ensures the reliability of the information, which you can utilize for activities like tax filing.
Speeds Up Decision Making
You can access and operate all financial information related to your business from a single interface.
Linking all accounts receivable and payables ensures higher transaction visibility on the vendor and customer sides. Besides, it makes it easy to analyze all your historical data from one place and make insightful decisions. You can easily evaluate transactions like the vendor’s supply history, sales estimates, and other information from a single dashboard and form smart business strategies around it.
Integrated accounting software solutions will soon become the norm for every company. After all, no information exists in isolation, and an accounting system integration results in a seamless flow of information from one function to another.
Thus, the key here is to choose the right system that fits your unique business needs well.
Accurate Client Billing
One of the most challenging tasks for most client-based organizations is ensuring they set up precise, fair, and accurate billing software.
Integrating time-tracking software is an excellent solution as it ensures your company does not overcharge or under-charge customers. Time management software maintains a detailed record of team members’ work hours on a particular project. It then calculates the commission/wages to be paid accurately within the prescribed period.
Thus, it largely affects your relationship with the clients. With a smooth billing system, you can create a good impression and a long-lasting rapport with them. Using the system eliminates all kinds of confusion or inaccuracy involved in the billing system.
Improved Operational Efficiency
Implementing time-tracking accounting software provides managers with a holistic view of an organization’s workflow activities. It gives them a 360-degree view of all the critical business operations.
Managers can keep a tab and increase work accountability, enhancing operational efficiency. It leads to the structured and seamless functioning of the entire organization and better quality decision-making by the top management.
Besides, the updated record of the timesheets of all employees enhances the overall output level. It results in creating a more professional image for the company.
Smooth Project Management
One of the best advantages of time-tracking accounting software is that it helps all your projects stick to their scheduled deadlines and prevents unexpected delays in project implementation.
Time management software facilitates monitoring important resources that aid project completion, records essential tasks, and even reminds project team members about upcoming deadlines. It is a fantastic tool that ensures all company projects follow the scheduled deadlines and greatly boosts productivity.
Furthermore, the system helps with risk management. It can identify any possibility of delay in project completion and send a warning about the same. Managers can proactively look for these signals and rectify the situation promptly.
A variety of detailed project reports can help managers learn about time worked on accounting tasks, invoices, and expenses, and You can also customize these reports to meet organizational requirements. So keep your projects running ahead of schedule by getting the best time-tracking software for your business.
Streamlined Payroll Processes
Payroll is one of the most time-consuming, tedious, and error-prone accounting functions in any modern business organization.
Time management software proves to be a huge asset for any establishment as it greatly reduces the time and effort involved in manual calculations for payroll processing.
Since employee time and attendance are fully automated, there are fewer requirements for a large payroll department and fewer errors. Employee timesheets can be utilized as a vital tool for measuring salary and compensation, making all payroll processes well-structured and highly optimized.
So make sure that calculating the payroll is not a painful and lengthy task in your organization. Time tracking software will make sure to manage all payroll activities smoothly.
Identifies Areas For Improvement
Constant and timely improvement is undoubtedly the golden key to corporate success.
Time management software is the best platform to help your organization conduct a productivity audit to identify potential areas for improvement effectively. You can monitor tasks taking longer to complete, analyze individual team members’ performances, and recognize common problem areas for better accounting processes.
Time-tracking accounting software also makes it possible to compare team members’ strengths and weaknesses so that they can be given accurate performance reviews and feedback. So start better task allocation, reduce expenses, and boost employee morale by getting a top-notch time-tracking software system for your company right now.
How to Set Up An Integrated Accounting System?
Integrated accounting systems require a few key steps to be set up, including deciding on how much power and functionality you’ll need, choosing an integration timeline, installing, troubleshooting, training, and migrating your data. Below are some steps you can use to set up integrated accounting:
Choose the Right System
If you are considering purchasing a good accounting system, you may want to believe it because it has been rated as the best, the most powerful, or the most sophisticated. Robust software is often complicated, and many CFOs find them challenging to use, master, and customize. Thus, carefully assess the complexity level that you need.
Decide on a Timeline for Integration
Choosing a rate for implementing integrated accounting software is crucial. Consider whether you want to launch immediately after installation or gradually roll it out.
Install & Troubleshoot
It is important to thoroughly test your new integrated accounting system before switching to ensure its compatibility with your network, hardware, and other software tools.
Get Your Team Trained
Implementing a new system can take days or weeks for your team to adjust; you must ensure they have all the time and resources they need to comprehend the new system fully.
Process-to-System Mapping
It’s critical to match your new system’s components and processes to your current business processes, including your industry areas, workflows, trades, IT networks, and protection.
Migrating Data
You must carry your legacy accounting system to your latest accounting software, and a troubleshooting period must be permitted to ensure that the new setup works swiftly with your company.
Bottom Line
Teams can streamline their accounting-related processes with accounting integration software. These tools let team members use fewer digital tools because they integrate accounting-related functions into a single application.
With an integrated accounting system, you can streamline manual data entry, reduce human errors, and consolidate accounting data into one source of truth.
Integrating your accounting functions into one application eliminates many problems that may arise with disparate accounting tools.
Frequently Asked Questions
When choosing accounting software, consider these essential factors:
- Stability
- Software type (e.g., cloud-based or on-premise)
- Features
- Expenses or Cost
- Accessibility
- Security & Protection
A system that maintains cost and financial accounts simultaneously is an integrated system, while one that holds the records separately is known as a non-integrated system.
An integrated accounting system is a single set of accounts that maintains both cost and financial reports on the same basis, using a double-entry system that provides full financial and cost accounting information.
Amaey Anand is a certified accountant with over 10 years of experience in the finance industry. He has worked with various organizations to streamline their petty cash management processes and reduce inefficiencies. He has also written several articles on financial management for leading publications such as Zensuggest and The Wall Street Journal.
