A computerized accounting system has made corporate life easier. Earlier, manual accounting systems were time-consuming and prone to errors. But, with technological evolution, our way of conducting business has improved.
Let’s learn about the various facets of computerized accounting systems.
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What is Computerized Accounting System?
A computerized accounting system evaluates different organizations’ profitability and financial performance. Manual accounting has become redundant nowadays, as they are prone to human error. Thus, businesses of all sizes rely on the best accounting software in India to make complex accounting tasks more manageable and error-free.
Computerized accounting systems are software programs installed on your computer for seamlessly managing your company’s financial dealings, reports, data, and statements. The software can also be accessed remotely via your mobile device with the help of mobile data or a strong Wi-Fi connection.
Computerized accounting software is the primary tool for recording, tracking, and generating accounting transaction reports of small and medium-sized enterprises. It comes with a host of modules, such as:
- Bookkeeping for tracking and managing payments and collections
- Invoicing for generating invoices for your customers
- General ledger for summarizing all the transactions taking place in your organization
- Inventory module for tracking products from purchase to sale
- Accounts payable for processing vendor invoices
- Accounts receivable for generating customer invoices
- Purchase order module for monitoring and managing all inventory orders, and
- Debt collection module for collecting late invoices.
In addition, some computerized billing apps also come with additional modules like electronic payment processing to help you make transactions via electronic mediums. These modules allow you to control the different aspects of accounting processes efficiently.
Are you planning to switch from manual accounting to automated accounting software? If yes, it would be useful to enlighten yourself about the features, advantages, and drawbacks of computerized accounting platforms, so that you can utilize them in the best possible manner.
Features of Computerized Accounting Systems
A robust accounting software solution can take your business to new heights of success. The best invoicing software overviews the financial transactions of internal and external users and helps you meet the legal obligations required to run your business smoothly. Here are some useful features:
Invoicing
This is the basic module of all computer based accounting systems that automate the collection process so that you never forget to send out an invoice. An invoicing system stores all customer data and generates accurate invoices for clients on time, besides reminding them about outstanding bills. Moreover, it also helps you adhere to effective billing and invoicing practices per industry standards.
Reporting
Software program for computerized accounting features a broad array of reporting options such as a balance sheet, income statement highlighting your profit and loss, cash flow statement, payroll summary, and so on.
They also come with customizable reporting features to help you generate reports per your preferences. Systems can also convert your financial data into graphs so that you can comprehend where your money is going
Banking
A computerized accounting system keeps track of your banking accounts and imports data from your bank into the system. Its automatic payment module prints checks and schedules bank payments and direct deposits, thus, automating your bank payment processes.
Budgeting and Forecasting
A good tool calculates and depicts your financial performance for the current and upcoming fiscal year. In addition, it generates balance sheet summaries to portray how well your business is performing at the moment so that you can set up realistic sales targets.
Inventory Management
An efficient billing software solution also manages your stock; this helps you keep tabs on the availability of your products so that you can quickly deal with delivery issues.
Payroll
Accounting software packages come with sophisticated payroll modules for managing all aspects of payroll. This module lets you generate payroll payments and process checks on time. It also simplifies managing variable pay schedules and allows you to adhere to your tax commitments.
Fund Accounting
The accounting system for NGOs and public agencies comes with a fund accounting module for grant management, tracking donations, and managing GASB regulations.
Ability to Collaborate
Computerized billing systems enable you to authorize contractual accountants to access your financial data. You can easily synchronize your data with your bank account and import your financial reports in seconds.
Multi-functionality
If you are operating your business globally, you might know how difficult it is to manage finances across multiple currencies. However, you can easily accumulate data from multiple business locations with the right invoicing solution. In addition, an efficient billing software solution is also capable of recording and delineating financial dealings in various currencies.
Advantages of Computerized Accounting System
A computerized accounting system streamlines accounting tasks and offers several benefits to its users. It automates your accounting tasks and helps you create a results-driven investment strategy. Here are the top perks of using such a solution:
Mobility
Being cloud based accounting systems, automated billing software allows you to access your financial accounts from anywhere. Besides supporting web browsers, advanced billing applications have a mobile interface to enable you to manage daily accounting tasks such as expense tracking, attaching receipts, viewing invoice information, or sending bills directly from your iOS and Android devices. It also helps you stay connected with your clients and accounts team.
Speed
Computerized accounting software is known for its swiftness. Once you input data into a connected module, it instantly processes and stores the information.
Cost-effective
Hiring an in-house accountant can be quite expensive for small business owners. However, once you deploy a computerized billing system, you can use the program after undergoing a training program to derive the maximum benefit from the software. What’s more, you need to pay only for purchasing and installing the accounting data software and an occasional software upgrade.
Saves Time
Compared to the time-consuming manual accounting process, a computerized accounting system saves time and boosts productivity. In addition, the software is capable of performing accounting functions faster than manual accounting.
In addition, it helps manage bank accounts, centralizes your business’s financial aspects, and enables you to deal with different accounting tasks within one unified accounting platform.
Reliability
Computerized billing solution generates financial statements and reports with precision and consistency. Thus, you can completely rely on it.
Reduces Human Errors
A computerized accounting system reduces errors and eliminates the need to check your accounts each time you input new data manually. Minimization of inaccuracies also makes this software more dependable.
Offers Real-Time Data
The software can synchronize your online banking account. As a result, you always receive real-time information on paid invoices and your business expenditures.
Lightning-fast Decision Making
Since computerized accounting solutions provide real-time financial information, it helps you make smarter financial decisions at lightning speed.
Security
Computerized billing software has sophisticated security mechanisms to protect sensitive financial data. It keeps your financial data, passwords, and other information safe and confidential.
Helps You Allocate Resources the Right Way
It is one of the key advantages of using this platform. It is important to comprehend the pattern of your financial performance. A computerized accounting system acts as your financial advisor, thus, helping you determine where to invest and where to cut costs.
Simplifies Tax Compliance
Automated accounting software gives you a quick overview of the amount of taxes your company has paid. It also computes the tax you or your clients must pay on each invoice.
Disadvantages of Computerized Accounting System
Along with its advantages, computerized invoicing software also has disadvantages. Here are some of the negative aspects of the software that you should be aware of before authorizing the software to store your financial data:
Security Issues
Some computerized billing systems are susceptible to cyber-security and misappropriation. For example, though your company’s financial information is stored in the cloud, it can be easily hacked to access your confidential data. This puts your assets at risk, besides jeopardizing your business efforts.
Technical Issues
Since computerized accounting involves computers, you may encounter several technical issues, such as a virus attack that destroys your stored data, power outage, system failure, etc., when dealing with computers. Additionally, if you operate the software incorrectly, it could be disastrous to your business.
Not Error-free
The efficacy of the data output is entirely dependent on your input. Simply put, the software will generate serious errors if you insert inaccurate or incomplete data.
Involves High Expenses
Computerized invoicing software may increase the total expenses of your organization, as managing each aspect of the software involves high costs. Moreover, paid training can also prove quite expensive as you must train your team continuously to learn how to use the billing application smoothly. Moreover, if the software demands regular up-gradation, it may be costly for your business.
Time-Consuming
Inputting data into an automated billing system takes a lot of time as it involves multiple steps to input basic data. In addition, if you are new to the invoicing software, getting used to the program will take some time. Moreover, if your data gets corrupt ted owing to worms or virus attacks, you will have to re-enter the lost data, which again consumes a lot of time.
These are a few reasons why some businesses avoid using automated invoicing software. However, you cannot deny that the advantages of automated billing software outshine its drawbacks. Moreover, you can quickly mitigate the shortcomings of the software with the right integration and by taking proper precautions.
For example, stringent measures could be taken to limit your employees’ access to the software. In addition, you should assign internal auditors to ensure no data inaccuracy. Some successful companies also pr for reaping the benefits of manual and computerized accounting modes instead of completely relying on computers.
Types of Computerized Accounting Systems
If you are looking for a results-driven accounting tool for your business, you will come across many options. Each accounting software solution has unique features; therefore, before picking an accounting system, it is advisable to compare the available software solutions to determine which parts are best suited for your business. Here is a list of other accounting software solutions you can choose:
Ready-to-use Accounting Software
If you are a small business owner, this is the right billing application. Ready-to-use accounting solutions are easy to use and also reasonably priced. However, you may not be able to integrate ready-to-use accounting software with your organization’s other systems.
Custorganization’sing System
This is tailored to cater to your business. Therefore, it is ideal for medium and large companies having multiple divisions. However, customized billing costs are higher than other billing software solutions. Consequently, it would be best if you underwent specialized training.
Commercial Accounting Software
This solution is fit for small and medium-sized businesses. It handles the accounting needs o your business and generates reports, data, and graphs to illustrate your company’s financial standing.
Importance of Computerized Accounting Systems
Cost-Effectiveness
Computerized accounting is cost-effective and more efficient than manual accounting. It reduces the costs associated with personnel, resources, and time.
Automation
In computerized accounting, tasks typically take hours to complete and can now be completed in seconds. So, for instance, even if you forget about an invoice, it will still be processed automatically.
Accuracy
Manual accounting is susceptible to human error. However, you can aspire for 100% accuracy with a computerized accounting system. It can help you report financial data in a precise and reliable manner that helps make financial decisions.
Scalability
You can upgrade your computerized accounting system as your organization grows or your demands change. Next, you need to enter some more information, and you’re done.
Security
Compared to manual accounting, computerized accounting software is safe and secure. Anyone can easily access physical documents and books, but only reliable individuals can access computer software.
Final Words
The above-mentioned features, types and benefits of computerized accounting systems have highlighted the importance of automated accounting software. Computerized accounting systems have become necessary for 21st-century businesses. It helps you gain a competitive edge besides strengthening your client relationship.
However, since there are so many billing software solutions, you should choose the right software to take your business to the next level. The best way to pick the right software is to analyze your company’s accounting requirements along with the pros and cons of the software.
Frequently Asked Questions
Some of the most commonly used computerized accounting software are:
- QuickBooks Online
- Oracle Netsuite
- FreshBooks
Depending on your business's complexity, installing and procuring a computing accounting system can take around 3-6 months.
In computerized accounting, accounting software with an automatic framework does the financial business operations. But, in traditional accounting, employees can manually record using ledgers, subsidiary books, and physical registers.
The basic requirements of every computerized accounting system are accounting software and operating procedure.
Computerized accounting is better than manual accounting because it automates processes and saves time.
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.
