The Advantages of Using Computerised Accounting Software

Small and medium sized businesses can now buy ‘off the shelf’ accounting programs at remarkably low cost. Larger businesses will often have customized programs made for their business. The accounting programs carry out functions such as invoicing, dealing with payments, paying wages and providing regular accounting reports such as trading and profit and loss accounts and balance sheets.

The introduction of computerized accounting systems provide major advantages such as speed and accuracy of operation, and, perhaps most importantly, the ability to see the real-time state of the company’s financial position. In my experience I have never seen a business that has upgraded to a computerized accounting system return to paper based accounting systems. A typical computerized accounting package will offer a number of different facilities. These include:

- On-screen input and printout of sales invoices
- Automatic updating of customer accounts in the sales ledger
- Recording of suppliers’ invoices
- Automatic updating of suppliers’ accounts in the purchases ledger Recording of bank receipts
- Making payments to suppliers and for expenses
- Automatic updating of the general ledger
- Automatic adjustment of stock records
- Integration of a business database with the accounting program
- Automatic calculation of payroll and associated entries

Computerized accounting programs can provide instant reports for management, for example:

- Aged debtors’ summary – a summary of customer accounts showing overdue amounts
- Trial balance, trading and profit and loss account and balance sheet
- Stock valuation
- Sales analysis
- Budget analysis and variance analysis
- GST/VAT returns
- Payroll analysis

When using a computerized accounting system the on computer, input screens have been designed for ease of use. The main advantage is that each transaction needs only to be inputed once, unlike a manual double entry system where two or three entries are required. The computerized ledger system is fully integrated. This means that when a business transaction is inputed on the computer it is recorded in a number of different accounting records at the same time.

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.
Automatic document production – fast and accurate invoices, credit notes, purchase orders, printing statements and payroll documents are all done automatically.
Accuracy – there is less room for errors as only one accounting entry is needed for each transaction rather than two (or three) for a manual system.
Up-to-date information – the accounting records are automatically updated and so account balances (e.g. customer accounts) will always be up-to-date.
Availability of information – the data is instantly available and can be made available to different users in different locations at the same time.
Management information – reports can be produced which will help management monitor and control the business, for example the aged debtors analysis will show which customer accounts are overdue, trial balance, trading and profit and loss account and balance sheet.
GST/VAT return – the automatic creation of figures for the regular GST/VAT returns.
Legibility ­– the onscreen and printed data should always be legible and so will avoid errors caused by poor figures.
Efficiency – better use is made of resources and time; cash flow should improve through better debt collection and inventory control.
Staff motivation – the system will require staff to be trained to use new skills, which can make them feel more motivated. Further to this with many ‘off-the-shelf’ packages like MYOB the training can be outsourced and thus making a particular staff member less critical of business operations.
Cost savings – computerized accounting programs reduce staff time doing accounts and reduce audit expenses as records are neat, up-to-date and accurate.
Reduce frustration – management can be on top of their accounts and thus reduce stress levels associated with what is not known.
The ability to deal in multiple currencies easily – many computerized accounting packages now allow a business to trade in multiple currencies with ease. Problems associated with exchange rate changes are minimized.

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