Posted on July - 15 - 2011 by Mary Sevilla
As software programs are written to aid, simplify and automate almost every human task, why should financial accounting be an exception? In fact, some of the earliest software programs, including Microsoft Excel were written with the requirements of the business user in mind. One thing that computers are exceedingly good at is number crunching and since accounting is all about dealing with numbers, it makes perfect sense to switch over to computerized accounting. Still, there are many who still rely on manual accounting, due to overall skepticism about automated accounting. In this Buzzle article, I have presented the advantages and disadvantages of using computerized accounting, which might help people decide, whether switching over to automated accounting system is the right decision for them. What is Computerized Accounting? Before we plunge into an analysis of the pros and cons of computerized accounting, let me define what exactly it entails. Computerized accounting is all about using software programs to carry out every task that is part of the yearly accounting cycle. This involves the use of payroll software, maintaining of accounts payable and accounts receivable, besides maintaining a record of invoices using software programs. There are many programs that can assist in tax calculations too. Some businesses may restrict themselves to just the use of spreadsheet software and some may completely handle their entire accounting cycle by using specialized software. Let us take a look at what are the pros and cons of switching over to automated accounting. Advantages and Disadvantages of Using Computerized Accounting If you are considering switching over to computerized accounting, it would be helpful to consider the advantages and disadvantages that this decision brings in. Advantages Here are the prime advantages of using software programs for accounting. Speed & Accuracy The prime benefit of using computerized accounting is speed and accuracy. Calculations can be zipped through substantially faster, compared to manual accounting. Repetitive calculations are especially easier. All you have to do is key in the data, apply required calculation formula and let the software handle the rest. Spreadsheets with thousands of entries can be processed in a jiffy, using software. Unless wrongly programmed, a computer never errs, which provides you with a high degree of accuracy in accounting. As a consequence, you save a substantial amount of time, which can be invested in financial analysis. Backing Up Facility & Easy Error Correction Backing up all your data is easier with computerized accounting. You can maintain a hard copy of all your yearly accounting in the form of printouts, along with a parallel software backup. Another advantage is easy error correction, which can be difficult in manual accounting. Disadvantages Here are the two prime disadvantages of using computerized accounting. Time Invested in Software Usage Training What could be considered a disadvantage of computerized accounting is the substantial amount of time and money invested in training of personnel. For people used to manual accounting, it takes time to switch over to software usage, which can delay accounts processing. For a non-computer savvy workforce, computerized accounting can be tough. However, you need to invest time and money in training just once. Security Risks Involved If precautions are not taken, including installation of anti-virus software and securing of office network, there is a security risk of losing data due to hacking attacks and spying via Internet. Ergo, it’s essential that adequate security safeguards are put in place, when using accounting software. Hope the listed advantages and disadvantages of using computerized accounting help you make up your mind regarding automated software usage. Instead of entirely switching over to computerized accounting, a business may opt for a parallel implementation with manual accounting. That way, you can have the advantages of both manual and automated modes. The speed and accuracy that a computer offers can help a company’s accounts department focus on analysis and financial planning, instead of investing time in the manual labor of individual calculations for every entry. To conclude, it’s highly recommended that modern businesses opt for computerized accounting as the advantages far outweigh the disadvantages.