Advantages and Disadvantages of Using Computerized Accounting

By Gray Pilgrim

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.

Article from Buzzle.com

Mistakes to Avoid when Running a Small Business

Even when the economy is functioning well, there are several things that need to be avoided when running a small business. When the economy is down, these things should be avoided more than ever. Running a small business in our current economy is difficult at best, yet making a profit is even more difficult. There are, however, many mistakes that small business owners make that can mean the difference between profitability and losing your business altogether. Avoid making these three simple mistakes in order to increase the chance of having a successful business. To have a successful business, don’t neglect your business expenditures, don’t waste your money on advertisements that don’t produce new business, and don’t refuse to change if your business isn’t working.

Neglecting Expenditures

It may cost money to make money, but spending too much money will kill any business. Many businesses barely break even, but the point of a business is to make a profit. The best way to make a profit is to make sure that you aren’t spending more money than you have coming in. The first, and often neglected, rule to making a profit is to know all of your expenditures. You need to know, down to the very cent, how much everything costs to run your business. This includes electricity, employee wages, water, supplies, and even plant food for your office plant. Don’t pay more attention to the big things like rent, electricity, and water. The little things, e.g., cleaning supplies, employees working an extra hour a day, or small, ineffective advertisements, can cost your business more money than they are worth. Something as small as closing an hour or two early, per day, could save you hundreds in the long run. Although it is only a couple of hours, it is time you are paying employee and electricity costs when you might not have a single customer.

Worthless Advertisements

Advertising is one of the most important aspects to running a business. You have to let people know who you are, where you are, and what your business offers. Usually the first place people want to run an ad is in the local paper. At first, it seems like a good idea, but it may not be. Today, there are so many channels that can be used for advertising. Advertising isn’t the challenge. The real challenge is making a choice about which type of advertising is best for your business. Think about who you are trying to advertise to and consider them in your advertising choices. If you are a tanning salon, older people are more likely to read the paper, but less likely to tan. Young people are likely to tan, but are unlikely to look in the paper. One advertising tip is to make sure you have a large, catchy sign that can be seen from the road. That is a big advertisement that is unlikely to cost you a lot of money. Instead of using the paper right away, advertise by flyer, signs, and the Internet.

Refusing to Change

If you are keeping track of your expenditures, you have placed your advertisements wisely, and you still are losing money or not making a profit, then you might need to change. It isn’t logical to continue running your business the same way you always have if it isn’t working. If something isn’t working the way you want it to, don’t keep doing it the same way. Look at all of the different things you do to run your business, and then think of ways you could be doing them differently. This is a great exercise to think of innovative ideas. Get a piece of paper and write down everything you can think of, even the silly, stupid, or impossible ideas. This will give you a lot of ideas to filter through, and you might just think of something really great! Paying attention to these three things will give you a great way to change up your business and hopefully start making a profit.

Article from Buzzle.com