What is Computerized Accounting System? Advantages & Disadvantages

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What is Computerized Accounting System?

A computerized accounting System is used for evaluating the profitability and financial performance of different organizations. 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 task more manageable and error-free.

Computerized accounting system is a software solution that can be 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 solutions acts as 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 tracking and managing all inventory orders; and debt collection module for collecting late invoices. Some computerized billing apps also come with additional modules like electronic payment processing to help you make transactions via electronic mediums. These modules help you 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 it in the best possible manner.

Features of Computerized Accounting System Software

A robust accounting software solution is capable of taking your business to new heights of success. The best invoicing software not only gives you an overview of your financial transactions but also helps you meet the legal obligations required for running your business smoothly. Here are some of the useful features:

• Invoicing: This is the basic module of all accounting software that automates the process of collections so that you never forget to send out an invoice. An invoicing system stores all customer data and also generate accurate invoices for clients on time, besides reminding them about outstanding bills. What’s more, it also helps you adhere to the effective practices of billing and invoicing as per industry standards.
  
• Reporting: Software 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 as per your preferences. Systems can also convert your financial data into graphs so that you can comprehend where your money is going.
  
• Banking: Computerized accounting software keeps track of your banking accounts and also 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. 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: Some software also comes with sophisticated payroll modules for managing all aspects of payroll. This module enables you to generate employee payments and process their checks on time. It also simplifies the process of managing variable pay schedules along with bonuses, commissions, profit-sharing, etc. The software also allows you to adhere to your tax commitments with perfection. 
• Fund Accounting: The accounting system designed 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, with the right invoicing solution, you can make the process of accumulating data from multiple business locations much easier. An efficient billing software solution is also capable of recording and delineating financial dealings in multiple currencies.

Advantages of Computerized Accounting System

Computerized Accounting System Software streamlines accounting tasks and offers several benefits to its users. It not only automates your accounting tasks but also helps you chalk out a results-driven investment strategy. Here are the top perks of using such a solution:

• Mobility: Being cloud-based, automated billing software allows you to access your financial accounts from anywhere. Apart from supporting web browsers, advanced billing applications come with 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 on the go.
  
• Speed: Computerized Account Software is known for its swiftness. Once you input data into a connected module, it processes and stores the information instantaneously.
• Cost-effective: Hiring an in-house accountant can be quite expensive for small business owners. Once you decide to deploy a computerized billing system, you can use the program after undergoing a customer training program to derive the maximum benefit from the software. What’s more, you need to pay only for purchasing and installing the software and an occasional software upgrade.
• Saves Time: Compared to the time-consuming manual process of accounting, a computerized accounting system saves your time, and boosts your productivity. The software is capable of performing accounting functions faster than manual accounting. It centralizes the financial aspects of your business 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: Computerized accounting system reduces errors, and eliminates the need for manually checking your accounts each time you input new data. Minimization of inaccuracies also makes this software more dependable.
• Offers Real-Time Data: The software can be synchronized with your online banking account. As a result, you always receive real-time information on paid invoices as well as 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 comes with 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 to run your company advantageously. A computerized accounting system acts as your financial advisor, and gives you a clear overview of your financial activities, thus, helping you determine where to invest more, and where to cut costs.
  
• Simplifies Tax Compliance: Automated accounting software system gives you a quick overview of the amount of taxes that your company has paid to date. It also computes the amount of tax that you or your clients need to pay on each invoice.

Disadvantages of Computerized Accounting System Software

Along with its advantages, computerized invoicing software also has its share of 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 issues and misappropriation. 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 come across several technical issues such as virus attack that destroys your stored data, power outage, system failure, etc., when dealing with computers. Additionally, if you operate the software incorrectly, it might prove disastrous to your business.
  
• Not Error-free: The efficacy of the data output is entirely dependent on your data input. In simple words, if you insert inaccurate or incomplete data, then the software will generate serious errors.
  
• 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 need to train your team from time to time to learn how to use the billing application smoothly. Moreover, if the software demands regular up-gradation, it may prove to be a costly affair 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. If you are new to the invoicing software, it will take some time for you to get used to the program. Moreover, if your data gets corrupted owing to worms or virus attacks, you will have to re-enter the lost data, which again consumes a lot of time. 

Perhaps, these are a few reasons why some businesses avoid using automated invoicing software. However, you cannot deny the fact 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 should be taken to limit your employees’ access to the software. At the same time, you should assign internal auditors to ensure there is no data inaccuracy. Some successful companies also prefer reaping the benefits of both manual and computerized modes of accounting instead of completely relying on computers.

Types of Computerized Accounting Software

If you are looking for a results-driven accounting tool for your business, you will come across a lot of options. Each accounting software solution has its unique features; therefore, before picking an accounting system, it is advisable to compare the different available software solutions to determine which features are best suited for your business. Here is a list of different accounting software solutions that you can choose from: 

• Ready-to-use Accounting Software: If you are a small business owner, this is the right billing application for you. Ready-to-use accounting solutions is easy to use and also reasonably priced. However, you may not be able to integrate ready-to-use accounting software with other available systems in your organization.
• Customized Accounting System: This accounting System is tailored to cater to the specific accounting needs of your business. Customized Accounting Software is ideal for medium and large businesses having numerous divisions. The cost of customized billing software is somewhat high compared to other billing software solutions as it involves addition and modification to the basic accounting solutions. Last but not least, you need to undergo specialized training to use this software.
• Commercial Accounting Software: This solution is fit for small and medium-sized businesses. It not only handles the accounting needs of your business but also generates reports, data, and graphs to illustrate your company’s financial standing.

Considering the factors mentioned above, we can conclude that computerized accounting system software solutions have become a necessity for 21st-century businesses. It acts as a valuable business asset that helps you gain a competitive edge besides strengthening your relationship with your clients. However, since there are countless billing software solutions available in the market, you should carefully choose the right accounting software to take your business to the next level. The best way to pick the right software would be to analyze your company’s accounting requirements along with the features, pros, and cons of the software.

A Chartered Accountant having 10 plus years of experience in corporate finance working as VP Finance with Appitsimple Infotek Pvt Ltd. I have strong interests in preparation as well as analysing financial statements of corporates!