Fundamentals of Business – Why Accounting Software is Important

Do accounting software packages offer you anything you can’t do yourself with an old-fashioned ledger? In a word, yes, accounting software creates a seamless workflow that you cannot achieve with manual ledgers and a calculator. Even if you have graduated to spreadsheets, you lack the continuity and auditing capacity found with a packaged accounting system. Technology enhances efficiency, and businesses can enhance their bookkeeping department with accounting software.  

What’s Wrong with Old-School?

Manual ledgers served at one time as the backbone of business accounting. A bookkeeper would create a general ledger with a number of smaller account ledgers branching off of it. The trick was to have all the various accounts balance back to the main ledger. It required some quick math skills, a good sense of organization, and a lot of trust. When something fell out of balance, it could take weeks to locate that one transaction that was entered incorrectly or the math error that shifted the totals in the wrong direction.

Technology Steps in with Spreadsheets

When affordable computers became all the rage in the business sector, spreadsheets took over and improved accounting prospects. It still qualified as manual bookkeeping, but the computer calculated the math for you. Although spreadsheets took the place of handwritten ledgers, the system still relied on human beings to input the right numbers on various ledgers that all tied into one central spreadsheet.

Why Accounting Software Gives You an Edge

Companies enjoy step-by-step automation with online accounting software like Sage One. It eliminates many of the risks that come with a manual system. Accounting programs tie everything together to eliminate the silos:

  • Sales
  • Inventory Control
  • Job Costing
  • Accounts Receivable
  • Accounts Payable

All the departments that affect the bottom line might use one centralized system that does not rely solely on manual input. For example, when the sales department generates an invoice, each line item displays automatically, including:

  • Price
  • Subtotal
  • Tax
  • Shipping
  • Invoice total

The salesperson can focus on the customer and let the software do the math. The sale automatically updates all the other ledgers, as well, like inventory control and accounts receivable. If there are terms of the sale, the invoice posts on an aged trial balance for easy monitoring.

Going Paperless

One of the most cost-effective features offered by accounting software is the option to go paperless. The U.S. Environmental Protection Agency estimates Americans produced approximately 44 million tons of paper waste in 2012. Manual accounting systems contribute to the paper pollution by generating physical invoices, reports, ledgers, and customer statements. A paperless accounting system saves on supplies and storage space and lowers operating expenses.

Disaster Recovery

Systems that work in the cloud make disaster recovery much easier, too. Critical systems are kept off-site and accessible from anywhere with the proper authorizations. If the unthinkable happens, such as fire or flood, the business can resume operation in hours instead of weeks.

A fully automated accounting system ties bank balances, invoices, vendor statements, expense sheets and job costs together seamlessly. That is something a manual bookkeeper will never bring to the table.

Author: Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles of partners on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to editor.webposts@gmail.com.