Businesses overcome the illustrations
A computer accounting system can replace the manual handwritten accounting records, the ledgers and day books. Written records are normally the traditional form for recording information, particularly for businesses that have just started up. Many businesses now use computerised information accounts because they find them beneficial in terms of cost and the information they provide. For many businesses, and particularly smaller businesses, computerising the accounts can be a marginal proposition. For example, a sole trader isn’t going to have a computerised account system as they are not big enough.
As they do not operate in large markets and the system will be too expensive. With the advent of the PC and the user-friendly accounting packages, even the smallest of businesses may use a computer to record all their financial transactions. Below are two opposing points of view about the computerisation of accounts: Quote 1: “Owners of the business sometimes think that if they computerise their accounts, they will automatically save time, money and effort. Tempted by advertising hype they will rush out and buy the latest and cheapest system, which they probably don’t understand and will seldom use.
They believe that technology equates with progress”. The quotation above is likely to relate to larger organisations as they are more likely to be in the position to rush out and buy a new system. Larger organisations invariably use computers and reap the benefits of efficiency and accessibility of information. This would make them more active in the market and therefore they would perceive to have a high entrepreneurial status, if they were to install a system, as they would be at a greater advantage. The major advantage of a computer accounting system is that it is very accurate.
This is because the data (for example, invoices, receipts, payments) are keyed in once, therefore avoiding any further opportunities for human error and once again increasing efficiency. Quote 2: “A computerised accounting system can be of a great benefit to a business; it will enable the owner to control the business better by streamlining procedures and providing more management information”. If the computerised system is for a small business like a sole trader or a partnership, the decision is to whether to install the system, as it may be of much convenience, as it is too expensive as they have not got the funds.
When the system is introduced it must be chosen with great care and with proper professional advice, this is mainly because it has to be suited to the companies required needs and it must be easily operated by the intended workforce. Integrated packages: These will normally contain all of the functions listed above. An integrated package may be expensive and initially more complex to operate. This means that this particular programme may require a skilled workforce, and it may also involve a lot of training. It is also suited to a PLC or an LTD as they are more financially able to purchase it.
Eventually it will prove very beneficial as it also automatically produces reports such as the trial balance, the trading, profit and loss account and the balance sheet. This will make the business more efficient as it will not be as time consuming as to when producing the accounts manually. A main advantage of this system is that it will be extremely accurate. Modular systems: These are suitable if the business does not need the full range of facilities offered. It may select individual functions, for example the Sales Ledger and Invoicing, which may be purchases separately.
This benefits, many organisations which may not be able to purchase the full package all at once as they are unable to afford it. It is also an opportunity to train staff to their specialist ledger, so they are fully equipped to any problem which may arouse. When separate ledgers are purchased, as a result the organisation will run more smoothly and efficiently. It is also useful because a business can purchase extra modules, for example, Purchase Ledger and General/Nominal Ledger, as the need arises.
Each model added is completely compatible with other modules from the same software house. A larger business which employs many accounts staff may consider networking a number of computer terminals in different parts of the office, linking them to a central storage system or printer. This can be a cost-effective solution, but professional advice must be taken for its implementation, when connecting PC’s to the standard of the computer accounting systems. The benefits of a Computer Accounting System:
The main benefits of the accounting system is its ability to handle a high volume of transactions, its simplification of double-entry, its improved credit control, instant VAT reports and rapid access to management information. Volume Transactions: Although the system may take time to set up, and may have problems for staff in understanding how to use the system, one of its main principals is the benefit of its ability to handle large volumes of transactions and to enable the owner of the business to access information immediately.
For example, if the customer telephones to query an invoice amount or discount allowed, the owner does not need to search through paper files, with the invoice possible missing or misplaced, they can instead call the transaction up on their screen and give an immediate answer. It also benefits the business as it expands, as the ability of the computer to deal with a high volume of transactions will lead to a saving in staff costs, as fewer accounts staff will be needed.
This is very useful to many businesses as it will mean that many people will be made redundant, as the organisation will have fewer people to employ. This could also result as a drawback, as the system may break down and therefore the company will not have the right number of staff to prevent any inconvenience. Avoidance of Double Entry: This is a major boost for many organisations as the time saving element of the computer accounting system is that the double entry is automatic.
This means that it will be very accurate as when employees manually produce the double entry, managers have to allow for human errors. As the demands for the companies products increases so does the workload. This can cause conflict between some employees, but most importantly the company is able to deal with demand as they have technological system to do so. Each transaction is recorded as a single entry into the system with an appropriate code input for automatic entering of the correspondence double entry transaction.