Accounting software is a tool management use to make business decisions. The beauty of accounting software is that it stores financial information in one centralized location. Reports or queries can easily be compiled for management review and use. A budget can be managed easily by inputting data in accounting software and then reviewing reports or queries. Accounting software is often management’s best friend.
Management often needs information fast, such as as sales for a month, inventory levels of certain items, expenses and amounts owed to vendors. Accounting software must be able to provide this type of information easily through reports or queries. If you require unusual or special reporting, ask your software vendor about this. Many times reports can be customized to meet specific requirements, but they may cost you extra. Other functionality may be available, such as inventory controls. Managers must consider a system’s limitations in selecting accounting software.
The biggest benefits of an accounting system are an increase in speed and a decrease of errors. With a manual system, management may have to wait days to know how much was sold in a month; with software, the information can be accessed as soon as data is entered. The program does most of the calculations and report compilations, minimizing mistakes and making the process efficient. Management can make faster decisions and improve the bottom line, a major plus to any small business where every penny counts.
Accounting programs come in many types. The software may reside in one computer only or in a network, where many people can get access to it, increasing the risk of unauthorized access to financial information. Managers can mitigate this risk by using IDs and passwords. Some managers are using the “cloud” for processing accounting transactions and this type of software is available with vendors and “cloud” providers. The “cloud” refers to software and data that are stored off site and accessed via the Internet. For example, Intuit, a software developer and seller, offers online accounting software where you use it and save your data online, not on your hard drive.
The effects of using an accounting software are found mainly in the efficiency and smoothness of operations. In many systems, purchase orders, for example, can be approved by managers using their own computers, without getting up from their chairs or dealing with lots of paperwork. Another effect is that managers get used to certain accounting reports, such as aging receivable reports where debtors can be tracked by amount owed and for how long. This report usually prompts managers to act quickly on late payers, such as following up on non-payment and refusing service to clients who are overdue, minimizing losses.
Managers should have some accounting background to be able to understand financial information presented and analyze it. Accounting software will not replace accounting knowledge. Managers still need to review reports and to ask appropriate questions. Another consideration for managers regarding accounting software is to make sure that there is a system of checks and balances to pick up errors, such as number transpositions, common when entering data in any system. For example, management may require reconciliations to be part of the accounting process.