Many businesses utilize accounting software to help automate routine accounting tasks, to establish controls and to create financial reports. With multiple accounting software packages on the market, there is usually one that can match most of a business's needs, whether it is a large corporation or a sole proprietorship. While accounting software can be a time saver and help preserve data, there are some disadvantages of using accounting software.
Loss of Data or Service
When a business is reliant on accounting software, any loss of service due to a power or computer outage could cause a work disruption. Work disruptions can prevent the input of new information as well as prevent access to stored information. Additionally, if information is not properly backed up, a computer outage could result in lost financial data.
The information in an accounting system is only as valid as the information put into the system. Since most accounting systems require some manual input of data, financial results could be incorrect unless all input data is reviewed. If there is a tendency to only review the final reports or output of an accounting system, it may be difficult to find faulty information.
Every business has unique aspects that may cause difficulties when it tries to tailor a generic accounting software package to its needs. While customization is available for many programs, it may cause downtime and potential inaccuracies if not done correctly. Also, as a business grows, there may be a need to change accounting software packages; this could cause a large disruption, as information must be migrated and new training is needed for personnel.
A disadvantage of accounting software is the cost involved. Beyond the initial outlay to purchase the software there is the cost of maintenance, customization, training and computer hardware. While time savings may justify the cost, for some businesses it may take years before an accounting software investment pays for itself.
Information stored electronically can be manipulated and accessed if proper controls and security measures are not in place. Strict controls are needed to make sure only authorized personnel use the accounting software and have access to reports. Since financial data can be sensitive and confidential, using accounting software creates the potential for fraud.