Like so many areas modern life, computers have transformed the way that accounting is performed, both for personal finances and for small and large businesses. Instead of making endless rows of manual entries and doing calculations by hand, computers have made much of the accounting process automatic once the basic data has been entered. But computerized accounting is not without disadvantage, and pros and cons should both be considered before utilizing computerized accounting.
Computers are renowned for efficiency, and accounting is no exception to this rule. The use of computerized accounting eliminates duplicating entries, hand-written ledgers and notes and manual calculations, saving staff time and allowing the same staff to handle larger numbers of transactions and reports.
Automated Report Generation
Rather than being forced to create standard financial reports by hand each time they’re needed, computerized accounting provides for nearly instantaneous creation of standard reports such as account balances, trial balances, general ledgers, profit and loss statements and other typical reporting requirements.
Because so many calculations are required for accurate accounting, computers are an ideal solution to human error. While errors may still be made in data entry, the computer’s calculations will increase the accuracy and reliability of the company’s reports.
Flexibility and Timeliness
Computerized accounting excels at manipulating data and provides a flexibility in reporting and data analysis that manual accounting cannot match. What’s more, as long as data is entered in a timely fashion, updated reports can be instantly generated that incorporate the company’s latest information.
Ease of Data Protection
In the event that data is corrupted or reports are damaged or lost, computerized accounting provides instant restoration from backup, ensuring that critical information isn’t lost. Digital backups may be maintained on- or off-site for additional protection of vital information.
By eliminating much of the routine work involved in manual accounting, computerized accounting allows staff to focus on wider-ranging tasks and minimizes the time spent doing boring, repetitive tasks such as manual calculations. As a result, employees can expect greater job satisfaction.
Despite many advantages, one disadvantage of computerized accounting is the initial cost of establishing the system. While the price of computers has fallen dramatically year after year, accounting software remains expensive and can cost thousands of dollars.
Computerized accounting systems also require specific software training for staff, incurring additional training expenses to the business and extending the time it takes to deploy the system before it can be utilized.
Computerized accounting systems are by nature vulnerable to issues such as computer viruses, power failures and hardware failures which may impact the reliability and availability of the system. Correcting computer problems will incur lost time and productivity.
Substantial difficulty for the business may result from any failure to properly set up the accounting software, or in choosing the wrong software package to meet the business’ needs. Inadequate or inaccurate reporting may result, requiring lost time to correct the problem or deploy a new software solution.
Mike Andrews is a freelance writer and serial entrepreneur focused on small-business and entrepreneurship for average people. He holds a bachelor's degree in biblical studies and a master's degree in theology and has appeared in a wide array of print and online periodicals including "HiCall," "Mature Living" and "Caregivers Home Companion."