A computerized accounting system refers to software based accounting systems for managing the finances of a business entity. Utilizing the processing power of a typical desktop computer, the accounting software takes care of the tedious and mundane technicalities of accounting, permitting the business owner and their accountant to focus on making the business more profitable.
It achieves this by allowing the collection and processing of transactions in an efficient manner, while at the same time minimizing the risk of error. It is quite common for accounting software to automate many of the routine operations, such as syncing with business bank accounts and credit cards, or capturing sales transactions from point of sale (POS) systems.
Computerized accounting systems are based on and derived from methods and practices used in manual accounting and management. They cover all the basic business needs, including sales and purchases, receivables and payables, cash receipts and disbursements, payroll, audit trails, as well as generating financial reports.
Today’s computerized accounting system software packages have not only enhanced and expanded on the standard accounting functionality, they also include a number of additional features to help the business owner keep track of, and better manage his business.
Typical Features of a Computerized Accounting System
The following is a small list of some of these features, many of them falling within the scope of automation capabilities offered with most computerized accounting systems. While not all of these features are available with the basic versions of all accounting software packages, they are usually available in the more advanced versions, or as add-ons and extensions, or through the smooth integration with other 3rd party software systems that provide the desired feature.
- Recurring Invoices – for products or services ordered on a consistent basis (e.g. subscriptions paid monthly or yearly), the system automatically schedules the creation and delivery of the appropriate invoice. Since the details, such as client information, product or service type, do not change, and the invoice is issued routinely at a set interval, recurring invoices are a perfect example of the accounting automation process.
- Payment Reminders – every business has at one time or another had to remind clients to pay overdue invoices. Payment reminders take care of this time-consuming and often awkward task. Different reminders can be created and sent out, depending on the number of days the payment is overdue, as well incurring late payment fees. Again, once set up, the system automatically takes care of when and to whom the reminder should be sent.
- Multi-currency Invoices – many businesses have trade dealings with companies and clients in other countries, and it may be convenient or even desirable to charge those clients in their own currency. A computerized accounting system can take the headache out of keeping track of exchange rates and dealing in multiple currencies.
- Multi-language Invoices – for similar reasons to multi-currency invoicing, it may be good for a business to issue invoices in the language of the client. Again, a computerized accounting system makes this a relatively simple task.
- Inventory Management and Tracking – while not actually part of the accounting process, tying in inventory tracking with the accounting system, greatly aids in the smooth functioning of a business. Integrating inventory management with the accounting system, means that as products are sold, they do not require that sales details be entered into two independent systems, one to update stock quantities in the inventory system, and the other to record and track sales and update assets in the accounting.
A single entry propagates across all relevant systems.
- Receipt Attachments – scan and attach receipts into the system to help manage expenses and to track project costs. Once in the system, the attached receipt is always available at the press of a key, without the need to go searching for the physical receipt.
- Estimates and Proposals – one of the main tasks of any business is to provide a quote, whether this be for the supply of a service, or for the sale of a product or products. Again, while this is not part of the traditional accounting process, many of the computerized accounting systems provide this capability.
The benefits are that if the quote is approved by the customer, the approval can be signed online (using an electronic signature or e-signature), and quickly converted into an invoice, ready to be sent to the client.
- Time Tracking – this is yet another feature that was not part of the standard accounting process, but has been integrated into most of the computerized accounting systems. It is especially useful for businesses that provide services charged by the hour, and helps log and track the time spent on a job or project. When an invoice is issued, the system takes care of calculating billable hours and cost.
- Online Credit Card Payment – allow clients to pay online using their credit card. Efficient, quick, and convenient for both the client and the business owner, online payments are automatically captured by the accounting system without the need for human intervention.
- Accounting Reports – all the usual reports expected of an accounting system are there, including but not limited to journal entries, profit & loss, general ledger, sales tax summary, balance sheet, bank reconciliation, chart of accounts, and many others.
And best of all, reports can be generated at any time and at the press of a key. Get a daily sales analysis report to see how the sales team is doing and who your best customers are. Monitor cash flow with the aged receivables summary.
Computerized accounting systems have made great advances from the days of manual accounting, where transactions were hand written into journals, books and ledgers. They have cut down on the time required to manually add transactions and the number of man-hours required to keep the books balanced, can now generate reports as and when required, and have helped significantly reduce (if not eliminate) calculation errors.
Perhaps more importantly though, they now provide the business owner with added functionality that goes far beyond the requirements of a standard accounting package.
And in a global marketplace, most, if not all computerized accounting systems also allow online access from a mobile phone. The business owner can now have a finger on the pulse of his business from anywhere in the world.
It would be an understatement to say that computerized accounting systems have taken accounting to a whole new level.
