Accounting helps businesses know whether the company is making a profit or facing a loss.
Many small businesses do their own accounting manually, or may use an excel spreadsheet to track their accounts.
As a professional who works with small businesses and nonprofits on their systems, I have found some of the reasons why some small businesses or start-ups still use manual systems are: (1) Not enough accounts activity to warrant a software package. (2) Not enough knowledge on how systems work, (3) limited budget.
There are those who are considering using a computerized system but have questions regarding what system is most suitable for their business. Accounting systems are so affordable these days and there are different programs to meet different needs and budget.
Computer vs Manual Accounting
Computerized and manual systems perform the same processes and apply the same accounting principals.
The major differences are in the mechanics of the process and functionality:
(1) Speed: Computerized accounting software processes data and information and allows you to generate reports faster than manual systems.
(2) Ease of backup of a computerized system. A computerized system allows you to backup your transactions in case of mishap or fire. You cannot back up paper records unless you make copies of your documents.
(3) Cost: Using a manual system may be cheaper than using a computerized system as all you need is pen and paper. There are costs associated with implementing, training and maintenance of your accounting system.
Some of the popular accounting systems in the market for small businesses are:
QuickBooks: An accounting software program designed for small businesses and produced by Intuit. This is an “off-the-shelf” accounting information system. § Sage 50, formally known as Peachtree: This program uses double-entry accounting principles which helps reduce errors and prevent fraud with automatic accounting checks and module-level security. It is designed to support small and medium oriented businesses. Many accounting software programs now offer cloud accounting. Cloud computing or “cloud” is a phase used to refer to a type of internet-based computing where different services such as storage servers, and applications are delivered to an organization’s computers and devices through the internet. QuickBooks is one of the leading “cloud” accounting for small businesses. With cloud accounting, you can access your information from anywhere. You can also allow your consultant or accountant access to your books to help you close your books monthly without them physically coming to your office or you giving them a copy of accounting data in a disk. There are number of things you have to consider when it comes to cloud computing, for example; security, costs, data privacy, dependence of cloud provider etc.
The number of small businesses using computerized systems is increasing as they learn more about the advantages of accounting programs such as speed and accuracy of operation.
Author Bio Agnes Gacheru, MBA, assists companies and nonprofit organizations in setting up accounting systems to meet current and future needs through Zuri Business Support.