Computerised Accounts

When should you consider computerising your accounts and what system should you use?

People who do not like writing up their accounting records often think a computer would be the answer.  This is not always the case.  It is better to have a good manual system first and then consider computerised options.  Computers can certainly assist in the financial management of a business but they can also hinder it.  Proper use of computers should be carefully planned and should be part of your information technology strategy.

This is not a specialist guide on information technology strategy, but does attempt to clarify some points on the use of computers in financial management and to help you to think through some of the decisions you may face.

There are two main options:

Spreadsheets

Using Microsoft Excel (or similar) programme, is ideal for budget preparation, management accounts, cash flow forecasts and writing some financial reports.  It will allow amendments and will automatically recalculate the totals.

Some people use spreadsheets for writing up the cash and petty cash books instead of a manual system.  This has the advantage of being able to track financial information more easily than in a manual cash book.  However, the following points should be considered:

  • It is easy to delete figures by mistake
  • It is easy to put figures in the wrong column or row
  • It is easy to assume that a formula is still correctly set up when in fact it is wrong because something else has been changed
  • A mistake in setting up will make the whole thing wrong
  • It can be difficult for other people to access or use
  • If it is a large spreadsheet, it can be difficult to read when printed out (can involve gluing pieces of paper together and it is still difficult to scan across the whole spreadsheet)
  • Cross checks should be built in to ensure that the spreadsheet adds across as well as down.

Accounting software packages

An accounting package is a whole system for the book-keeping of the business.  Every package will be based on the double entry book-keeping system and for most packages a sound understanding of double entry book-keeping is required: the meaning of such terms as debit and credit and how to enter journal transactions.    It may be wise to undertake training in this aspect first before attempting to computerise, as trying to learn both the accounts and computer aspect of a new system simultaneously is very daunting.   

In addition, decisions will need to be made about how the system should be set up before it can be used.   If the system is not correctly set up, it will not work correctly.

Computerising the accounts will be a big step for most businesses and if you are not happy or ready for it, it will fail.

It is important to consider carefully both the advantages and disadvantages of computerising the accounts:

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