The "language of business," no matter the company, is accounting. Without accounting knowledge, it is difficult to be effective in your business. Accounting helps reduce unnecessary costs and increase profits through the company by monitoring historical financial information, spending trends, and revenue records. Companies benefit from using the same strategy of recording transactions and analyzing data for all transactions. As such, using accounting software to manage computerized accounting information provide the best consistency. There are definite advantages to using computerized accounting software over manually keeping books.
In terms of manual books, all financial records must be entered, often in more than one place. There are general ledger entries, as well as journal entries to manage for every single transaction. At the end of the accounting cycle, this information must be compiled into the balance sheet, the income statement, and the statement of cash flow. The process is sequential, with each statement providing the information necessary for the next. However, when there are thousands of transactions to go over, the process can be hectic and there is more opportunity for error, unlike using computerized accounting information.
Obviously, manual accounting practices would take considerable time and resources to the larger organization. Computerized accounting information saves time as many manual functions are handled automatically. A relatively untrained employee can be shown how to enter transactions into the system as they occur. Banking activities can automatically be downloaded into the system directly from the bank or financial institution. Other departments such as shipping and receiving can record incoming materials and outgoing products in real time. As each of these transactions occurs and is entered into the system, the computer compiles the information for automatic generation of reports and financial statements.
Manual accounting and computerized accounting have their advantages and disadvantages. They may differ only in terms of cost, speed and mobility. Computerized accounting information systems can be implemented according to company size, location, and budget. A sole proprietor, for example, might be just as comfortable with manual accounting as they are a computer program. A small business might only need basic computerized accounting software. However, a large organization might need an enterprise solution or custom-designed package. In such cases, these companies will need to hire and retain professionals who can implement, manage, troubleshoot, and adapt the system as the needs of the business change and evolve. In some cases, that may be an IT department. However, a professional with accounting knowledge is ideal.