Advantages Of Manual Accounting System
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There's a thing about technology that's easy to forget: You don't always need to use it. You can still buy your groceries from a list on a notepad, you can still get where you're going with a paper map instead of a GPS and you can keep your company's books in actual books instead of an accounting program. It may seem counterintuitive, but for many small businesses, a manual accounting system is the practical, pragmatic option.
- Advantages of Manual Accounting. Data System Errors and File Corruption: Computer systems store data in ways that aren’t commonly understood by many users. Opening the wrong file with old data or encountering a data file with digital errors can ruin the validity of your current data. Manual systems use a single file, the ledger, for each account.
- The main advantages of a computerized accounting system are listed below: Speed – data entry onto the computer with its formatted screens and built-in databases of customers and supplier details and stock records can be carried out far more quickly than any manual processing.
Ease of Setup and Entry
Dec 11, 2013 9 Advantages of Computerized Accounting. An accounting system is a collection of processes, procedures and controls designed to collect, record, classify and summarize financial data for interpretation and management decision-making. Computerized Accounting involves making use of computers and accounting software to record. Manual systems put pressure on people to be correct in all details of their work at all times, the problem being that people aren’t perfect, however much each of us wishes we were.
A traditional manual system would typically use one ledger each for receivables, payables and sales, and then consolidate those figures into one general ledger. You can either set them up yourself or have a bookkeeper do it for you, but either way, it can be done in an afternoon. Once everything is ready, you just need to sit down at closing time to enter the day's transactions, or – if you prefer – sit down the next morning to enter the previous day's transactions.
A computerized system can take longer to set up, although your accountant probably does it on a regular basis and can tweak a standardized set of accounts to fit your business's needs. Once the accounts are set up, you'll need to either learn how to use the software or hire someone who's got experience with it. Paper ledgers can potentially get you up and running more quickly, which is a small win for manual systems.
Transparent Error Correction
You can make a case for either manual or computerized systems when it comes to fixing errors in your books. With a paper ledger, you'll be able to simply erase and overwrite any inaccurate entries, or cover them with correction fluid. It's quick, it's easy and the corrections are self-evident. Computerized accounting systems don't show physical corrections and erasures like paper ledgers do, so instead, they have built-in safeguards to create an audit trail from any changes. That can make corrections more time-consuming, but it means you'll have a solid paper trail.
Everything at a Glance
Generating informative reports and graphs is one of the strengths of computerized accounting, but creating those reports and graphs isn't always the simplest process. Rar password remover crack free download. With a paper ledger, remembering how to conjure up the figures you need is never a problem. Just open the appropriate ledger to its current page, and the numbers are right in front of your eyes. For a small business with modest numbers of transactions, a manual system can be simpler, but as you grow, you'll appreciate the more powerful reporting features of a software-based system.
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Data Security and Access
How long has it been since you last read a news story about a company's data being stolen or compromised? A day? A week? If your accounting systems are connected to the internet, they're vulnerable to hacking, and even standalone computers can fail. Unless you back up your data diligently, either to other computers or the cloud, you could be in real trouble.
Benefits Of Using A Manual Accounting System
Paper ledgers can be less problematic. Data security is a simple matter of locking them up at night in a fireproof and waterproof safe, though it's still prudent to keep a second set of books in a separate location in case of a natural disaster or another catastrophe. That gives a slight security advantage to manual systems – you'll never get hacked – but with computerized systems, you'll have access to your accounting data even when you're on the road, which is a major advantage of automation.
Size Matters
The two big issues with manual accounting are accuracy and growth. When numbers have to be manually added to ledgers and then transferred between them, you're creating the potential for errors. You can minimize errors by using the so-called 'one write' systems, which copy your entries onto the underlying pages so you don't have to re-enter them, but mistakes will still creep in.
Time is another factor. Manual accounting is an efficient answer for small companies, but as your business grows, entering transactions manually will begin to sap more and more of your time. Even if a manual system makes the most sense for you today, you should keep one eye on the future and have a plan in place to transition to a computerized system when the time comes.
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About the Author
Fred Decker learned business fundamentals at second hand as an insurance and mutual funds broker, and at firsthand as a retail store manager and the chef/proprietor of his own restaurants. He has written hundreds of business-related articles for sites including Zacks.com, Chron.com, Vitamix.com, Bizfluent and GoBankingRates and many others. He was educated at Memorial University of Newfoundland and the Northern Alberta Institute of Technology.
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Disadvantages Of Manual Accounting System
