Manual vs Computerized Accounting system: Comparison

0

Accounting is the process of documenting financial transactions. It also refers to the process of storing, organizing, classifying, retrieving, and presenting the information related to financial transactions in different reporting formats so that you can make informed business decisions.

Traditional accounting is done by proficient accountants who maintain financial records manually. In traditional accounting, account books, registers, pen, and paper are used for recording and maintaining transactions. 

Though the manual accounting software is characterised by confidentiality and easy accessibility, manual financial reports can be prepared accurately only if the accountant is highly proficient in accounting and Bookkeeping Services. Moreover, the manual system of accounting is prone to human errors, and therefore, avoided by the new age businesses.

Thus, with the advancement of technology, more and more businesses across the globe are embracing computerized accounting systems, owing to its speed, convenience, and accuracy.

The Common Role of Manual and Automated Accounting System

The primary objective of both systems is to prepare and record financial statements accurately. Both manual and automated billing software calculate transactions, gauge the results, and present the same to the concerned authorities, including the owners, creditors, investors, etc. 

Though both traditional and computerized accounting systems are based on the same accounting concepts, they have a lot of differences. Now let’s shed light on the most striking differences between a manual accounting  and a computerized accounting. So here we go:

  1. Mechanism: Manual accounting is done using pen and paper, whereas computerized accounting is done using software systems and internet-enabled devices for recording transactions electronically.
  2. Calculations: Manual accounting calls for manual calculation of accounts. For example, an accountant has to manually calculate the deposits and withdrawal to determine the balance of a ledger account. 

In a computerized accounting, balance calculations are automatically done by the accounting software. 

  1. Speed: Manual accounting is also a time-consuming affair as all transaction-related calculations are done manually by the accountants. It keeps accountants involved all the time for entering and updating financial transactions, which is, no doubt, a tedious thing to do.  

On the other hand, since computerized accounting automate the process of calculating and recording transactions, they help save a great deal of time. Once you enter a transaction in an automated accounting system, the software automatically updates the financial transaction in all relevant accounts, thus, making the accounting process smoother and faster.

Moreover, businesses that still adhere to traditional accounting systems prepare financial statements at the end of the financial year. On the other hand, organizations that use computerized systems can instantly generate financial statements only by clicking a button. 

  1. Trial Balance: A traditional accounting tool creates trial balance manually whenever required, whereas, in a computerized accounting, the trial balance is generated on a daily basis. 
  • Accuracy: Manual accounting is more prone to human errors such as inaccurate or incomplete recording of transactions, errors in adding figures, and so on, which may prove disastrous to your business and company’s reputation.

A computerized accounting system, on the other hand, minimizes the risk of human errors if all account-related data is entered correctly. 

  • Backup: Nowadays, having a reliable data backup is a vital element for every small and big business. Backing up your files is not possible in a traditional system; however, if you use an automated accounting system, you can easily and instantly save your transaction records in the system without wasting additional time. 

Nevertheless, data backed up by computerized accounting can be corrupted by a virus or bug. Moreover, data saved on a cloud server is also prone to cyberattacks. Despite this, the best thing about computerized accounting is that you can back up your electronic data and store them in a secure place so that you do not have to suffer the consequences of data loss.

  • Safety: Physical accounting files are also prone to damages caused by fire, water, hurricane, and other natural disasters. Once you lose the files, or if the files get stolen, there’s no way of retrieving the information if you do not have copies of the files. 

In computerized accounting, all accounting files are safely stored on a cloud-based server; thus, in the event of an unexpected calamity, you do not have to worry about losing your valuable data.

  • Compliance: One of the most important factors that businesses should take care of is to stay tax compliant.  Nevertheless, the complex nature of different taxes makes it difficult for accountants to handle everything manually. 

Automated accounting makes it easy for accountants to evaluate the compliance of work practices. At the same time, accounting software analyzes your business data to streamlines and accelerate the process of filing accurate returns.

  • Ease of Editing: Editing a paper-based accounting file is quite a daunting task. In case your physical accounting file needs even a minor correction, you will need to rewrite all the details on a paper. Each time you want to make more changes to your paper-based files, you will have to repeat the rewriting task.

A computerized system, on the other hand, allows you to make corrections to your digitized accounting files instantly. It also enables you to create customized accounting reports whenever required. 

  • Organized: In manual accounting, it gets difficult to store data in a systematic manner. Computerized accounting, on the other hand, offers multiple options and templates for saving data properly and in an organized manner. Moreover, a computerized system makes it easy for you to locate, access, or retrieve account-related data compared to the traditional method. 
  • Expenses: Since traditional accounting is paper-based, it comes with additional associated expenses. Other than piles of papers and registers, traditional accounting also needs additional accessories, such as photocopy machines, printers, ink, pencils, pens, erasers, and other stationeries. Thus, the conventional way of accounting can prove to be quite expensive for some businesses. 

A computerized accounting system, on the other hand, helps you save money in multiple ways. For example, by investing in an accounting software system, you can cut the costs of basic stationery such as paper, ink, paperclips, etc. It also helps you downsize your accounts department. QuickBooks is one of the popular accounting software which can be hosted on azure cloud with the help of quickbooks hosting providers who provide low cost azure virtual desktop pricing for accounting software hosting. Thus, small businesses that are looking for ways to save money should consider investing in accounting software.

  • Automation: The conventional method of accounting is more tiring compared to automated accounting. The traditional system requires you to draw columns and fill them up with accurate numbers. What’s more, you are also required to cross-check your work time and again. 

Computerized accounting is capable of handling such day-to-day tasks quickly and accurately. Accounting software calculates and updates all transaction records automatically, thus, reducing human errors, and enhancing efficiency.

The Bottom Line

Considering the weaknesses of manual accounting, we can easily conclude that computerized accounting is the way forward. Though computerized accounting is a new concept, it has already started redefining the global accounting industry. 

The growing volumes of business transactions will gradually make it impossible for organizations to maintain accounts manually. A computerized accounting, known for its high speed, enhanced productivity, accuracy, reliability, easy backup of records, and mobility of reporting, helps you do away with the limitations of traditional accounting. What’s more, it is capable of managing all accounting processes, such as accounts payable/receivable, outstanding tracking, bank reconciliation, and compliance much faster. 

Thus, in this fast-paced business world, if you do not want to fall behind your business competitors, you should consider investing in an advanced, feature-packed accounting software.

Share.

Leave A Reply