Accounting Systems Explained

Businesses of all sizes need to stay on top of their transactions for a number of reasons. First, it’s only by tracking your transactions that you are able to get an overall picture of your business. Second, you need to accurately keep tabs on your transactions to ensure that you are actually able to pay the right taxes. Lastly, without keeping a record of transactions, there is no way to ascertain the value of the effort you put in your business.

Accounting systems and enterprise resource planning suites like SAP Business One solve these issues by allowing businesses to accurately track the flow of money and other assets to and from the business. There are a few ways to do this, but generally speaking, modern accounting involves using a journal for initial chronological recordings of transactions, and then the ledger, where specific and similar accounts and transactions are grouped.

While this could be done manually, it’s generally understood that the term “accounting system” will tend to refer to systems involving specialized software. Systems that use paper or non-specialized software such as Excel are also normally considered to be manual systems.

If your accounting system today is still heavily reliant on Excel or paper, perhaps the best thing you can do for your organization is to make the switch to a computerized system, preferably a cloud-based one that has other functionality suited for your specific type of business. SAP Business One is a widely-used enterprise resource planning (ERP) system with accounting functions that offers all those features.

Going with a computerized accounting or ERP system with these features offers a number of advantages:

More accuracy

Human error is a given in paper-based accounting systems. In older accounting software as with Excel-based systems, this can still be a significant problem as well, as there may be more steps in the process where human error may be introduced. Specialized accounting software, as well as those bundled in contemporary enterprise resource planning systems, do not have this problem to the same degree.

More efficiency

Computerized accounting systems can greatly speed up the time it takes to process transactions, which is especially important if you have a significant volume of them. Doing something as basic as a trial balance can take hours or days with a pencil and paper system, whereas it may only take a few moments with modern software. This speed also reduces the amount of downtime needed to do the books and also reduces the need to hire more people into your accounting and payroll team.

Better data security

If your accounting system is cloud-based or allows you to save data onto the cloud, as is possible on SAP Business One, it removes the very real dangers of data loss due to hardware failure from your end. Your records can be effectively protected such common dangers such as fires, power surges, human error, or employee malice. Updated systems are also typically more challenging for hackers, who will often prefer to target older, more exploitable legacy systems.

Reduced costs

Taken together, better accuracy, efficiency, and security also mean that a computerized accounting system is cheaper to run, in the long term. The initial investment can be expensive in terms of the time needed to transition all your paper-based data into the new system. However, once implemented, a modern accounting system saves money by reducing all the associated costs of paper-based systems.   

Computerized systems are critical for any modern business, regardless of size. Given that there are many affordable options on the market, every organization owes it to itself to try them out.


Arnel Ariate is the webmaster of Money Soldiers.

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