It isn’t so very long ago that anyone dealing with the bookkeeping requirements of a small, or even quite large, business would have done so using paper ledgers. It wasn’t called “bookkeeping “for nothing.
For many years I sold accounting systems for a living; at first they were paper-based and then, very slowly, they transitioned into a computer based system as the necessary software and hardware became more affordable for businesses.
Over time, the bookkeeping function has evolved into something much more comprehensive. This is due to the capability, inherent within most accounting software these days, to integrate the various bookkeeping functions in order to see the bigger picture immediately, without having to wait days for reports to be compiled by hand.
It’s all very well for the sales manager to know that his team of high-performing salespeople have booked orders worth over a hundred thousand dollars this week but, unless he knows how much it has cost to run that sales team, how much the goods and services being provided have cost to produce and what other overheads are involved, his sales figure taken in isolation doesn’t mean very much.
If, on the other hand he can get a real-time impression of the overall situation including a bottom line profit or loss calculation, he can make decisions and take action much more quickly than he could back in the paper-based bookkeeping days.
The information, of course, was always available, it just wasn’t easily accessible.
If we accept that it takes roughly the same amount of time to enter the details of a suppliers invoice into the purchase ledger module of a computerised accounting system as it does to write it into a paper ledger then, line for line, both methods are more or less equal. So why invest the time, effort and money in installing a computerised accounting system?
The answer, of course, lies in what happens to that information once it is entered into the system. If you write the details of a purchase invoice into a book it stays there, in the book. No one else knows about it.
If, on the other hand, you take the same amount of time and enter those same details into an integrated computer-based accounting system, the information is distributed to all areas of the system where it is needed. Management can see the up-to-date expenditure figure at the click of a mouse or the push of a button. I think most people would agree that is more efficient than asking one of the bookkeeping team to prepare a report by hand.
Accounting software not only reduces the time taken to keep company-wide accounts data up-to-date, it also gives employees and management at all levels the information that they need in an instant.
The salesperson answering a stock enquiry from a customer can see whether a particular item is in stock without having to walk down to the warehouse, the company accountant can see how much cash should be received by the end of the month and how much of it will be available to pay suppliers.
Accounting software saves time and effort and puts people in control by giving them up-to-date information upon which to make important business decisions.