Friday, June 29, 2007

Why computerise your accounts?

If your accounting is not already computerised, then this is probably a question that you should ponder.

Accounting software has evolved into more than just book-keeping software, and actually organises your work and streamlines it while providing you with critical information for decision making. Let's take a look at a typical business activity.

Sales cycle process
Think of a company that trades in goods. In the normal course of doing business, it has to:
  1. provide quotations,
  2. receive orders,
  3. deliver orders,
  4. invoice delivered orders, and,
  5. receive payment for invoiced orders
Now, if you were doing this manually, you would prepare a quote, and when the customer confirms, look up that quote and prepare a delivery order/invoice which would involve re-entering the data into a different format.

On top of this, you would have to lookup stock levels to ensure that you have enough, as well as ensure that the customer has not exceeded their credit limit with the new order.

Phew! A lot of work for just one order, and if your business is growing, it would be very easy to lose track of things.

There is also the possibility of human error. Imagine for a moment if the person entering the data missed out one zero and did not notice the error. You just quoted RM10.00 for an RM100.00 product!

At your finger tips
These days, business is conducted at the speed of thought. Customers do not like to wait too long for a quote or an order to be fulfilled, and are always on the look out for suppliers who can not only cater to their requirements but are also price competitive.

With a good accounting software, you can do all this seamlessly. Most accounting softwares allow you to generate quotes to customers. These are essentially memo entries and do not have an accounting impact. These quotes can then be recalled instantly and converted to orders, and then into invoices without having to bend over backwards. A good system should allow you to look up stock levels and prices as well as customer credit standing at each point of the process. In other words, even when you are preparing the quote, you would have all this information at your finger tips.

Business decisions
And if the customer asks for a discount? No problem! You can look up:
  1. the customer's history to see how much they have bought from you and how regularly,
  2. their payment history
  3. your cost price
before making a decision. All this is done right at your desk! No need to rummage through files looking for information or running down to the store to see if you have sufficient stock on hand.

An accounting software therefore empowers you with information, both current and historical, enabling you to make decisions instantly.

Accounting knowledge not required
Most accounting software these days are single entry systems. What this means is that you do not need accounting knowledge to use them. The systems are intelligent and know where to make the corresponding entry. For instance, if you generate an invoice, the system knows it has to debit Trade Debtors. You only need to know which income account you want to classify the sale to.

The only time accounting knowledge is required is when passing journal entries, and these are usually entered at the end of the month and/or financial year.

Segregation of functions
Accounting systems also allow you to segregate functions. With multi-user access, you can segregate sales, purchasing and store keeping functions, allowing the accounting department to focus on core functions rather than expending time on issuing invoices, etc.

You could then divert manpower resources to revenue generating activities and still be able to function administratively.

So if you haven't already, take a serious look at computerising your accounts. There are a lot of good accounting software out there, and they vary in price and functions, but are affordable and can save you time and money.

1 comment:

Anonymous said...

You make some solid comments. A good accounting package is certainly worth its weight in gold!

Rebecca Gill
Technology Group International