Advantages and Disadvantages of Accounting Software

Accounting software is more than just an automated way to do your books. The benefits of accounting software are not just limited to saving you time, money and headaches. Accounting software helps you streamline all parts of your business processes so you can focus on growing your company and making money instead of wasting time on tedious tasks.

In this guide, we review the aspects of How Accounting Software Improve Productivity, benefits of accounting software, advantages and disadvantages of accounting software, and the role of accounting software in minimizing business costs.

How Accounting Software Improve Productivity

Accounting software is a great way to increase your productivity, but the benefits are more than just saving time and money. Accounting software helps you streamline your business processes, get real-time updates on how you’re doing and make sure all your clients are happy.

Real-time reporting

Real-time reporting allows you to see your business in real time. This means that you can see the effects of your decisions immediately and make changes to your business based on what you see. With traditional accounting software, it often takes a few weeks before employees can get access to their financial data and reports so they can make informed decisions about day-to-day operations. While this isn’t a huge issue if everything is going smoothly, it can be frustrating when something goes wrong or needs adjusting since there might not be any immediate feedback from an employee who made a change based on incorrect information from outdated reports.

Any time, any place

Mobile access is another great benefit of accounting software. It allows users to work from anywhere and make the most of their time by freeing them from traditional office hours. Some companies may have some restrictions on when you can log in or access certain parts of the system, but for the most part, you’re able to do your job wherever and whenever you want.

Streamline business processes

With accounting software, you can streamline business processes and take advantage of integration with other software. For example, if your accounting software has connectivity to your marketing automation platform, it will automatically create a lead when there is an invoice that hasn’t been paid or send out reminders to collect payment after 30 days.

Integrations also make it easier to manage multiple locations because all the data is in one place. It’s easier for employees at each location to access the data they need and have access to the same tools as other employees in the organization. With better visibility into what everyone else is doing, you can make sure that everyone is on track with their tasks so that there aren’t any bottlenecks or delays in getting work done.

Happy customers

Happy customers are happier for a reason. They are more likely to come back, refer you to others, pay on time and buy additional products and services. If your business is like most other businesses it’s imperative that you keep track of customer satisfaction ratings. This will enable you to identify problem areas early and make changes before they become too big of an issue.

You may think that the only way to improve your customer service is by hiring more people but this just isn’t the case. Having more employees means paying higher wages which means less profits for you as a business owner! Instead of hiring another person why not use accounting software?

Benefits of Accounting Software for Small Businesses

Many companies could gain from utilizing trustworthy accounting software. However, it is important to keep in mind that even the best software has its quirks. Many companies reach a point when the manual processes and piecemeal accounting practices they once used to manage taxes, finances, payables, receivables and inventory begin to limit their businesses instead of benefiting them.

Companies looking to flourish need to do more than maintain a basic general ledger, enter data onto various spreadsheets and documents, and waste precious resources corralling redundant reports from multiple departments. Accounting software helps small and growing companies cost-effectively manage, streamline and automate basic and more complicated financial and operational processes. Here’s a look at accounting software’s different features and how they help companies better compete in today’s dynamic and increasingly complex markets.

Accounting software has many benefits. Among the many advantages of accounting software are:

Quick and easy data entry is usually only necessary once Digital record keeping is crucial for Making Tax Digital for VAT


Profit and loss, creditors and customers, inventory and sales reports and forecasts can all be generated automatically.


Tasks like calculating pay, creating pay stubs, calculating and submitting VAT, etc. can all be automated.
decrease in mistakes like number transposition, incorrect or missing transaction recording, etc.


The ability to connect to other platforms, such as online banking and electronic filing
Investing in accounting software is a smart move that will help you save money and time while providing you with crucial data about your company. Purchasing a computerized accounting system may be one of the best moves you make for your company if you give careful consideration to the package you go with.

Use this HMRC service to look for accounting, record-keeping, and bridging software that complies with Making Tax Digital for VAT, and get advice on which package would be best for your business.

Accounting software improves productivity by giving you better metrics, mobile access and a more efficient way to do business.

Accounting software can help you make better business decisions.

Accounting software is an excellent way to keep track of your business finances, but it can also provide other valuable benefits that will improve productivity and efficiency.

Many companies reach a point when the manual processes and piecemeal accounting practices they once used to manage taxes, finances, payables, receivables and inventory begin to limit their businesses instead of benefiting them. Companies looking to flourish need to do more than maintain a basic general ledger, enter data onto various spreadsheets and documents, and waste precious resources corralling redundant reports from multiple departments. Accounting software helps small and growing companies cost-effectively manage, streamline and automate basic and more complicated financial and operational processes. Here’s a look at accounting software’s different features and how they help companies better compete in today’s dynamic and increasingly complex markets.

Advantages and Disadvantages of Accounting Software

Many companies reach a point when the manual processes and piecemeal accounting practices they once used to manage taxes, finances, payables, receivables and inventory begin to limit their businesses instead of benefiting them. Reliable accounting software is likely to benefit many businesses. However, such software sometimes comes with its share of problems, so it is important not to overlook the possible issues.

benefits of accounting software

Companies looking to flourish need to do more than maintain a basic general ledger, enter data onto various spreadsheets and documents, and waste precious resources corralling redundant reports from multiple departments. Accounting software helps small and growing companies cost-effectively manage, streamline and automate basic and more complicated financial and operational processes. Here’s a look at accounting software’s different features and how they help companies better compete in today’s dynamic and increasingly complex markets.

The size and complexity of most businesses are within the software’s capabilities. Depending on a business’s requirements, a variety of add-ons and modules are available to expand the system’s capabilities. They all help businesses in similar ways by digitizing and automating accounting and financial procedures, which in turn improves efficiency, accuracy, and productivity. Here are a few of the most important features of the modern accounting software that businesses use.

1. Time is saved through automation; quality accounting software can send out automated invoices and payment reminders with online payment links. Automation can also aid in payroll, tax payments, and accounts payable by facilitating the scheduling of bank payments and direct deposits, data entry into the most common tax forms, and electronic filing with the IRS. Time is saved, and the accuracy of the books is enhanced, because of the removal of manual processes. If a mistake is made, the accounting software can notify the user and draw attention to the problem. The accounting and finance departments can now devote their time to more important projects.

2. Data is useless if it cannot be viewed in real-time by key employees so they can make quick, informed decisions for planning, forecasting, and goal attainment. Companies that deal in transactions can gain an advantage by learning more about the specifics of their customers’ purchases, such as the method of payment used, the time of day, and the location of the purchase. Revenue, profit, assets, and inventory can all be quickly accessed by management and other team members. Data from different eras can be compared with little effort.

3. Clearer and more precise data are easier to see than they would be with blurry lenses or an out-of-date prescription. The same can be said for accounting methods from yesteryear or clunky, antiquated computer programs. The accounting software of today makes it simple to keep tabs on all financial transactions, organize and update data, and foster better interdepartmental communication. This overarching perspective is useful for cutting down on mistakes, reducing bureaucratic walls, keeping tabs on who’s responsible, and cutting out unnecessary steps. With a clear picture of how each division is doing, the company as a whole can better allocate its resources. Executives can benefit from this as well, whether they are the manager of a small company or the founder of a rapidly expanding business.

4. Accounting software employs encryption and other forms of user authentication to keep financial records safe and operations running smoothly. Important data is safeguarded in the event of a lost or stolen mobile device, a fire, or any other disaster thanks to the offsite storage provided by cloud computing. Also, even a small business can get the same protections that large ones do.

5. Producing, labeling, checking, and submitting financial data in documents and spreadsheets by hand is not only error-prone, but also a time-consuming compliance process. The constant upheaval of rules, regulations, and tax structures only compounds the difficulty. A well-designed piece of accounting software can streamline and automate these tasks, allowing for more reliable financial statements to be generated in accordance with GAAP and IFRS (IFRS). Automating routine tasks like preparing quarterly tax estimates and annual tax returns reduces the amount of time and stress spent on these tasks.

6. Improved judgment: decisions should be based on hard evidence, not on wishful thinking or gut feelings. Accounting software is useful because it provides immediate access to the data and key metrics (such as revenue, customer purchase rates, product sales, and inventory levels) that define the financial health of a business, be it a stand-alone coffee shop or a regional bakery with multiple locations. Decisions can be based on a firmer foundation than the static, disjointed, and siloed methods of manual accounting thanks to the increased control, insight, and collaboration afforded by modern accounting methods.

7. A more productive workforce is the result of software that automates mundane accounting tasks, allowing key employees to shift their focus from merely maintaining financial data to actively developing new avenues of revenue. Improved business strategies and cross-departmental communication thanks to accounting software’s core features like increased accuracy, real-time data delivery, visibility, and collaboration lead to more informed decisions.

8. Accessibility from anywhere: As a result of the pandemic, many accounting departments have implemented cloud-based accounting systems that allow authorized users to access their accounts and financial records in real time from any web-enabled device. These enhancements help with speed, precision, teamwork, and making sound choices.

9. As a company expands in size, its sales, financial transactions, customer base, inventory, and payroll needs, the scalability of its accounting software becomes increasingly important. The majority of these suites feature expandable modules and add-ons that manage expansion and link to things like financials and stock. During slow periods, periods of transition, or seasonal trends, businesses may also choose to eliminate unused features.

10. Less expensively, cloud-based accounting software transmits information to the remote servers of a provider, where it is processed and made available to business managers. That helps cut down on expenditures of money, time, and other resources. Because the software is not installed on the company’s computers or network, the cloud-based system frees up resources and gives IT personnel more time to focus on other projects. With automatic updates, you’ll never have to spend money on costly new licenses, expensive hardware, time-consuming maintenance, or complicated system integration again. These advantages are particularly useful for companies operating in unstable or changing markets.

Disadvantages of Accounting Software

Almost any report or article you read today will extol the benefits of, and in some cases the requirement of, business owners integrating technology into every facet of their operations. It’s true that not every small business would benefit from purchasing accounting software. There are benefits to using accounting software, but those who work for themselves or run small businesses also need to weigh the costs.

Cost

Although there are reasonably priced accounting packages available for small businesses, there are additional expenses associated with maintaining and utilizing the software. The hardware requirements for accounting software include a minimum amount of RAM, processor speed, and hard drive memory. More space is needed to make a backup of your accounting data than an Excel spreadsheet, which can be copied to a flash drive. There may be additional fees for technical support, and upgrading the software may require paying a yearly licensing fee. Moreover, you may have to pay a consultant to set up your software and your books if you lack the necessary expertise.

Difficulty


Even if you choose accounting software that is tailored to the needs of those who are not trained in the field, you will still have to overcome a learning curve. It may take more time to learn the accounting terms, layouts, and proper setup of the software than the benefits you gain from using it if this is your first time using accounting software. The trials and tribulations of running a business are difficult enough without adding more to your plate. If learning accounting software isn’t absolutely necessary or the benefits of using the software outweigh the costs, you shouldn’t add that stress to your plate.

Time


Accounting software takes more time to process expenses and invoices than a ledger pad or spreadsheet software and creating handwritten invoices or invoices created in accounting software. A software’s benefits may be outweighed by the time spent entering simple financial data every day if using a computer is not a regular part of your routine.

Maintenance


Updating the accounting software package is only part of what it takes to keep it running smoothly. Newer versions of the software may also necessitate more recent hardware in order to function properly. Your computer, monitor, printer, Internet modem, backup hard drive, and operating system are all examples of such hardware. Stick with spreadsheets or ledgers if you don’t want to invest in keeping your hardware up to date with the accounting software’s requirements.

What Is Accounting Software?

Accounting software is used to collect, record, categorize, manage, access and share accounting data and other financial information from a single platform. It saves companies time and money by automating manual functions, such as creating journal entries, generating financial statements, updating key reports, managing payroll and expenses, and syncing data across different departments.

There are several kinds of accounting software. Small companies generally start off with a basic package that’s installed on an in-house system. However, online (read: cloud-based) software provides more features, benefits and customization. Pricing models range from a one-off licensing payment for a basic on-premises package to an annual subscription fee for cloud-based software. Subscriptions generally bundle together separate fees based on the core platform, optional modules and number of employees who will use the software. Most accounting software is scalable, depending on a growing business’s needs, either by integrating additional features into on-premises software or by adding modules in the cloud.

Regardless of the brand a company chooses, most popular accounting software includes core features that handle general ledger entries, invoicing and billing, accounts payable and receivable, reporting and analytics, and employee time and expense management. Employees can create dashboards to view and track the information that’s most important to their roles.

Cloud-based software includes those basics but, because it’s connected to a centrally managed server via the internet, can offer additional functionality and convenience. Cloud-based software, for example, provides authorized access to data anyplace, anytime and from any device. It can also include automatic updates for security, backup and new tax regulations. Modules allow managers to quickly add different features, such as deeper resource management capabilities and analytical tools.

Like a basic on-premises package, cloud-based software is designed for use by most types of companies and can be customized for different business models. A company that operates on a subscription-based business model, for example, can customize the software to handle recurring billing, usage-based pricing, real-time invoices and dynamic inventory management.

Why Use Accounting Software?

Companies that have outgrown manual accounting practices and processes use accounting software to save time by automating and streamlining the recording, management, reporting and sharing of accounting and financial data. With good accounting software, a business can automate many transactions involving payables and receivables, inventory and employee payroll, as well as reports and financial statements.

Among the many reasons why small businesses switch from manual processes to accounting software are that the software can:

Cloud-based accounting software requires minimal installation and provides automatic updates and backups, as well as extra layers of encryption and other security measures. This allows companies to free-up in-house computing systems and IT resources, saving costs, increasing efficiencies and cutting manual processes.

Companies use accounting software to eliminate manual and redundant tasks, allowing key employees to focus on more important duties that add greater value to the overall business.

Benefits of Accounting Software

Most accounting software can scale to a business’s size and complexity. Add-ons and modules provide additional features and functions depending on a company’s needs. Most deliver similar benefits that help businesses digitize, automate, streamline, increase accuracy, and improve their accounting and financial processes. Here are some of the main benefits of today’s popular accounting software.

Saves time with automation: Any good accounting software can automate invoicing by delivering invoice and payment reminders that include links for the appropriate online payment methods. Automation can also help accounts payable, by scheduling bank payments and direct deposits; tax payments, by entering data into the most common tax forms and electronically filing them with the IRS; and payroll, by calculating hours and taxes, processing wages and paying payroll taxes. This elimination of manual processes saves time and improves accounting accuracy. And when errors do crop up, accounting software can send a notification and highlight the error. All of this frees up accounting and financial teams to focus their efforts on higher-value tasks.

Up-to-the-minute information access: Data isn’t worth much unless key employees can view up-to-date, accurate information and quickly make decisions for planning, forecasting and achieving goals. Transactional businesses benefit by accessing information on the payment method, time and location of specific product sales. On a more basic level, management and other team members can quickly access up-to-date revenues, profits, assets and inventory. They can also easily compare data to other time periods.

Improved visibility of more accurate information: It’s tough to see details through scratched lenses or an old eyeglass prescription. The same is true with yesterday’s accounting processes or outdated software. Today’s accounting software lets departments easily view and track transactions, manage and maintain up-to-date data, and improve collaboration across departments. That comprehensive view helps to prevent errors, break down departmental silos, track accountability and avoid redundancies. Full visibility of overall performance makes it easier to adjust funding and expenses for different departments, improving the company’s overall health. It also helps executives — whether the manager of a small business or the founder of a growing company — make accurate, real-time decisions.

Security and continuity: Accounting software uses encryption and other layers of security to protect data and authenticate users. This is especially important for cloud-based software, where the data resides on a remote server; crucial information is also protected in case of a lost or stolen mobile device or in the event of a fire or other disaster. And small businesses can obtain the same level of security as bigger companies.

Compliance: Manually producing, tagging, double-checking and submitting financial data in documents and spreadsheets is time-intensive and creates errors. Keeping up with ever-changing guidelines, regulations and tax structures adds to the frustration. Accounting software can automate and simplify those processes, producing accurate financial statements through continuously updated templates for compliance with Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). Process automation saves time and frustration from filing quarterly tax estimates and yearly returns.

Better decision-making: Hope and instinct don’t make the best foundations for crucial decisions. Accounting software benefits the decision-making process by providing visibility into the real-time data and key metrics — such as revenue, customer purchase rates, product sales and inventory levels — that define financial health for, say, a standalone coffee shop or regional bakery with multiple sites. That level of control, insight and collaboration forms more solid ground for making business decisions than the static, scattered and siloed methods of traditional manual accounting practices.

More productive employees: By automating routine accounting processes, software can transform key employees from passive caretakers of financial data to proactive creators of business value. Accounting software’s core capabilities — increased accuracy, real-time data delivery, visibility and collaboration — help teams develop better business strategies and communicate across departmental silos, both of which facilitate better-informed decisions.

Remote access: Remote work caused by the pandemic has prompted many accounting departments to add cloud-based accounting systems that make real-time data and information accessible to authorized employees from any place, at any time and on any device. Those features improve efficiency, accuracy, collaboration and decision-making.

Scalability: The scalability of accounting software is crucial as a company’s accounting processes, sales, financial transactions, customer base, inventory and payroll become larger and more complex. Most packages include modules and add-ons that handle growth and integrate with bank accounts, credit cards, inventory and other business elements. Companies can also delete unnecessary features during downtimes, transitions or seasonal trends.

Lower cost: Cloud-based accounting software sends data through the internet to a provider’s remote servers, where it is processed and made available to business managers. That saves cost, time and resources. Since the software no longer resides on a business’s computers or network, the cloud-based system frees up valuable computing space and allows IT staff to focus on other tasks. Automatic software updates eliminate fees for new licenses, hardware, system maintenance and integration. Those benefits are especially important for businesses in volatile or dynamic markets.

Key Accounting Software Features

Basic features of most popular packages automate and update the data entry and management of general ledgers, journals, accounts payable and receivable, payroll, income statements, balance sheets, reports, invoicing, reconciliation, and purchase and sales orders. Cloud-based accounting software also provides access to accounting and financial data no matter the time, employee’s location or device in use. Here are the main features offered by most popular standalone and online accounting software.

Choosing the Right Accounting Software

Businesses of all sizes and in any industry — from the small mom-and-pop in a niche market to a large enterprise on the international stage — have a variety of accounting software platforms to choose from. It’s important for a company to take the time to assess which one suits its size, budget, market and predicted growth. Most of today’s software includes tools that multiple people on the accounting and finance teams will need, so make sure it’s easy to use and can integrate with any operational systems to facilitate automation. Some accounting software is also aimed at particular industries, which may make a better fit for your company.

Before choosing accounting software for your business, gauge the company’s growth path and make sure the software can scale and make any necessary adjustments to the company’s future direction. If you plan to add a subscription-based model, for example, look for software with recurring billing, real-time invoices and inventory management features. Other modules can handle complex business and financial needs, multiple currencies, resource management, financial planning, shipping, and automatic updates for dynamic tax regulations. Such advanced features often can be scaled back or removed during seasonal dips.

Take Control of Your Accounting With NetSuite

No matter the size of a company, cloud-based accounting software can help it become more efficient and competitive by streamlining, automating and optimizing accounting and financial operations that were once done manually, within silos or not at all. NetSuite Cloud Accounting Software makes it easier to enter, manage, track, update and customize core processes, such as accounts, journal entries, transactions, and billing and invoicing, through its dynamic general ledger. Authorized employees can view and share financial data from a single platform anyplace, anytime and from any mobile device. Full visibility of real-time information eliminates redundancies and errors, improves collaboration and decision-making, and ensures timely closings. The software links to business bank accounts to automatically import banking and credit card information for a real-time view of cash flow. Updated security and encryption protects business data and saves IT staff time and money.

Every business, no matter the size, strives to improve efficiencies, cut costs and simplify complicated tasks. Accounting software can help achieve those goals and more. Accounting software can eliminate time-consuming manual processes and redundancies by automating accounting practices, from the most basic to the advanced. It can help businesses manage inventory, changing tax regulations, growing staffs and complicated resource management issues. Cloud-based accounting software can also provide real-time data access anyplace, anytime and from any device to give business managers and employees the information they need to make the right decision at the right time.

objectives of accounting software

Whether your accounting system is simple or complex, it must meet certain objectives to keep your business running smoothly. It’s difficult to make informed business decisions without accurate financial data that helps you see where you are, where you’ve been and trends that may determine where you’re headed. The objectives of an accounting information system should be to provide information to decision makers in a format that is easy to understand.

Track Spending and Income

One of the primary objectives of an accounting system is to help you track the income and spending of your company. Comparing the two gives you a snapshot of the company’s profits or losses, although there are often other factors that determine whether your company is successful. A month showing a loss is understandable if you purchased a large piece of equipment that month, for example. Tracking where the money is coming from and where it’s going is imperative in order to create financial statements. This consolidated information can then be evaluated and used to make further decisions such as purchasing, advertising or the need to scale back in a particular area.

Provide Accurate Reporting

Accurate reports are critical to your ability to make business decisions. One of the primary qualities of accounting information is the principle of faithful representation, meaning that the information presented in financial statements is truthful and free from error. Accurate information will allow you to examine every aspect of your income and expenditures at a glance and know that your data is reflecting an true picture of your current financial situation. If your overall profit and loss statement shows a profit, but one department is consistently running at a loss, your company isn’t performing at peak efficiency. Your cost of goods sold should be a fairly consistent number. When it starts to rise, you need to know that immediately so you can change your purchasing habits. Reports also are essential when you try to get a new loan or want to develop a business partnership with another company. Financial statements that have been produced by following sound accounting practices will enable outside entities to confidently assess the financial health of your company.

Streamline Office Work Flow

Your accounting system should help you improve the work flow in your office by creating a central location for financial information and forms. With all staff members using the same system, you have immediate access to outstanding purchase orders, invoices, expense reports and time sheets. This helps you see not only the current status of your finances but what to expect in the near future. It gives you a snapshot of the money that’s expected to come in, when it’s expected and the money that is likely to be going out in the same timeframe. It centralizes your accounting functions so all transactions are kept in the same system, allowing for a more efficient work flow throughout your office. Your employees don’t have to track down the most recent version of the expense report; it’s always available through the system, for example.

Maintain Tax Records

Another purpose of an accounting information system is the need to regularly and properly maintain your company’s business records for tax purposes. You must keep track of your company’s tax obligations as well as what you’ve paid toward your employees’ federal programs, such as Social Security, to accurately report that information on the W-2 forms. Keeping all your financial information in one place simplifies the tax process by allowing you to create the reports you need on demand to give to your accountant. This includes W-2 information, sales and income information as well as business-related expenses and depreciation on your assets. Some accounting systems allow you to scan in receipts to attach to expense reports or purchases for convenience if audited, but all systems should be able to track the proper information necessary to file your taxes.

Based outside Atlanta, Ga., Shala Munroe has been writing and copy editing since 1995. Beginning her career at newspapers such as the “Marietta Daily Journal” and the “Atlanta Business Chronicle,” she most recently worked in communications and management for several nonprofit organizations before purchasing a flower shop in 2006. She earned a BA in communications from Jacksonville State University.

the role of accounting software in minimizing business costs

Among the reasons organizations decide whether or not to purchase and implement accounting software is whether or not the software can reduce costs.

Finance Team Salary

There are obviously a number of factors at play when it comes to evaluating a business’s accounting costs, but the largest and most obvious is salary. Expenses for accounting salary can add up quickly. Here’s a rundown of the average salary for accountants across a number of levels, according to Salary.com.

Tax Accountant I: Typically responsible for maintaining and preparing tax returns, tax records, tax schedules and related tax reports. Median salary is $54,491.

Tax Accountant III: Median salary for this position is $81,725 for maintaining and preparing tax returns, local state and federal returns, and analysis of tax regulations.

Financial Reporting Accountant IV: Responsible for preparing and maintaining returns, as well as collecting and analyzing changes in local, state and federal regulations to ensure work processes are in compliance. Financial reporting accountants in this role ensure that all reporting is in compliance with SEC and GAAP reporting guidelines. This role typically requires more than seven years of experience. Median salary is $97,355.

Cost Accountant III: Responsible for preparing and analyzing cost reports and costing audits, a Cost Accountant III examines and reviews unusual cost records and ensures cost data are allocated correctly. Their median salary is $82,479 for a person with four to seven years of experience.

Of course, accounting software won’t remove the need for an accounting department entirely, but it has been proven to provide the following benefits: allow a company to avoid adding staff to the finance team despite double digit growth; switch one employee from finance into a revenue generating sales role; and cut close time from nine days down to two hours. Those are just a handful of examples, but given the salaries demanded today by top accounting professionals as listed above, the automation that accounting software provides starts to pay for itself pretty quickly either by eliminating the need for existing finance team positions or eliminating the need to add more as a company grows. For example, if accounting software eliminates the need for just one Tax Accountant II, in just three years a company will have saved on average $245,715. That in and of itself can go a long way towards paying for itself. However, while the elimination of salaried finance positions is the most obvious and one of the most effective ways of reducing costs for a business, it is by no means the only one.

Identifying Wasteful Spending

With automation freeing up time spent on manual data entry, reconciling different sets of numbers in multiple Excel spreadsheets and other tedious tasks, the finance department can spend more time on evaluating business performance. And because finance and the business side typically have more faith in the numbers once they’re entered into a central general ledger, they are more willing to make critical decisions on that data. For example, accounting software can help to identify which employees are producing the most value relative to their salary. Alternatively, accounting software can help to identify the most profitable customers and ensure that the business isn’t devoting the most time and resources to the customers that are the least profitable.

Better Invoicing

For many small and growing businesses, invoicing the customer can be an expensive proposition. Invoicing encompasses maintaining master customer and product files, generating customer billing data, transmitting billing data to customers, posting receivables entries and resolving billing inquiries. One survey of 896 organizations found that the worst performing organizations spend on average $9 to invoice a customer, the best performing spend $2 per invoice and the median is $3.94. Accounting software that is fully integrated with other departments can reduce this cost significantly as it can automatically generate and send invoices to customers and recognize payments. Business growth typically involves more invoicing, meaning greater costs for those still stuck with manual processes. Additionally, automated invoicing and billing with accounting software means fewer errors, which can improve relationships with valued customers.

Greater Business Visibility

With a centralized system of record that everyone in the organization can agree to, the business is better positioned to hit margin goals and improve the bottom line.

Less Reliance on Excel

Early stage businesses that do not have modern accounting software installed, typically rely on Microsoft Excel spreadsheets to manage finances. While a useful tool, Excel spreadsheets can create hidden costs that many organizations fail to take into account.

#1 CloudAccounting Software

Manual Reporting

For example, Excel requires manual review and preparation of reports. A Cost Accountant III, with a median salary of $82,479 as above that spends 30 hours a month on Excel reporting could account for nearly $15,000 a year on reporting. Modern, cloud-based accounting software can provide automated report creation, enabling a business to cut back on its accounting department or redirect those resources elsewhere to more profitable work. Moreover, the average report goes to eight different people, creating additional workloads and time drags. The benefits of automation add up quickly.

Data Entry Errors

The costs of incorrect data entry in an Excel spreadsheet can lead to millions of dollars in losses. In 2003, TransAlta cost the firm $24 million when the power generator purchased too much in transmission contracts. CEO Steve Snyder said in a conference call that the error was “literally a cut-and-paste error in an Excel spreadsheet that we did not detect when we did our final sorting and ranking bids prior to submission.”

In other cases, Fanie Mae discovered a $1.1 billion error in shareholder equity due to a miscalculation and RedEnvelope lost a quarter of its value after it reported a fourth quarter loss because of overestimation of margins based on a spreadsheet error.

While data entry errors won’t reach into the millions for most businesses, the evidence is there that a reliance on spreadsheets can be costly.

A modern accounting software solution can quickly pay for itself in reducing costs as listed here, but it also can create the confidence in financials and impact the kind of decisions that drive business growth as well.

Leave a Comment

5 × one =