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The Benefit of Using Business Accounting Software and Paper-Based Accounting
By admin | May 22, 2009
Even with great advances in technology, it is not uncommon to find companies that still use paper-based accounting methods to track their costs and revenues. Although they may realize the potential for increasing their efficiencies with accounting software, many business owners worry about the switch from paper to electronic accounting. Additionally, some businesses may feel that their paper methods are adequate and may not want to expose themselves to the risk of losing all their accounting records if their hard drive crashes. However, with proper planning and foresight, and with some help from accounting software reviews, making the switch to electronic accounting tracking can provide several benefits to a company, such as improving efficiency and accuracy. But the question remains – is making the swicth too cumbersome?
Let me begin by saying that paper based accounting methods and accounting software should not be seen as two opposite ends of the spectrum. It is not a “one or the other” choice. In fact, using both systems in tandem is possibly the best solution and is a simple and effective way to make the transition from paper to accounting software.
Although they may seem like polar opposites, the most effective way to use the systems together and switch from one to the other is by using both simultaneously for a period of time and reconciling them at the end of the month, quarter, or whatever time period you choose.
The process works like this: All transactions are recorded in both systems, independent of each other. To begin with, the accounting software and paper based accounting methods are viewed as separate entities. If a sale is made, it is recorded in both the software and on the company’s “accounting books.” At the end of the month or quarter, the final figures for each system are calculated and compared. The data collected by both systems should match, but if it doesn’t, the two systems can be to check the accuracy of the other system.
This periodic reconciliation allows the company to detect and solve problems in a much more proactive manner.
Once the company becomes comfortable using both systems, they can decide to phase the use of one system out over a period of time. In most cases, companies{/spin] get comfortable with accounting software, realize the additional benefits that it presents in the form of reduced costs (time) and improved accuracy, and eventually stops using paper based methods to track all transactions.
100% confident in the software, you nearly eliminate your risk of using the software incorrectly and basing your decisions on those numbers.
Additionally, if your company has the “honor” of being audited by the IRS, having two sets of data can provide you some additional protection. Since both systems are independent, you will have two independent sets of records to show the IRS, which should greatly improve your credibility.
Finally, continuing to use your paper methods for a period of time reduces your risk of losing all your accounting records in the case of a hard drive crash or something similar. During your period of using both systems, you should also identify and test ways to ensure that your data is always backed up.
If you have been confused about how to make the switch to a small business accounting software package, hopefully this article has been beneficial. You can read accounting software comparisons for more information. Using both systems in unison for a period of time provides you the ability to get comfortable with the new software without losing any accuracy in your accounting records or exposing your company to any unnecessary risk.
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