Accounting System

Introduction Benefits Module

Accounting System“Accounting Software” generally refers to financial management system or application software that records monetary transactions for an organization and provides information (reports) to the organisation’s leadership. Accounting applications provide the framework for recording and managing the revenue and expense transactions of the organization in a consistent, compliant and reliable manner.

The ultimate purpose of accounting software is to ensure internal and regulatory compliance; inform leadership of past financial performance; identify the current financial position, and, based upon key financial metrics and trends, help predict future financial performance.

Accounting software can exist by itself or as a part of a larger, more comprehensive Enterprise Resource Planning (ERP) solution. Most accounting systems are broken down into component based modules. The financial modules are loosely segregated into “core” functionality and extended functions. The core accounting modules usually include General Ledger, Accounts Payable, and Accounts Receivable (sometimes referred to as GLAPAR). Some systems include sales and purchase orders, billing, and inventory management modules.

    Accounting software systems provide numerous benefits in the areas of information management, regulatory compliance, business process automation and real-time reporting. The following financial system benefits are common in most accounting software applications.

  1. Control :
  2. A strong accounting package provides management with internal controls to record transactions in a timely and consistent manner. These controls ensure that only authorized users are performing prescribed tasks and that adequate segregation of duties is being enforced to help prevent fraud and abuse. Well designed internal controls are flexible enough to allow for the reallocation of responsibilities as staffing and workloads shift. Strong controls also help ensure compliance with regulatory mandates such as Sarbanes-Oxley, IFRS (International Financial Reporting Standards), GAAP (Generally Accepted Accounting Principals) and the host of taxing authorities that face today’s organizations.

  3. Security :
  4. Access to information should be managed in a thoughtful and logical manner. For many companies, accounting software security is based on a need-to-know basis. In addition to access management, the data itself should be secured from malicious activities, as well as system failure or natural disaster. A secure system provides for recovery up to the point of failure. Security also means that database rules are enforced to ensure integrity and prevent corruption. Strong data types and server-based referential integrity help ensure that the data is meaningful and as free from error as possible.

  5. Information:
  6. The ultimate goal of an accounting system is to provide financial information to management and decision makers. For example, how has the business performed and how is it likely to perform? A well designed accounting system provides its users with real time analytical information and the tools to shift into predictive, “what if” scenarios or hypothetical planning. The ability to present relevant data in a timely, consistent, and concise manner is a hallmark of the best financial software systems.

  7. Standardization:
  8. As an abstraction of the business, the financial accounting system represents a standardized measure of the business. Ensuring that all transactions are recorded in an approved, standardized format, allows that abstraction to be meaningful. The standardization is important to make meaningful period-to-period comparisons or to track geographic, divisional, departmental, line of business or managerial performance.

  9. Platform for other systems :
  10. The accounting system is generally viewed as the foundation and system of record for additional information. Analytics and Business Intelligence systems all leverage the abstraction that the accounting system enforces.

  11. Cost Reduction & Profit Maximization :
  12. Because a good accounting system provides timely and accurate information, business line managers can identify and reduce costs and add margin to their areas of responsibility.

  13. Efficiency:
  14. With business software automation and readily available information, staff can spend less time rekeying data, searching and collating, and more time running the business.

  15. Improve Service :
  16. Accurate invoices and customer statements, timely order status updates, and consistent processes all help improve your customer’s experience. Access to order history helps your sales and marketing team tailor up-sell, cross-sell, renewal and other promotional offers for your existing customer base.

  17. Better supply chain visibility and communication :
  18. Knowing what inventory quantities you have on hand, what is backordered, and when your suppliers will ship all help you run your business with smaller inventories and better inventory turnaround.

  19. Improved Cash Management :
  20. If you know your sales order pipeline, your current inventory position and requirements, and your current cash commitments, you can manage the cash requirements of the business without turmoil or the need for sudden corrective actions.

  21. Respond quickly to change :
  22. A powerful, flexible accounting software system will allow you to respond to rapid market changes, restructure the company hierarchy, add or remove lines of business, change pricing models, acquire new businesses or spin off old ones.