Even though the initial reason that anyone purchases financial accounting software is to prepare and report a company’s financial software, a significant function of an accounting system is to maximize productivity and improve operating efficiency.
There are several reasons why implementing financial accounting software that can lead to increases in operating efficiency. The first way that operating efficiency is increased is through the reduction in labor expense that comes from shifting accounting and other tasks originally performed by employees to the accounting software. Another is the reduction in training time and expense that comes from teaching employees how to use the software as opposed to how to perform accounting tasks. Finally, accounting software eliminates repetitive tasks and the duplication of effort that often takes place when employees perform accounting functions.
Using accounting software is considerably easier than accounting. Accounting software can also perform many more tasks and process more transactions than a group of accountants. If accounting software can process three times the amount of information than a person performing the same task, then productivity is tripled by implementing the accounting system. Data entry facilitated by drop down lists and predetermined categories significantly reduces the amount of time it takes to input data in the system. Most accounting software systems use electronic data interchange (EDI) which allows one system to populate another electronically. By having your sales and inventory transactions fed to the accounting system electronically, there is no need for data entry or the risk of mistakes made by human error.
Many accounting systems provide functionality that is underutilized by business owners. For example many accounting platforms allow for time keeping as well as processing payroll. By having employees time entered electronically or by hand, businesses can allocate labor time by project or customer. The owner can determine the most productive way to schedule employees and determine ways to avoid paying overtime. The timekeeping function is especially valuable for companies that invoice their customers for labor expenses. In addition to tracking employee time and making sure that all working hours are allocated to a project or a customer, the accounting system can create periodic invoices to clients with a labor breakdown by employee
The accounting platform also increases productivity by automating another repetitive task that would otherwise have to be done by an accounting clerk. As far as payroll is concerned, the system will determine any unallocated time, sick and vacation hours, payroll taxes and create periodic payroll checks for each employee. For a labor intensive business, trying to operate without time keeping software is extremely time consuming, costly and inefficient.
Another reason that accounting software increases productivity is because it is scalable. Since all business processes are automated the growth in the business and any increases in business transactions will not result in increased time or additional costs. Although business growth usually requires an increase in staff, any increases in invoicing, payroll, inventory management, purchasing or any other business processes will be performed by the system as long as the function is part of the accounting software.
It is clear that accounting software is no longer just a means to report a company’s financial information. Most have been designed to be fully integrated enterprise systems that allow owners to better analyze their company’s operations and to automate redundant and repetitive tasks. The cost of these systems is usually less than the cost of the employees needed to provide the same functionality. Since most small business owners under utilize their existing accounting system, they should determine if their existing platform includes additional functionality that they are not currently using before deciding to upgrade to a new more advanced system. In many cases their accounting system can be used to better manage cash flows while reducing overall labor costs.