The Importance of Computers in Accounting

The Importance of Computers in Accounting

Accounting software systems have revolutionized small business in ways in which are still propagating through the industry, transforming it and themselves as they are going. Accounting and allied fields are still changing rapidly, often in ways we will not easily predict. However, it’s clear that new accounting technology has greatly enhanced our abilities to urge our work done more efficiently and effectively, a trend that’s likely to continue for the foreseeable future. the arrival of complex computers, a spate of latest and useful programs, and e-commerce generally has completely changed the way that accountants do business. Since we’re accounting nerds, we’ll cover some pretty hardcore topics handling the role of accounting systems technology such as:

Accounting uses of the web and Intranets

Advantages and drawbacks of electronic commerce

A comparison of batch and real-time transaction processing

Electronic data interchange (EDI) processes

Accounting Uses for Internets and Intranets

Both Intranets and therefore the Internet are extremely useful for accounting purposes, but unfortunately (and inevitably) drawbacks exist which will threaten the integrity of any accounting. The bellwether issue during this instance is, because it so often is, security. Any electronic system connected to an outdoor source like the web is susceptible to attacks from clever hackers, though lately even inexperienced children can attack and effect networks, because the scripts necessary to try to so are published on easily-accessed websites.

These “script-kiddies,” whether or not they truly have malicious intent or are performing the cyberspace equivalent of joyriding, can cause substantial damage to a company’s bottom line, especially if they’re ready to steal, alter, or delete sensitive accounting information. Even worse, corporate spies and disgruntled employees may cash in of their positions to either steal important information or wreak havoc on a company’s systems. Some employees may even hack into sensitive areas not for malicious reasons, but just because they will. Unfortunately, such intrusions are often hard to detect, because information is straightforward to repeat then usually doesn’t disappear when it’s stolen.

That said, uses like maintenance and posting of travel expenses, company directories, inventories and price controls, and buy orders are prime samples of the ways in which company Intranets and therefore the Internet are often made to figure for the accountant. for instance, expense entry and reimbursement are often sped up significantly, with processing costs cut simultaneously. Intranets also allow a corporation to publish accounting information company-wide all directly, information that they could otherwise need to send via snail-mail, a considerable consideration for larger companies. Furthermore, in many cases intranets and their associated processes are extremely easy and comparatively cheap to institute; they often cash in of existing e-mail systems, for instance, and help to knit together the disparate aspects of the corporation.

While not necessary an immediate function of accounting, some payroll functions are easy to relegate to those sorts of networks, and it’s possible to transmit payroll and other accounting information to third-party processors so as to chop payroll and expense checks for the workers. accounting services in denver even maintain servers using programs like Web Congas that allow employees to look at electronic pay check stubs, a useful function in companies during which pay checks are electronically deposited and no physical check is ever issued, an increasingly common occurrence.

Advantages and drawbacks of E-Commerce in Accounting

Many of drawbacks of e-commerce in accounting are essentially an equivalent as those listed within the previous section. the large issue is security; many of us don’t care to offer their MasterCard numbers and other sensitive information to online vendors and permanently reason, considering the horror stories of third-party fraud constantly repeated within the media. Additionally, creating the framework for e-commerce accounting is often difficult and time consuming. Although a posh database is often simple to use and an excellent timesaver once it’s been created, the corporate must necessarily undergo the method of building that database within the first place, often from scratch. Fortunately, there are spreads of programs, including Microsoft Access, which will streamline this process. Sometimes, too, it’s hard to seek out the individual item one is trying to find during a large database; the proper questions must be asked so as to elicit the knowledge one needs.

But the benefits are nonetheless vast. E-commerce taps into a fast-growing market that’s not merely local or regional, but global also. Data entered into the forms on an internet site are often easily downloaded into databases for extended accounting, management, and marketing uses. From an extranet perspective (extranets being expanded intranets allowing some customers and vendors into the system) online bidding and improved supply-chain management allows companies to streamline their processes, which successively helps to regulate costs. Installing e-commerce functionality also can help integrate and improve both accounting and management, especially when integrated websites interact with both financial and inventory software.

Read Also: 7 Common Mistakes of Accounting done by Small Business

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One interesting way during which accounting and e-commerce could interact involves digital money, which is entirely virtual. Digital money may be a direct outgrowth of e-commerce, and if it ever comes into wide use, it’ll have sweeping effects on the economy. a number of these are going to be as prosaic as saving on the prices of printing, transporting, and handling folding money, and a few are going to be as impressive as making counterfeiting and concealment impossible or, at the very least, far more difficult than they already are. Accounting will likely be impacted, though not the maximum amount together might initially suppose. Accountants already juggle large amounts of monetary data without ever touching cash, and a few of that’s already transferred electronically without ever being converted into real cash, although in fact the important article must exist in some form to back it.

Batch and real-time operation 

The differences between batch and real-time transaction processing are rather straightforward, and are more of degree than of kind. Both, moreover, are valid methods of processing business events like accounting transaction entries, though they’re usually employed in differing circumstances. Generally, execution occurs when large numbers of transactions are received during a specific period of time, and real-time operation is completed in situations where more manageable numbers of transactions are received therein same amount of your time.

In some situations, it’s advantageous to group transactions into batches for a selected period (usually an hour or day) and process all of them directly. This generally uses less computing time, and may be done in the dark. It is necessary to define certain parameters before the batches are initiated, and in some cases, events are often lost or corrupted if the right care isn’t taken. The method also makes it harder to catch errors in individual transactions or entries. Execution is typically done when there are large numbers of transactions involved, and actual hand-entry as they came in would be prohibitively time-consuming and expensive. Also, it conserves system resources that would better be used for other purposes during business hours.

Real-time processing, on the opposite hand, involves complete processing as transactions are received. This is often advantageous in situations where limited numbers of transactions are received during work hours, since it gets everything taken care of quickly and therefore the use of system resources is negligible. Assuming they’re monitored, real-time transactions are potentially less susceptible to error than batch transactions. The method also can allow a method of in-depth customer service that execution doesn’t. Providing real-time operation for all transactions is cost-prohibitive, however, if large numbers of transactions are involved; it’s at now that execution comes into its own.

Electronic Data Interchange Processes

Electronic data interchange (EDI) may be a sort of electronic commerce won’t to exchange data between companies or between branches of an equivalent company. bookkeeping services in denver can revolutionize the straightforward exchange of such information, trimming unnecessary redundancy and making the physical exchange of much of the required paperwork a thing of the past. Most EDI is batch-related (see the previous section), and uses standardized formats like ANSI X2 and EDIFACT to transfer a transmission set through networks containing specialized software and hardware. Companies can communicate using methods as disparate as virtual private networks (VPNs), third-party value-added networks (VANs), or maybe the multipurpose internet mail extension (MIME) aspects of existing email systems, which allows transmission across the web. Many wonders about the necessity for accountants within the future but ultimately instituting EDI is comparatively inexpensive, involving the straightforward automation of an existing process, and within the end can economize by cutting costs. Of course, EDI designers must take security under consideration so as to safeguard the info, and must include provisions to verify transmission authenticity also as accuracy and completeness. The electronic trail should be auditable also.

The Advantages and drawbacks of ERP

Enterprise Resource Planning (ERP) is another new technological approach to business that has lofty ambitions, many of which it happens to be unable to measure up to. The intent is to integrate all of a company’s departments and functions (including and particularly accounting) onto one computing system which will handle the whole company’s needs. Although the tactic could also be somewhat crude, it’s most useful as a way of centralizing and improving customer order processing through the utilization of one computer program; Oracle, for instance. All the departments can see the customer entries and may update it as necessary. When it works well, ERP provides several useful functions. It can:

Integrate financial information;

Integrate customer order information;

Standardize and speed up manufacturing processes;

Reduce inventory; and

Standardize HR information

At its best, ERP can help companies streamline their internal processes in order that everything runs more smoothly. These are the perfect results of ERP use. However, ERP systems are often difficult to put in, and should never work well. Despite vendor promises, full-blown ERP systems often take several years to figure their way into company processes, and should take longer if resistance to vary may be a significant factor. On the typical, process approval and savings do start to seem after a mean of eight months. Often, ERP systems require “middleware” or intermediate software so as to integrate with existing programs and systems. Additionally, ERP systems tend to be quite expensive to institute and maintain: the entire cost of ownership (TCO) includes necessary hardware, software, staff costs, and professional services, and should run into the many dollars. Hidden costs (training, customization, testing and integration, conversion, data analysis, and consultant costs) can also be quite high. Generally, ERP seems to be more trouble than it’s worth, especially for smaller businesses.