Computerized Accounting Software: Advantages & Disadvantages Video

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  • 0:04 Manual vs.…
  • 0:57 Types of Computerized Software
  • 1:44 Advantages of…
  • 2:35 Computerized Software…
  • 3:36 Lesson Summary
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Lesson Transcript
Instructor: Kat Kadian-Baumeyer

Kat has a Master of Science in Organizational Leadership and Management and teaches Business courses.

With business as complex as it is today, adopting computerized accounting software seems like the right choice. Even the most sophisticated computer programs have advantages and disadvantages. We will explore these in this lesson.

Manual vs. Computerized Accounting

For some companies, a well-sharpened pencil and ledger book is enough to manage finances. But for most, computerized accounting software is the answer. Years ago, most businesses used manual accounting, the process of keeping records by hand, using paper and pencil. And for some, it may still work. Consider a very small business, with less than five employees, or even a consultant who works alone. For them, having computerized accounting software may not be very cost-effective.

For most businesses, computerized accounting software is a necessity. These are programs set-up on a company's computer that allow a business owner, or finance person, to track sales, expenses, payroll, taxes, and even inventory. The major difference between the two, is the complexity of the accounting that a given business requires to run smoothly.

Types of Computerized Software

Software packages come in all shapes and sizes, but there are primarily two kinds:

  • Off-the-shelf software packages
  • Customized software packages

Off-the-shelf programs are bought as a package and usually offer only the most common functionality, such as sales tracking, payroll, and taxes. Several types of these can be purchased from any major office supply store. Once the product is purchased, it can be uploaded to a computer without much specialized skill. Operating this software is fairly simple as well.

Even though off-the-shelf software offers the basics, depending on the business, sometimes more specialized software is needed. This is when customized software packages come in handy, as they're generally developed for the business owner's unique needs.

Advantages of Computerized Software

An advantage of having computerized accounting software is the money it can save. Think about the real-time decisions that can be made when financial information like profit and loss statements, income statements, and sales reports can be run in an instant.

It's a time saver, too. Payroll, for example, is a time-consuming and tedious task. Every minute and hour must be calculated with accuracy. With computerized software, payroll can be done efficiently in minutes.

Let's face it, nobody is perfect. Computerized accounting software, however, is close to it. Generally, computer programs do not make mistakes. When dealing with billing plus accounts receivable and payable, this is a very comforting fact for companies.

Now, that's not to say that there isn't a downside. Computerized programs have their faults too.

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