you computerized your Accounting System?
Most organizations seek
the following benefits from accounts automation:
- increased efficiency
- lower costs (less
staff time supporting accounting activities)
- greater accuracy
- more timely reports
- better control
But the questions are:
Will you achieve these results? And how quickly? One of the
biggest mistakes an agency can make is to believe that an
accounting system in trouble can be improved by putting it
on the computer. This is virtually never the case: a mess
put in to the computer can be worse than a mess on ledger
What are the prerequisites
for computerizing your accounts?
The most important factor
to consider when deciding whether to computerize the accounting
system is the accounting expertise of responsible people at
your agency. People, not computers, do accounting. Computers
add numbers very quickly, and enable you to enter the number
into the system once for it to appear in all journals, ledgers
and other reports. However, a human being has to decide where
to enter that information and then to keep the data into the
system. Someone in the organization still has to understand
debits and credits, decide what account code to charge each
transaction to, determine whether an error has been made and,
if so, how to correct that error. So, computerizing the accounting
function does not automatically lead to greater accuracy or
It is important to have "clean," that is accurate,
up-to-date beginning balances to enter into your new computerized
accounting system. This is one area where "garbage in,
garbage out" really applies. Many organizations choose
to enter data starting from audited financial statements to
get them off to a fresh start.
What accounting software
should you purchase?
Well, there is no one
definite answer to this question. To understand why, imagine
answering the question, What's the best car to buy? In order
to answer, you would first need to ask questions such as:
How many passengers do you normally have? How much are you
willing to spend? What features are important to you? One
of these considerations might outweigh all of the others.
Once you have all the information, there might be two or three
cars which meet the criteria. The final decision will be based
on personal preference. A similar set of questions and circumstances
can be applied to selecting an accounting software package.
What to look for
when selecting a accounting software package?
The following factors
often play an important role in the final selection of accounting
- How many checking
accounts are permitted?
- Can the software
handle the payroll function, including W-2s and 1099s? How
- Is there room to
grow into the software? Will it be able to accommodate your
needs as they become more sophisticated?
- Does the software
include security features which prevent unauthorized personnel
from accessing and/or manipulating data in the accounting
- What installation
and ongoing support is available?
- How long has the
company been in business?
- Are there user groups
or other support mechanisms outside of the vendor?
Why can't we just
put the books on spreadsheet software?
No way. Since there
are so few controls for spreadsheet software, numbers can
be easily changed, damaging the integrity of your financial
reports. However, you can export, or electronically transfer,
data from your accounting system into a spreadsheet package
such as Lotus or Excel to prepare more customized reports.
Similarly, it is not a good idea to keep your books on database
software which does not have the controls or reporting capability
of accounting software. Finally, many consultants do not recommend
using checkbook software for nonprofit bookkeeping. The attraction
of checkbook software is that it is easy to use. However,
most nonprofits outgrow checkbook software quickly because
it does not use double-entry bookkeeping and its reporting
capabilities are often very limited.