Advantages and Disadvantages of Computerised Accounting
Computers offer many advantages, such as increased productivity, efficient data management, and access to vast information. However, they also have disadvantages, including the risk of cyber-attacks, reduced physical activity, and potential over-reliance on technology, etc. Let us study here in detail.
Advantages of Computerised accounting:
The automation of accounting processes with the help of various accounting software ensures that accounting work is done quickly and accurately.
Given that the various items in computer accounting are automated, and a few items are recorded manually, improving reporting of transactions and statements.
In computerized accounting margin of error is very less and the transactions are precisely recorded.
The information stored on the computer is reliable and can be sent digitally anywhere in a fraction of a second using the internet.
A computerized accounting system allows users to store their data in a central location. In this way, if any piece of paper that contains valuable information is lost, no one is at risk of having their information stolen. All the data is hence stored at a central location.
The computerized Accounting system is so flexible as to accommodate the changing business volume
Any changes can be performed easily as it’s easy to edit things in a computer system and doesn’t have to redo the whole work again.
As the process is based on accounting software, the preparation of the financial reports has no errors. This means that managers can quickly make decisions based on the accounting data.
Since documents are digitally stored, it does not require a large area to store records and ledgers as in the case of manual accounting.
The use of accounting software in a business ensures the production of standard financial statements over the years. These reports are very vital when comparing a company’s financial performance over the years, or when comparing different businesses that are similar in operation.
A computerized Accounting system helps the management of a company to have greater control over its operations. This is more suitable for a company which is large and has multiple departments. All vital information is easily available with one click.
Many accounting systems are integrated with online banking. It helps businesses quickly make banking decisions based on accounting data.
Disadvantages:
There is a risk of data breaches or cyber-attacks, such as ransomware attacks or phishing attempts to steal the data of the organization unless it is strongly secured using advanced anti-hacking software. Regular updates and fixes are needed to keep it running smoothly.
Computers may often face technical problems; Data can be lost due to power interruptions, hard disk damage, or other technical malfunctions like software freezing, system not responding, data crashes, etc.
The initial cost of buying and setting up the software can be expensive, and there are ongoing costs for updates, technical support, and subscription fees. Therefore, it can be costly to set up and maintain.
As newer versions of both the hardware and the software are introduced in the market, there is a need for businesses to update them regularly. Employees must be retrained for efficient use of such new tools.
Companies must update new versions of hardware and software regularly.
Switching from manual to computerized accounting can be difficult, and staff may need time to get used to the new system.
Computerized accounting depends on technology, if the technology fails access to financial data and operations might be affected.
The adoption of computerized accounting software means fewer employees do a lot of work. Such a move at times leads to layoffs. Where layoffs have not been done, employees fear anticipated job loss.
If the accuracy of the data entered is compromised, the software is bound to produce faulty or misleading accounting information.
Since most of the financial/accounting data is stored in the cloud, professional hackers may gain access to a company’s records. Such actions may expose the assets of a business to greater risks.