Why should 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 paper.

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 better control.

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 software's:

• How many checking accounts are permitted?
• Can the software handle the payroll function, including W-2s and 1099s? How easily?
• 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 system?
• 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.