Before the advent of fast and cheap computers, accounting traditionally was processed manually with all transactions recorded in columnar papers and kept in voluminous binders. Once computers became popular and software affordable, accounting tasks moved into this medium, where concepts stayed the same but mechanics changed from papers to programs.
The most glaring difference between traditional and computerized accounting is the speed of operations. With an accounting program, data is entered once and it is saved. The program provides management with reports in a speed never dreamed possible in the traditional days. No more waiting days or weeks to know whether your business is making a profit. Using computerized accounting, information can be accessed in a matter of minutes. Once data is available in the system, it can be used in reports, queries, and analysis.
Computerized systems have drastically increased accuracy of calculations when compared to the traditional, manual system, in which columns had to be added up, numbers moved from one page to the next, and trial balance and financial statements manually compiled. If errors occurred, many hours had to be spent trying to find and correct them. With accounting software, this problem is eliminated. In the case of accounting spreadsheets, adding simple formulas still may be needed, but it is an easier and more accurate process. Efficiency goes through the roof when a computerized system is used.
The traditional manual accounting system with paper and pencil is cheaper than the computerized version, in which a firm needs a computer, software, printer and other expenses associated with a system. The manual system may work for small businesses up to a certain point, but with the affordable costs of computers and software, many firms are opting for the computerized system. They are easy to use, and finding experienced employees to run the system is not a hurdle.
When using a manual system, the risk of losing data is real. If important papers are damaged or destroyed, that work may have to be re-created. Copies of the original work can be made, but that could be expensive and time-consuming. Accounting on a computerized system offers the choice of saving work on a CD, portable or external hard drive, flash drive, or even online. Many firms back up data every night as a precaution. If something happens the next day, the data can be restored from the backup.
Using a computerized accounting system keeps all the information organized and in one place— the computer hard drive. Finding and accessing information on an accounting software program is much easier than the traditional method. Specific data can be found using system functions, which usually include a “find” or “search” key. For example, finding information about a vendor on a manual system could take many steps and significant time. The
same process in a computerized system most likely would yield the information in a snap, with less confusion and aggravation.