Basic Accounting Software – Advancement From Manual Accounting!
Basic accounting software programs are off-the-shelf products sold by different software companies. Depending on the nature and complexity of such accounting software the output may vary, but in essence, all of them perform relatively similar functions.
Earlier, accounting in business establishments used to be more of a manual activity. Accounting staff of the organization maintained registers; vouchers, files etc and these were in the form of paper or hard copies. However, with increase in size of business establishments manual accounting has been replaced by computerized form of accounting.
Accounting software comes in different categories. The simpler versions support single user or maybe multiple users within a local network of computers. These are known as Basic Accounting Software and are used by shops, traders or small commercial establishments, where office is located in one place. These programs are based on simple logics and are usually capable of data storage up to a limited extent.
Two major drawbacks or limitations of such type of basic accounting software are:
1. Limited or no flexibility: Simple basic accounting software usually has limited data handling and/or storage capacity. Hence these types of programs can prove to be very risky, where business expansion happens or is likely to happen. In today’s rapidly changing business environment, where business expansion and diversification is key to ensure profitability, such type of software can create serious problems to the owners and managers of companies. Before selecting a particular variant therefore, the owners of the business or commercial establishment should carefully consider the possibilities of future expansion programs and judge the compatibility of this software in such appropriate context.
2. Limited reporting options: One of the key advantages of using this is its capacity to generate or create multiple, user defined reports. These reports can be of different types like sales reports, profit and loss and cash flow statements etc, etc. Simple, basic accounting software usually have limited reporting options like Trial Balance, Cash Book, Sales/Purchase Register etc, but more complicated ones are normally not available. Moreover, it does not have customization options, i.e. the possibilities to create user-defined reports almost are non-existent. More often than not, reports need to be customized and tailored as per requirements of a specific business purpose. Even if the business size is small, but the requirements are to produce multiple, different varieties of reports, use of this might not prove to be fruitful.
However, there are few advantages of using basic software.
First of all, it is cost effective. The most important criteria behind the selection of what kind to be used are the cost element. Advanced accounting software like mainframe based or ERP based software usually provide astonishing features, flexibility and reporting options, but they cost a fortune to acquire and maintain them. Moreover they also require huge amount of server space, which might not be available for a small, or medium sized commercial establishment.
Secondly, they are also economical to maintain, in the sense they do not require dedicated support vendors providing expensive annual maintenance contracts. They are simple programs, which can be debugged and serviced by the end users themselves.
Thirdly, end users find it easier to understand and use basic accounting software. They usually do not use complicated logics and other syntaxes which their high end counterparts use and are therefore easily understood by common man quicker.
The decision to use basic accounting software needs to be taken by the owner of the business after a careful consideration of its advantages and disadvantages. Needless to mention that size of the business and budget are two factors, which eventually determine which software program would serve the purpose of the organization.