HomeProductsAccountingAccounting System - Definition, Element, Benefits, Characteristic, and Feature

Accounting System – Definition, Element, Benefits, Characteristic, and Feature

Finance is one of the most important things for a company in managing its business always to run smoothly and Accounting System can certainly help enterprises to do that. Companies generally use accounting systems to organize financial information. In doing business in an organized manner, organizations need to keep track of all the transactions. In this process, accounting software plays an important role. The software enables comprehensive tracking of financial transactions as well as real-time reporting and analysis. Before the program came into existence, operational activities and financial management had to be completed manually and using various types of physical documents. Here are the further explanations:

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Definition of the accounting system

accounting systems
Source: freepik.com

An accounting system is a tool that helps businesses to track and manage their financial transactions and make the work of accountants easier. Business processes and transactions such as sales, purchases, assets and general ledgers that normally run manually can be simplified with these automated solutions. An accounting system helps you to make scalable business financial plans with reliable analytical functions. With one centralized system, businesses can monitor overall finances, from income, cash balances, to accounts payable and account receivable.

In addition, accounting applications are very helpful in making financial reports, an important element in running business operations. Especially when you want to make a decision. Previously, every employee has to do all the financial tasks and journal entries with the manual method, which made the preparation of financial statements impractical. Now you can enter, modify and interpret data only through this automated solution that you can access from anywhere.

Is accounting software important?

The main reason why companies should use accounting systems is to track expenses, income, and other activities. Oversee all the data that has an impact on the finances of a business organization. The bigger the size of a business, the cash flow will also be faster and involve a lot of money. Performing calculations manually will make them vulnerable to errors that cost the company a loss. Therefore, this system will help minimize and even correct human errors and increase its financial management accuracy.

accounting
Source: idp.com

Accounting system elements

Form

Forms are documents that are useful for recording all transactions, this is because events that occur in the organization are recorded on a piece of paper. So, here the form functions as a historical recording medium for events or transactions. In addition, to function to realize and maintain internal financial control of the company. Examples are cash sales invoices, requests for quotations, purchase orders, credit sales invoices.

Journal

Journals are physical records or digital documents that are stored as books, spreadsheets, or data in an accounting application. It is useful for systematically recording all accounting transactions before they are entered into the general ledger and aims to summarize other financial data. After that, the results of the data summary are then posted to the account concerned in the general ledger. Consists of several types, such as general accounting journals, adjusting journals, transaction journals, special journals, closing journals.

Ledger

An accounting ledger is an account or record storing bookkeeping entries for balance sheet transactions and income statements. Accounting ledger journal entries can include cash, charges receivable, investments, inventory, accounts payable, company accrued expenses, and customer deposits. Valid for all types of balance sheet and income statement transactions.

Subsidiary book

This element stores the details of a particular account and is an extension of the general ledger. This book stores the details for the general ledger control account. After the information is recorded in the subsidiary ledger, the information is periodically summarized and posted to a control account in the general ledger, which is then used to prepare the company’s financial statements. This document is generally used when there is a large amount of transaction information that is likely to interfere with the general ledger. This situation usually arises in companies with significant sales volume.

Report

Is the end result of the entire process that the accounting application runs. Some examples of reports are balance sheets, income statements, marketing expense reports, changes in capital reports, cost of goods sold reports, and accounts payable. Accounting software can create all these types of financial reports with just a few clicks. It is also good if the company uses a document management system to manage its reports.

Related article: 4 Financial Reporting Components You Need to Know

Which companies can use online accounting system software?

Financial data is the company’s most valuable information and must be prevented from falling into the wrong hands. That’s what accounting and economic systems do for their users, controlling accounting from the risk of fraud or error. In addition, companies can provide access to people who have the responsibility to manage finances.

Businesses of all sizes can implement this system. Choose the most appropriate software and by company conditions. Software is a waste when they are too complex or filled with features that are not necessary. Customizable accounting and ERP software is the best choice. So that in the future, the software can anticipate financial-related challenges and have the potential to emerge in the future.

The following are some of the characteristics of a good accounting system application:

User-friendly

Accounting software is targeting all users. However, it is still important to ensure that the system of your choice is user-friendly, accessible, and operable by anyone, even those who are not good at accounting or technology. Furthermore, the program of your choice must be able to adapt or adapt to the needs of the company. If employees have difficulty operating the accounting system, the company is more prone to make mistakes. User-friendly and easy-to-understand software will allow you to efficiently manage your employees and business.

Easy to access

When running a business, you need to access data quickly and efficiently to make crucial decisions. The handy system allows you to access your critical financial information anytime, from anywhere, because all data and information is encrypted and stored safely on the server.

Be accurate

Accuracy is the most crucial element of good software. The accounting system must maintain accurate and up-to-date balances in individual accounts and ledgers to be commensurate with the time and investment that has been spent. Discrepancies may occur due to database crashes or server problems. Still, a sound accounting system must identify and correct errors that could lead to data inaccuracies.

the advantages of using accounting software
Source: omniaccounts.co.za

Benefits of accounting software

Business efficiency

In conventional accounting systems, employees have to perform manual processes such as transferring data from one spreadsheet to another. Using online accounting software can save your company time and prevent mistakes. The company also has all transaction information in one centralized platform. As a result, you can easily see what has run out or gone into business, and you always know where to find this information.

Using accounting software helps to use resources in their accounting department efficiently and can reduce bookkeeping errors. With the Business Intelligence (BI) feature, companies can also gain a comprehensive insight into business operations, increasing their productivity and efficiency.

Simplify tax processing

Dealing with business taxes can be a complex process, as it requires you to keep track of all business transactions. The benefits of accounting software include making this process easier by ensuring that your business’s financial details are in one place. In addition, this allows you to calculate company revenue semi-automatically instead of manually wasting time and effort working on the required information.

The software also offers industry and even country-specific solutions to comply with applicable laws and regulations. For example, a business accounting application for companies based in Indonesia must comply with Indonesia’s existing tax regulations.

Accurate estimation and full financial transparency

That’s one of the main advantages of online accounting software. Understanding in detail the patterns and trends of your financial performance will take a long time to resolve without a solid system. Accounting software helps you understand where to cut expenses or where to invest more. With a clear picture of your current financial status, you will find it easier to develop intelligent strategies and allocate resources in the right way.

Accounting and finance systems automate core accounting and administrative procedures and control your revenue framework, not to shift financial management to external experts. They also reduce costs associated with printing and distributing documentation and storing sensitive data in a secure, monitored location.

From the accountant or auditor’s point of view, the main highlight of a sound accounting system is preventing fatal and recurring human errors. Calculating inaccurate numbers or failing to report data on time can easily lead to a business crisis, and this is where automated solutions come in most useful.

Also read: How to Find the Best Cloud Accounting?

Features of the accounting system

Interactive dashboard

Visibility to your key accounting metrics and data is critical to running a business. Manage and access accounting procedures, streamline processes and improve data accuracy through interactive dashboards. Monitor your business finances such as income, cash balance accounts payable, and accounts receivable. Go all-in and combine all your accounting and financial metrics on one platform in real-time.

Cash flow monitor

Monitor cash flow conditions accurately and in real-time to avoid business losses. So as to speed up the decision-making process whenever and wherever you are easy. Present a report on cash inflows and cash flows out of the company in a certain period.

Bank reconciliation

Reconciliation is an essential step in ensuring the accuracy of financial data. It is no longer the era of manual bank reconciliation because it takes a long time and is prone to human errors. Automate the business reconciliation process with financial applications.

Complete financial report

Generate income statements, cash flow, balance sheets, capital changes, and more in seconds. This system also allows the creation of reports in various types of formats such as tables, graphs, line, and circle charts. Relevant financial information is presented in a structured and understandable form. These features help accountants organize expenses, budgets, and resources and then create reports for further analysis.

Budget management

Accounting software has the ability to integrate with purchasing management to simplify budgeting in order to track the income and expenses of a business. Serves as a method of monitoring and exercising control in managing finances. Accounting software can be integrated with Purchasing Management to simplify purchasing budget management and approval matrix settings. a process by which future income and expenses are decided to streamline the spending process

Automatic follow-up

Send automatic notifications to clients to complete payments according to the time lAre your customers not making payments before the due date? The invoice follow-up process is quite time-consuming. Send automatic notifications to clients to complete payments in accordance with the existing deadline. This can improve the smooth flow of company finances, even if you are busy and don’t have time to manage it directly.

E-invoicing

Businesses must consider finance because it is very important and will affect the development of the business. business owners have the obligation to take care of a number of things, they might pay less attention to the proper finances. Generate electronic invoices and send them to clients automatically as proof of payment. Invoices can be personalized from various components according to the preferences of the business owner and can be created in no time. You can also schedule previous invoices to be sent automatically later.

Conclusion

In conclusion, accounting software is a tool that makes it easy for business people to manage some business financial processes and automate various financial tasks appropriately. Therefore, choosing the right software can make the job easier for financial managers to be more productive at work.

Interest in getting savvy tips for improving your business efficiency?

Anatha Ginting
Anatha Ginting
A full-time Content Writer at HashMicro. Strive to develop my writing skill and knowledge in terms of business, technology, and other relevant issues.

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