Information Technology savvy business and finance executives will agree with me that the reliance on the manual systems of maintaining accounting records has given way to modern systems. We have had the experience of using separate tools for discreet purposes such as accounting, invoicing, sales, customer management, and so on. This was resource-intensive and frustrating to manage all these different data streams in silos and time-consuming to ensure consistency across reports. Integrated accounting systems which can now perform those functions with ease. I, therefore, find it necessary to share my thoughts on integrated accounting systems, and will look at the key features and the associated benefits for using them.
An integrated accounting system is a type of modern software which combines all the major financial accounting functions into one application. It is also referred to a financial operations platform and unifies all separate books and records of accounts thereby removing all the paper and tedious manual processes. It allows data to automatically flow into an accounting system after transactions have been approved.
Selecting an Integrated Accounting System.
When choosing an integrated accounting system, it is important for organizations to have a clear idea understanding of what objectives it needs to accomplish for them. Based on that, they will need to consider issues such as the types of financial reports which will be generated, the organization’s long-term financial goals, the number of users who will need an access to the system as well as the additional features which will be required. Indeed, integrated accounting systems can be designed for specific industries or regulatory environments.
Core Features of Integrated Accounting System
An integrated accounting systems usually have core and non-core modules, all of which are seamlessly interconnected and provide same user experience. Core modules allow integration of accounts receivables and accounts payables, bank reconciliation, general ledgers, purchase orders, stock/inventory, billing and book-keeping. These embedded components of an integrated accounting system make the technology more efficient:
This is one of the key modules which keeps accounts of daily transactions. A general ledger usually records transactions by account type or category with items such as an asset, liability, capital, revenue, or expense account which are very necessary for preparing financial reports. As a result of application of integrated accounting system, all these items are automated.
Accounts Receivable & Payables
This component of a robust integrated accounting system tracks data on receipts and payments. There is an element of Optical Character Recognition (OCR) Technology which captures invoices and eliminates the need for manual data entry. Credit control systems can also automate invoice chasing and streamline the accounts receivable process. Apart from that, Customer Relationship Management(CRM) Systems can link sales to finance with fields for customer billing, key contacts, invoicing and contracts. The integration goes both ways, giving both the sales and finance teams a consistent view of the data in what can be described as a single source of truth. An integrated accounting system can, therefore, empower teams to forecast a company’s cash inflows and outflows to minimize expenses and smooth working capital needs.
Manual account reconciliation involving large volumes of transactions and accounts is tedious and prone to errors. This requires matching invoices and payments to keep track of cash flow, but sometimes they end up paying some invoices multiple times. An integrated accounting system can be unified with electronic banking systems to allow for automated bank reconciliation which is very useful in eliminating bottlenecks associated with manual processes.
This core feature of an integrated accounting system facilitates the tracking of revenue streams and expenses in real-time. It also simplifies the rest of the accounting tasks and processes that are time-consuming consuming by ensuring the flow of those revenues and expenses data into the proper accounts and creating appropriate journal entries.
Besides, the core features, the non-core modules of integrated accounting systems are optional. Some of the components include electronic payment processing, debt collection, payroll and time sheet management, departmental accounting and support for multi-currency or value-added taxation. Some systems can also be connected with enterprise resource planning (ERP), inventory management and customer relationship management (CRM) systems.
Benefits of Integrated Accounting Systems
It is very obvious that integrated accounting systems could well be the game-change in the modern corporate office based on the number of solutions they offer. Some of the benefits include:
Improve Accuracy/Reliability of Data Entry
Manual data entry task requires extensive attention and time. But this demanding task can be eliminated with the automation of Optical Character Recognition (OCR) Technology as part of the implementation of integrated accounting system. The system also removes double entries or the chances of missing an entry. In some cases, it also identifies duplicate entries, if any, and merges them into one. This level of accuracy brings an extra layer of assurance to your reporting. Integrated accounting systems ensure that accounting records are precise and well organized to provide decision-makers with accurate financial reports in a timely manner.
Streamline Business Operations
Businesses can increase measurable productivity through integration simply by eliminating time-consuming tasks safely. For instance, the manual data entry with its associated human errors and duplications can be phased out. An integrated accounting system provides users with a real-time view of all transactions related to the business. You can then use this spare time to focus more on new opportunities or other business development activities. Furthermore, integrating systems ensures the reliability of the information, which you can utilize for activities like tax filing.
Platform for A Centralized Financial Data
When data is in silos or saved in multiple platforms, users are required to log into those discreet platforms before they can view the true state of affairs of transactions on their bank accounts, credit card accounts, and investment accounts and investment accounts among others. An integrated accounting system brings those disparate functions and platforms together into a centralized dashboard which enables users to view financial data at a glance. This helps business executives to make realistic projections and other strategic decisions.
Speed Up Decision-Making
It is now very clear that the integration of accounting systems results in a seamless flow of information from one function to another. For instance, the interface between all accounts receivable and payables ensures higher transaction visibility on both the supplier and customer sides. As a result, users can access all financial information from a single interface or dashboard. This makes it easier to analyze all historical financial data from one place for quick and informed decisions.
I strongly believe that many businesses will embrace integrated accounting software solutions in their operations as the norm than the exception in this fast paced technological world. It is indeed true that accounting workflow and processes can take up most of business executives time which could equally be used for other far reaching decisions for growth and profitability. The time has come to fully accept integrated accounting software to automate your processes and create more accurate accounting results. In effect, it will empower businesses to get immediate feedback through up-to-date information and reports, thereby free up time to focus on improving other important parts of operations.
Bernard is a Chartered Accountant with over 14 years of professional and industry experience in Financial Services Sector and Management Consultancy. He is the Managing Partner of J.S Morlu (Ghana) an international consulting firm providing Accounting, Tax, Auditing, IT Solutions and Business Advisory Services to both private businesses and government.
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