An accounting system offer several benefits to your business, including accurate financial records, speed, better financial analysis, improved cash flow management, enhanced data security, and higher compliance.
An accounting system is a set of procedures businesses can adopt to keep track of financial data, make informed decisions and maintain accurate records.
Accounting software, on the other hand, is a computer program designed to process financial data more efficiently and automate some processes involved in creating financial reports.
Accounting Software Explained
Accounting software is a computer program that handles and records an organization’s day-to-day financial activities, such as fixed asset management, cost management, revenue management, accounts receivable, accounts payable, sub-ledger accounting, and reporting and analytics.
You can think of accounting software as a type of accounting system. Other types of accounting systems include single and double accounting systems and manual accounting systems.
These days, most businesses have opted for more effective ways to manage financial information, thus making accounting software (digital accounting systems) very popular and widely used all over the world.
The article intends to highlight the importance for Small and Medium enterprises (SMEs) in Hong Kong to adopt an accounting system to create a system for financial data tracking, storage, and reporting.
Benefits of Adopting an Accounting System as a Small Business
Below, we have highlighted some of the major benefits of implementing accounting systems in your business and/or organization.
1. Accurate Financial Records
An accounting system makes it easier to keep track of financial transactions and ensures the accuracy of financial information. As financial information guides stakeholders in making informed decisions about the future of the business, it’s important to choose an accounting system that streamlines the process of maintaining records, is quick to update, and is less prone to error.
Cloud accounting software is the best bet to achieve this. This is important for tax purposes, auditing, and decision-making. For business owners on a budget, there is free accounting software in the market. Note that some of the free software might have some limited features, but in general, they can meet the basic requirements.
2. Time-saving
Once there is an accounting system in place (whether manual or automated), time is saved when there is a need to generate financial reports on the company’s financial status. Without an accounting system in place, business owners need to start from scratch to prepare financial reports whenever it is required
An accounting system automates many of the manual tasks required for bookkeeping. This saves time and allows businesses to focus on other important tasks.
3. Better Financial Analysis and Management
An accounting system helps businesses analyze their financial performance. Accounting software on the other hand provides real-time analysis, allowing for up-to-date reporting for accurate decision making.
With accounting software in place, budgeting, forecasting, resource allocation, cash flow management and reporting can be automated. These are essential for making informed decisions about when to pay bills, when to collect payments, and when to invest in the business.
4. Increased Compliance
An accounting system helps businesses comply with financial regulations and tax laws. This reduces the risk of penalties and legal issues that can arise from late reporting due to the non-existence of an accounting system.
Some businesses might be looking to save the subscription cost by using an accounting system, but the cost of late filing (penalties and court summons) exceeds the former
An accounting system is an essential tool for businesses of all sizes. It provides a way to organize and manage financial data, which is important for making informed decisions and maintaining accurate records. While having an accounting system in place is important, it is advisable to use accounting software compared to manual accounting systems (use of Excel or double entry systems).
The benefits of accounting software against manual accounting methods include accurate financial records, time-saving, better financial analysis, improved cash flow management, enhanced data security, and increased compliance.
Conclusion
Whether you are looking to explore manual accounting systems, use accounting software, or outsource accounting maintenance for your company, Discount will be able to support you.
Feel free to book a 30-minute consultation on the most appropriate accounting system for your business.