Differences Between Manual & Computerized Accounting Systems

Manual accounting systems have been around since ancient scribes began keeping records of taxes, tribute and temple inventories. Computerized accounting systems are barely two generations old, but they have already revolutionized the accounting field to the point where it's rare to find a business that doesn't use computerized accounting in some form or another.

Manual and Computerized Systems

Many contemporary businesses use a hybrid of the two systems. The manual element can range from keeping physical receipts to writing all journal entries by hand, while the computerized element can range from using an electronic cash register to maintaining an entirely digital accounting system.

When choosing an accounting approach for your small business, consider several aspects of accounting: speed, reliability, transparency and simplicity.

Speed of Accounting Systems

Computerized accounting systems are considerably quicker than manual ones. The time required for data entry may be comparable in the two approaches, but a computerized system saves considerable time when tallying results. A computer can generate reports quickly, and you can change parameters by simply clicking and selecting options rather than adding entire columns of numbers. Computerized systems are vulnerable to bugs and glitches, which have the potential to slow you down.

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Although a manual system generates data much more slowly, it's easier to predict the amount of time it takes to perform different functions in a manual system.

Reliability of Accounting Systems

The data in a computerized system depends on reliable hardware to track the information you need. When your system crashes or freezes, you may not have access to your records. Regular backups mitigate this risk, but you still have to deal with some unpredictability getting your system back up and running.

Manual accounting systems are kept in ledger books, which are always available for you to use and view. Of course, physical records can be vulnerable as well and can be damaged or misplaced. You can photocopy manual records to keep a backup of sorts, but the process of backing up a digital file is much simpler.

Transparency of Accounting Systems

Although digital systems can generate sophisticated reports in seconds, it may be difficult to track down difficulties when they occur because calculations are based on preprogrammed back-end calculations. For example, if your system is set up incorrectly, it may be treating some liabilities as assets, and you wouldn't be able to identify the problem unless you know precisely where to look.

In contrast, it's easy to see whether an entry into a manual bookkeeping system is being added or subtracted because you're doing each of these calculations yourself.

Simplicity of Accounting Systems

Although some manual systems are sophisticated and some computerized systems are simple, manual systems lend themselves well to businesses whose accounting needs are basic and straightforward. Some small businesses don't need double-entry systems that track every transaction against bank account and credit card statements. They may do perfectly well with single-entry systems that list and categorize sales and expenditures.

If your accounting needs are simple, you may be happiest with a manual system rather than a computerized accounting system.