Finance Management Software as an Alternative for Manual Accounting - Research Paper Example

Introduction Accounting package or software is basically application software which is able to record, process and account transactions within any accounting scenario such as receivable accounts, payable accounts or even payroll. Such software may be developed in in-house settings or be purchased from a third party. Alternatively, an accounting package may be third party software bought and then modified so as to be used in the specific accounting situation in a particular organization. Database management packages or software on the other hand have the ability to process information about particular elements in the database (McKeown, 1986: pp305-307). These packages can be modified to play a particular accounting functionality such as payroll processing. Because of the modification specializes the software to one particular function, using such an application package becomes highly manageable and easy to use. As such as, most organizations prefer the highly manageable and user friendly database packages which are gradually outgrowing the use of accounting packages (Siegel & Shim, 2000: pp305-307). Both the accounting and database packages make the work of an accountant quite easy and smooth. It has even been cited that such application packages can be used by a person who is not an accountant. In a way, this aspect of the application packages being able to be used by non-accountants threatens the tenure of the accountant and reduces him/her to any other employee. Initially, before these packages gained usage, the accountant was respected for the work done but now with the applications in the market, worse still the fact that can be used by anyone with little or no accounting knowledge, has underscored the importance and services of accountants. This fact also threatens the accuracy of accounting records because if an accountant notices an error he will be able to rectify it. This paper seeks to highlight how the ready availability of database packages has rendered the accounting package obsolete and diminished the role of the accountant. Accounting and Database Packages As intimated earlier, Accounting package or software is basically application software which is able to record, process and account transactions within any accounting scenario such as receivable accounts, payable accounts or even payroll. Accounting software characteristically made up of various modules. These modules are basically a section of software which handles a particular function in accounting. The most common modules include but are not limited to: 1 Accounts receivable- This is where the money received by the company is entered 2 Billing- Productions of invoices to the clients and/or customers 3 Purchase Order-where the organization orders 4 Accounts payable-where the organization enters the debts the company owes other people and/or organization as well as bills such as electricity, water and telephone bills. 5 Stock/Inventory-this is where the company is able to manage its stock or inventories 6 Sales Order- where the organization enters the orders it receives from customers prior to the supply of such inventories to these customers 7 General ledger- this represents the company’s book of accounts The above modules represent the major ones. However there are others which are not core but have the application of accounting packages. These include but are not limited to: 1 Expense—this is where the organization enters its expenses related to operations, employees or business. 2 Timesheet—where the professionals working for the organization enter the time they have worked so as to make billing easier. 3 Payroll— organization follows salary and/or wages from here. It is also where all the related taxes on wages are entered. 4 Reports—organization prints out data here 5 Debt Collection— Sometimes it is part of the accounts receivable module but it can also stand independent. This is where the organization’s efforts to recover what creditors owe the organization are recorded and tracked. 6 Purchase Requisition—Organization makes, approves and tacks orders for purchases from here 7 Inquiries—where the organization accesses information without editing (adding or removing data or information) The accounting software come in categories, the main categories of accounting packages include: the personal accounting packages, low end packages, mid market packages, high end packages and the hybrid packages. The personal accounting packages are usually used at home and they handle accounts payable kinds of transactions, manage budgets and also reconcile accounts. Low end accounting packages on the other hand allow the general accounting functionalities and they vary from one national market to another. A low end accounting package will only handle the general accounting functionalities in a particular national market. These packages are only capable of single entries and most of these packages lack security features and/or audit trials (Bragg, 2001: pp57-59). The mid market packages on the other hand are able to handle the multiple accounting functionalities in a national market and can as well account in more than one currency. Besides the packages handling general accounting functionalities, the packages also have integrated management information systems. These information systems may be skewed towards one or more markets e.g. market with integrated management information systems or add on information systems i.e. the package can be modified in a bid to customise it. Most packages in this category include the following features: 1 Standard databases- e.g. PostgreSQL, Oracle, Microsoft SQL etc 2 Standard reporting tools- e.g. Crystal and Cognos 3 Configuration and package extension tools e.g. access to program code, control through Visual Basic for Applications etc High end accounting packages are complex and quite expensive. This package is normally a suite (collection of software) and is at times called Enterprise Resource Planning software. They take long period of implementation and require extensive integration and customization so as to be able to handle accounting functionalities. The only advantage of these high accounting 0ackages is that they are designed to perform specific functionalities characteristic of particular organization. Actually, these packages can often be tailored to fit specific company accounting needs. Because of this possibility of extensive customization to fit the particular company’s needs, these packages are expensive both in terms of time of implementation and cost. Vertical market packages are often designed for specific business types and as such they will have the features that are specific to the industry they are designed for. These packages come in two types; the ones designed for specific industry function and general ones that can be modified. The following are examples of the vertical market accounting and database packages 1 Banking 2 Non-profit 3 Medical 4 Construction 5 Child care management software 6 Point of Sale mainly used by retailers Hybrid Solutions Hybrid packages are usually used ton carry out the functions that are carried out by the mid market and high end accounting and database packages. These packages include the possibility of advanced customization and databases that can easily be scaled. These two foregoing features are required even by the smallest of business. Hybrid packages have been made more necessary because businesses are constantly opening up new branches, crossing the borders to establish abroad etc. As such, such expanding businesses require packages that can easily be customized to fit their particular accounting needs and those that can handle databases and enable accessibility from various locations or countries where the company has branches. Database packages have passed on well as hybrid packages which perform specific customized functions which are gradually making accounting packages obsolete. For instance, the database packages can manage the payroll better than the accounting packages (Drury, 2004: pp449). How Accounting and Database Packages are making Accountants Irrelevant Accountants offer a myriad of services to their clients. The services range from public management, internal auditing, government accounting etc. They also prepare, analyze and verify financial data so as to provide information which their clients can use to make decisions or enact strategy. With the rapidly changing accounting environment, most accountants are forced to harbour a myriad of skills. Accountants nowadays offer services such as budget analysis, IT consulting, financial and investment planning and some degree of legal services. With the changing times specialization has been a must and as such most accountants now specialize in particular areas albeit they can perform multifarious functions as far as accounting is concerned. For instance, an accountant can concentrate on matters to do with tax or compensation or employees or design of controls that will enhance safeguarding of assets etc (Fox, 2001: p57). Accountant and database packages are gradually changing the nature of the work accountants do. First, it is important to note that these accounting and database packages enhance the work of accountants and at the same time threatens their jobs. As far as enhancement is concerned, these packages: 1 Help accountants to sum up transactions in standard layouts that are in use in the financial recording process 2 Helps accountant to organize data in a layout used in financial analysis 3 Minimize the amount of manual work related with management of data and record keeping 4 Enables mobility of accountants 5 Enable the accountants to use the systems of the client so as to extract the required data information from databases Similarly, the accounting and database packages are gradually limiting the amount of job the accountants can do. As a result of this, the packages are therefore gradually making the accountants irrelevant. There is worldwide concern that the client oriented accounting packages which can simply be got off the counters of most software vendors. This software target the functionalities of professional accountants and as such most companies are choosing between accountants and the software. Other organizations have however decided to keep both to enhance the accuracy and comparability of the financial information generated by both the accountant and the software. However, in this era of steep marketplace competition, most organizations are quickly embracing cost effective ventures and duplicating functionalities in the work placer is the last thing they want to do; it is either the accountant or the software. Based on this, the accountants are hard pressed to ensure that they are flexible and adaptive so as to effectively compete with this software revolution. The accountants are up against the present and future accounting packages that target their write-up clients. Soon or later, the packages are going to keep them out of business. Flexibility and adaptability is a must for the accountants because the software will never stop developing packages that are meant to replace the services which are characteristically offered by the professional accountants (Fox, 2001: pp58-60). Even the smallest of businesses are looking for accounting software so as to save on the accounting fees offered to the accountant for the write-ups. However, inasmuch as the businesses are rapidly turning to accounting packages for their solutions, whenever the packages fail them, they are going to require the services of a CPA or auditor. One may wonder why are the businesses are rapidly venturing into solutions offered by these packages? The answer to this is the fact that these businesses a re hard pressed to create value to their customers. Value creation has been the core reason behind the most successful businesses and as such, those other businesses that need to succeed are now emphasising on value creation more than ever before. Value creation has the ability to generate the energy that has been able to unify businesses thus making value creation at the centre of their very existence. The cheap packages that can be got off the counters are designed to do away with the need for a professional accountant. This therefore allows the business owners, especially for small businesses, more time to rum their own businesses. These packages are designed in that with just a mouse click, the packages are able to write checks, process modest payrolls, generate financial statements, generate invoices and other business management reports. Actually, the packages are able to do all that a professional accountant can do except to walk to the bank to deposit cash (Fox, 2001: pp57-62). It is even amazing that these packages are designed to a point where a non-accountant can use it comfortably and post results. As such, the services of professional accountants are fast dwindling and soon or later these services are going to be extinct or totally irrelevant. Conclusion In conclusion, the professional accountant are under obligation to be more flexible and adaptive to the ever evolving technology, When they are savvy to the way the packages work they are at a better position to use them well. An organization wi8ll be more ready to hire a professional accountant who knows to use the software well because this has dual functionality in that if the package fails, the accountant will know where to start from and in case of a problem or error, the accountant is able to locate it in time. Inasmuch as the packages offer real time solutions, these packages are not able to re[place the services of a professional accountant when it comes to services such as the setting up of structures of accounts, offering financial advice and guidance, presentation of reports and the provision of financial analysis. References Siegel J G & Shim K J, (2006): Accounting Handbook, Barron’s Educational Series, pp305-307 Bragg S M, (2001): Accounting Best Practices, John Wiley and Sons, pp57-59 Drury C, (2004): Management and Cost Accounting, Cengage Learning EMEA, pp449 McKeown P G, (1986): Living with computers, Harcourt Brace Jovanovich, pp305-307 Fox J, (2001): Building a profitable online accounting practice, John Wiley and Sons, pp57-62 Read More