Manual Accounting Systems - advantages, disadvantages and overview of Manual accounts proceedures
Manual accounting systems, even in todays world where computerised accounting systems seem to triumph over paper based systems, can still provide an effective and useful way of of recording business transactions and can deliver an efficient accounting information system for the small business owner.
A manual accounts system, if developed correctly can deliver timely and accurate information. In many ways, particularly for the smaller business, in a well designed manual accounting system the advantages outweigh the disadvantages. The manual system, though requires a greater understanding of how to book keep, can be easier to manage, once the key concepts of double entry book keeping have been learnt. The basic book keeping skills needed, once mastered, apply to all the books of account and can be applied to any business, whether you are setting up a maunal accounting system for a plumber, website designer or even a book keeping business, the fundementals are the same.
A disadvantage of a maunal accounting system is the likelyhood of human error, however those errors manifest themselves. Errors in addition, transposition of figures, incorrect recording of a transaction, incomplete recording of a transaction, - where only one side of the double entry is recorded - are all quite common mistakes and can prove to be quite difficult to locate without a good deal of experience in accounting.
Another obvious disadvantage is the likelyhood of damage to the records themselves. It might seem an obvious downside, but the records in a paper based accounts system are susceptable to damage by water, fire and other perils. In addition where there exists many transactions to record in a business the sheer volume of transactions can be a disadvatage of a manual accounting system,
Advantages of a manual accounting system:
- Applies to any business
- Easier to set up
- Can be more flexible than a computerised accounting system
- More secure
- Does not need electricty or batteries
- Greater “impression” of control
Disadvantages of a manual accounting system:
- Prone to human error
- Longer to generate reports
- More suited to smaller businesses
- Records susceptable to perils such as fire and water
- Disaster recovery plans harder to implement
- Can take longer
- Not paricularly suited to environments where there are a large volume of transactions
Before deciding whether your business is better suited to a manual accounting system or a compuristed accounting system, careful consideration should be given to your own preferences. There is no right or wrong decision. At Accountsman we believe in the addage “horses for courses”. If you are more at home writing up ledgers and books then perhaps some of the more modern accounting software packages may not be for you as often there is a steep learning curve to get to grips with a modern computerised accounting system. Though at this juncture, it should be said that the modern accounts software is being written in such a way as to make it much more user friendly to business owners than the older more complex programs of days gone by. Most small businesses will probably start out using a manual accounts system or a hybrid between the two. Though as the business develops the need for a speedier solution to record the transactions of the business will become increasingly more pressing.