Accounting is an intrinsic part of any business, large or small–owners and other interested parties want to know whether they are making a profit or not. Many small businesses do their accounting manually and they are happy with this setup. Others may be considering using a computerized system, since accounting software is so affordable these days. Manual and computerized accounting systems perform basically the same processes; the accounting principles and concepts are the same with differences lying in the mechanics of the process.
The main difference between manual and computerized systems is speed. Accounting software processes data and creates reports much faster than manual systems. Calculations are done automatically in software programs, minimizing errors and increasing efficiency. Once data is input, you can create reports literally by pressing a button in a computerized system.
Another difference between manual and computerized systems is cost. Manual accounting with paper and pencil is much cheaper than a computerized system, which requires a machine and software. Other expenses associated with accounting software include training and program maintenance. Expenses can add up fast with costs for printers, paper, ink and other supplies.
A third difference between manual and computerized systems is the ease of backup of a computerized system. All transactions can be saved and backed up, in case of fire or other mishap. You cannot do this with paper records, unless you make copies of all pages–a long and inefficient process.