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Thread: Why Accounting Software Cannot Replace The Accountant

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    Why Accounting Software Cannot Replace The Accountant

    It is a common misperception that accounting software can and will replace an accountant. Accounting software is a means to an end, not an end in itself. Many software companies promote their respective accounting packages as a substitute for accountants. In an endeavor to promote their own sales, these companies are doing the users a great disservice.

    Accounting software fulfills an important role, in expediting the recording of financial transactions, and assisting in finalizing accounts in a shorter period of time than manual bookkeeping. In industrialized countries, 99% of business use either advanced software, or spreadsheets.

    This dependency on software leads to many smaller businesses discarding the services of outside consultant’s altogether. It is dangerous, for small business owners to assume that they will not require regular advice from a qualified accountant or tax advisor.

    All accounting software utilizes double entry, despite it not appearing so. Difficulties are encountered when accounts have to be structured in a proper manner. In most cases, the receipts and payments are easy to record with accounting software. Bank reconciliation’s are automated, and are generally easy. Where most errors occur, is with the interfacing of creditors, debtors, assets, sales tax or vat, with payments on cashbook. The best software in the world is not going to address this problem.

    Opening or “take on” balances are not imported on to the new software from either a manual system or previous accounting software. Virtually every item on a new balance sheet will be under reported or misstated in such a case.

    Sales, purchases, assets and taxes may be captured, but receiving payments, making tax payments and balancing the respective accounts is mostly overlooked. Many a time, these transactions are duplicated. A payment to a creditor could be entered separately in the cashbook, without linking it to the creditors balance.
    Even where the cashbook reconciles to the bank statement and is prepared neatly, the entire income and expenses items could still be grossly out of balance. Example 1: Expense DR
    Creditor CR

    The same expense duplicated when creditor is paid
    Expense DR
    Bank CR
    Thus leaving the creditors balance “open”, resulting in an inaccurate creditors balance.
    Example 2: Monthly repayments for assets purchased, are expensed via the bank account, omitting a range of relevant items, such as asset cost, liability portion of the asset and finance charges.
    And yet the accurate payment reflects in the cashbook, and the cashbook reconciles to the bank statement.
    Without a technical background in accounting the above cannot be performed.
    These occurrences are borne out by my experiences at many establishments, and is in no way meant to be demeaning to the independent use of accounting software. Software users should do their homework, and research the various available packages, on the market, thoroughly. Off and online support to the software should constitute part of the licensing and cost of the software. It is advisable that the users of software should have it customized or tailored by an accountant, and then go for further training.

    With proper training on accounting software the user will in the long term not require constant assistance from an accountant.
    Sean Goss We all are scared, but only few are brave.

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    Dave A (25-Mar-09)

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by sgafc View Post
    With proper training on accounting software the user will in the long term not require constant assistance from an accountant.

    And may I stress the word constant.

    Acquiring the skill to compile a well-drawn set of books is one thing; interpreting what those figures are trying to tell you and ensuring you've applied the vast range of tax issues the best way possible is another story completely.

    Even when I was a very small operation with an incredibly simple set of books, I still used to look forward to running it past my accountant for the insights and advice I'd get. Worth every penny.

    On software selection, I really like Quickbooks Pro. Apart from the setup wizard which is simply awesome, the information available in Help and the analysis tools go a long way to demystify many aspects of accounting principles and sound financial management.
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