Why Traditional Accounting Systems Are No Longer Sufficient?
Why Traditional Accounting Systems Are No Longer Sufficient?
discover | Sunday - 27 / 10 / 2024 - 10:52 pm
Over years of collaboration with startups and medium-sized companies, we discovered that a significant number prefer to use traditional accounting systems, especially in the early stages. At the same time, these companies place great importance on managing daily business data; they recognize the need for an integrated Enterprise Resource Planning (ERP) system to manage their daily orders, inventory, receipts, payment data, and more. However, at some point, they face greater challenges in managing their financial data as the company grows and expands its operations. In this case, the client has two simultaneous requirements:
– Utilizing an integrated accounting system.
– Using an ERP system.
These two requirements are inevitably linked. This highlighted for us the importance of having a single system to provide both services. Thus, the client will not need to spend resources on two systems (which includes integration issues and others), and combining accounting services with an ERP system will have central value and be preferred by clients. This was the moment of birth for Logix’s ERP accounting system!
Understanding the Relationship Between Enterprise Resource Planning (ERP) and Accounting:
Accountants manage the financial health of their companies by relying on accurate and real-time data. Unfortunately, most companies can only afford traditional accounting systems with limited features. As mentioned, these systems cannot keep up with the financial requirements of large companies.
On the other hand, Logix’s ERP accounting system is an integrated system that companies use to merge and manage their business functions. This is because it includes a dedicated financial management unit for accounting and related operations, providing real-time data, seamless integration between departments, and efficient automation for the accounting team in these companies.
What value does Logix ERP accounting system provide to customers and companies?
Once small businesses reach a certain size, they invest more effort in managing their financial books. When the number of customers ranges between 50 to 60 customers, business owners may be content with managing their accounts manually or using a spreadsheet. However, accounting becomes more difficult as their business expands and their customer base reaches 1,000, then 5,000, or even 10,000 customers.
To increase business productivity, business owners seek an integrated system, and the obvious choice here would be a traditional accounting system because the business owner needs to monitor sales, collect payments, pay suppliers, and determine profitability. While traditional accounting systems may help solve these problems, they cannot manage an increasing number of employees, track suppliers, or view warehouse costs and other tasks.
Although some may use an accounting system to manage only basic data and financial reports, an ERP accounting system will give you greater flexibility.
Greater integration of business activities, including inventory and warehouse management, customer relationship management, and supply chain management, becomes possible through an ERP accounting system. We don’t think a traditional accounting system can meet these goals, do you?
The value it provides is different from what we mentioned in previous blog posts such as:
– How did the advantages of purchasing management in our system change the course of history?
– What would your online store look like without an ERP system?
– Integrating an ERP system with a point-of-sale (POS) system is not just a luxury!
Here, the “value is doubled,” as the benefit of using an ERP accounting system primarily returns to the customer, as well as to their company.
Let’s start with the value for the customer:
Reduces the risks and costs associated with choosing a traditional accounting system:
In many cases, the client – meaning the company owner – first needs to find an external accounting services company to help them build their accounting system and prepare the company’s financial accounts. Then, our client will need an external accountant. And since they have placed their trust in this external accounting firm, they will undoubtedly give priority to an accountant recommended by this firm. But what if that accountant is… incompetent?
When a company owner uses an ERP accounting system, they reduce their options and limit them to a single provider. ERP providers are typically companies that have been evaluated by large organizations and companies, and have previously worked on many different projects.
Therefore, the quality of service will be much higher.
Synergy Between Financial and Commercial Data:
A company’s daily operations aren’t limited to just financial transactions, right?
There are a multitude of tasks involved like; customer relationship management, human resources, inventory management, equipment and production unit management, and let’s not forget complex supply chain management.
All these tasks require more than just one program. This is where ERP accounting systems, with their centralized data, shine.
Unlike traditional programs that are prone to inconsistencies and data duplication, ERP programs store all company data in a single database. This makes it easy for accountants to access financial data while improving data integrity and accuracy.
And if a customer needs to access some accounting-related data, they can also search for it directly in the same system in a timely manner. This saves time and effort of both the client (the business owner) and the accountants in their company.
Impressive Tracking Capabilities:
Logix ERP accounting system’s ability to function as a comprehensive financial management system is a fundamental advantage in accounting. Enhancements in tasks such as credit management, revenue tracking, customer payment plans, and numerous other functions fall under this category.
By adopting an integrated accounting system in your organization, you ensure the simplicity of managing tasks, especially revenue, payments, and invoices. The system can also be used for cost analysis, budget analysis, invoice analysis, and profit tracking.
Improving Data Access Control:
Financial management relies heavily on data accessibility. This means your accounting team must have easy access to company data to perform their duties.
ERP accounting software ensures real-time data access.
But what about sensitive information?
Rest assured, dear business owner! Modern enterprise resource planning systems, such as Logix ERP accounting system, have access control features that help determine who gets access to what.
These features are flexible; you can customize permissions as you see fit, granting some employees exclusive access while revoking permissions for others.
Now, what do you think if we talk about the value of ERP accounting software for the entire organization?
Improving accounting efficiency and data accuracy:
One of our clients told us about a bad situation they encountered, where they missed some entries in the accounting system and didn’t discover it until several months later. At that time, the client found that the financial data in the system did not match the statistical data of the inventory department tables, so they spent weeks – literally – verifying and modifying!
During this time, and since the accounting information did not accurately reflect the state of work, the accountants faced great difficulty in accurately determining the actual state of work and making accurate daily entries such as: Was there an invoice due? Do we need to re-evaluate inventory?
On the other hand, you will not face any problem of this kind when using an integrated system, such as the ERP accounting system from Logix, because the entered work data will automatically generate accurate daily entries to cover various possible work scenarios.
Merging the Company’s Financial Data:
Note that financial management relies on accurate information; even the smallest errors can cost the company a lot.
Implementing a single repository for all company information allows your team to access company data quickly and efficiently. Financial managers will find their work easier as they will not have to switch between systems when preparing reports. It also reduces the time they spend searching for financial information, giving them more time to focus on other important financial operations.
Reducing Human Error:
Manual data entry can become tedious and time-consuming over time. This can lead to a loss of focus, causing you to press the wrong keys. Inaccurate or incomplete accounting information can harm financial reports and complicate tax matters.
Resource planning systems detect and correct data entry errors, reducing the likelihood of issuing incorrect invoices, making inaccurate payments, or causing other accounting problems due to data entry mistakes.
Facilitating Better Management:
Managing payments and invoices is never an easy task, and it becomes even more challenging when dealing with departments that have varying levels of activity (inputs/outputs).
Therefore, the built-in financial tracking feature in the integrated Logix accounting system is invaluable as it assists in monitoring payments.
The system tracks all your payments and notifies you of any accounts that have not been settled on time. You can also track customer and supplier payments to ensure timely settlements. All of this leads to a smooth workflow in your accounting department.
Improving Cost Control:
Wouldn’t your organization’s accounting department like to find practical ways to control costs and maximize efficiency in your operations?
For accountants, Enterprise Resource Planning (ERP) systems automate the cost management process, greatly simplifying efforts. It also automates processes such as expense tracking, purchase orders, and invoice management.
Creating Advanced Reports:
Want to know a secret? Most companies use Enterprise Resource Planning (ERP) systems to enjoy advanced reporting capabilities. ERP systems generate accurate and comprehensive reports that are valuable for decision-making. They provide correct and up-to-date information since the data comes from a centralized database.
It’s crucial to understand the importance of having reliable reports. They provide a framework for your company’s accounting team to work and better understand the financial health of your business. You can also use these reports to predict trends and determine the best way to grow your company.
Compliance:
The complexity of accounting makes it necessary to report your company’s financial affairs to other parties for compliance purposes. Logix Enterprise Resource Planning (ERP) system facilitates this process as most of it is already compliant with Generally Accepted Accounting Principles (GAAP). GAAP standardizes data recording by defining how financial information should be recorded and what should be included to reflect the entity’s actual performance.
Accelerating Growth:
When businesses are first starting out, they tend to operate in a somewhat haphazard manner. But growth doesn’t align with randomness. A garage might not be an efficient place to store products or fulfill orders. Today’s businesses require the ability to access resources that are miles, counties, or half a world away. It’s essential to manage these resources.
ERP accounting systems contain many modules, including those for supply chain management, customer relationship management, and human resources, making it often the most versatile option for expanding companies. And using an accounting system makes it impossible to track orders, shipments, and supplies. If you still rely on traditional accounting systems, this data is likely spread across multiple spreadsheets. You can quickly obtain any necessary information using an ERP system, which can organize data.
With an ERP system, you can control how your company operates as it grows. It provides you with a comprehensive view of your business. Enterprise resource planning systems contain all your operational data in a single database, and here the company may become more efficient as a result.
Take for example an organization that uses an “order-to-cash” process. The sales team receives the order (or perhaps a web order), then passes it to the warehouse. Create a picking list first. This means the item must be removed from the shelf and recorded as having been taken out of stock. They must then move it to shipping. Accounting needs to provide an invoice after the product is shipped. If not recorded adequately, these activities will take time and are likely to go wrong. With an ERP system, many steps of the “order-to-cash” process can be automated.
The integrated nature of an ERP system and the ability to examine every area of your business model in one place and link them together can lead to further improvements. You can streamline supply chain automation and enhance production planning and scheduling.
What does the future have for traditional accounting systems?
The traditional accounting systems market has recently faced challenges, with the most well-known accounting software providers reporting that 24% of accountants have lost money or time due to accounting software errors. ERP accounting systems seem to be rapidly taking over the accounting software market, especially among expanding organizations, as more companies demand improved operational integration.
Many medium-sized companies are looking for ERP accounting systems that can control multiple business activities. This makes investing in Logix ERP accounting system a wise choice for your company.
How is Logix system considered the pinnacle of accounting system integration? The Logix system is one of the few cloud-based ERP systems that includes an integrated accounting module for your company. This module handles all accounting operations and aims to simplify financial management. Some available features include accounts payable and receivable, tax compliance, financial reporting, project accounting, and the general ledger. If you want a comprehensive accounting system that gives you full control over your financial data, detailed reports, and real-time insights, the Logix ERP accounting system is the best choice; it manages everything from transaction tracking to expense management to ensure a seamless and error-free accounting process. Another important reason to consider the Logix ERP accounting system is its inherent scalability. Many ERP systems cannot promise growth alongside your company like ours can. Businesses of all sizes effectively benefit from our cloud-based system based on their specific needs.
Do you need help choosing the right ERP system for your needs?
