A lady told me she could not understand the figures in her financial reports. I asked if I could have a look starting with the balance sheet. From her laptop she generated one in a horizontal format and guess what, balances under the title other current assets category were appearing on the liabilities & equity side of the balance sheet! The accounting equation is: Assets = Liabilities + Equity.
Unreliable financial reports
Apparently her accounting software was set up by her IT personnel. Well one may justify that since the IT people handle most of the software installations, the Accounting software is just one of the many. I have been to quite a number of organizations during my consultancy and mentoring work and discovered that if the Accounting software was not set up by a competent Accountant it is highly likely that the financial reports generated CANNOT be relied on. The simple accounting principle of double entry if not mastered well can totally distort the organizations financial statements.
Inadequate financial reports
The main purpose of having an accounting software is mainly to be able to generate reports that are useful for decision making by the various stakeholders in an organization. I have received requests from organizations who would like to change from one accounting software to another citing various inadequacies of their existing accounting software. Upon conducting a systems review vis a vie the stakeholder needs, I have found that the accounting software have the functions needed to generate the needed reports but no customization was done to meet the organizations needs.
Ineffective use of accounting software features
I have seen a number of accounting personnel who have accounting software but they carryout manual bank reconciliation and am baffled. Some are not even aware that they can generate customer statements, stock tracking, product profitability analysis and sales reps performance out of the same system. These are just examples of basic functions that can be performed using an accounting software that the users aren’t aware of. I have found that in most of these cases the person who installed and set up the accounting software did not have an idea how to use the features themselves.
It is important for the organization to engage a competent person to set up the accounting software, preferably with accounting knowledge so that the users can be trained in the effective and efficient use of the accounting software. This will go a long way in minimizing errors and ensure that the financial reports generated from the system can be relied upon for informed decision making.
Before procuring an accounting software in the first place, it is important for the organization to have needs assessment carried out to ensure that they are getting the right software for their organization. Some questions to consider:1) What are the unique needs of your business, company, organization or industry?
2) What are the various stakeholders reporting needs?
3) How is the finance and accounting function structured?
4) How will the software be accessed? Remotely or within a network?
5) What are the internal control issues that will need to be supported or addressed?
6) What are the organization’s future plans?
An accounting software is more like a labor saving device for the Accountant in that it helps simplify some of the routine accounting processes while efficiently producing accurate and useful management reports and financial statements. Anything less than that means there is need to check the set up of the accounting software.
The IT specialist can run the CD, advise on which location/drive to install the software, how to access the server and help in networking, but I would recommend that the set up, accounts structuring, customization and user training be done by a competent Accountant.
Who set up your accounting software, the IT specialist or the Accountant? What is your experience with accounting software?