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.
User training
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.
Needs assessment
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?
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