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- Features of Accounting Software
General features of accounting features
General features must be used to evaluate a software package. In other words every software package must have 4 features as follows (Rushinek and Rushinek, 1995):
a. Easy installation
b. Easy use
c. Seller support
d. Capability of update
Regarding various functions of should be software here designed by programmers, training capability of softwares is another feature to meet future needs of an organization. Thus essential training of users is an important way to attain business objectives for organizations.
According to Zanjani and Ramazani (2012), compatibility is one feature of paramount importance of appropriate accounting software which thereby is defined by Byrd and Turner (2000), as ‘a smooth functional system consistent with operations, staff and organizational structure’. Ramazani and Allahyari (2013) harmonizes with other authors that it is significant for accounting softwares because it provides the salability if any information and technology across the organizations. Therefore, if the accounting softwares are incompatible with the organisation it is doomed to failure because organisations usually focus on usable data to meet their needs of their information systems (Zanjani and Ramazani, 2012).
Furthermore, Chapman and Kiln (2009) indicate that incompatible accounting softwares will have problems of data concentration within the organizations. Zanjani and Ramazani (2012) agree with previous researches that compatibility of the accounting softwares facilitates timely provision of accurate information for decision makers.
A compatible system works aligned with activities, employees and firm structure. For example, we can assume Trade Bank that has many branches. Compatible AIS adjusts the data with specific requirements of a firm unit, and considering this helps to avoid any waste of time in firms and duly obtain our favorable goals based on firm requirements (Charles et al, 1995).
Ramazaniet al (2013) revealed that the main reason of nonconformity of modern costing systems is incompatibility of AISs with activities of production cycle.
Ghaemi et al (2012) concluded that there is a direct relationship between AIS appropriateness and firms’ performance.
Ramazani and Vali Moghaddam Zanjani (2012) that accounting software mustbe designed and assessed based on AIS features. They grasped a gap between current and ideal situation of accounting software in adapting to the activities of firms under study.
Flexibility is of great importance in accounting information systems (Genus & Dickson, 1995). Flexibility is the system’s capacity against change of direction or deviation from the predetermined direction of activity (Eardley et al, 1997). According to Evans (1991), compatibility is capability against changes consistent with future requirements of an organization. According to Rezaian (2001), an information system must have the capacity for integration in the future. One expert in this field contends that when most items in a organization and system are put in a linked environmental process, compatibility acts as a critical and strategic factor in success of an organization (Evans, 1991). Eppink (1978) contends that flexibility is a strategic reaction consistent with future requirements of organizations.
Flexibility is one of the major subjects in AIS (Genus and Dickson, 1995). Flexibility is the ability of the system to switch or shift from planned activity (Eardley et al, 1997). Evans (1991) defines flexibility as the ability against changes aligned with future organizational needs. Rezayian (2001) stated that an information system must be able to be integrated into the future and this can be covered by flexibility. One of the experts believes that when most of organizational items and system are interconnected in an environmental circuit, flexibility flows in the organization as a critical success factor (CSF) strategy (Evans, 1991). Eppink (1978) believes that flexibility is a strategic reaction along organization’s future needs.
Firms are growing and developing. They produce new products, disregard non-profitable activities and appeal to more profitable activities. Changes in firm units often lead to changes of accounting system. A flexible system can simultaneously adapt itself to firm units’ changes without substantial changes. Ramazani and Vali Moghaddam Zanjani (2012) grasped a gap between current and ideal situation of accounting software in adapting to the future changes of firms under study.
- Internal Control
Internal control is plans and methods adopted by a business to protect assets, provide accurate and reliable information, enhance efficiency of operations and encourage staff to observe rules and management approaches (Sajjadi & Tabatabaee, 2006). Accounting information systems are important mechanisms for correct management decisions and control in organizations (Jensen, 1983 & Zimmerman, 1995). Internal control is information need of an organization to closely supervise operations (Simons, 1987). Rushinek and Rushinek (1995) contend that designing the system of software choice is consistent with control. They made this evaluation part of the objective of their study. From the viewpoint of control, appropriateness of data security is usually a major organizational challenge (Abernethy & etc, 2004). If functional controls are weak, outputs of AIS will contain management errors. This in turn will have negative impact on organization’s relationship with sellers, customers and outsiders. On the whole there are five internal control groups in computer systems as follows (Sajjadi & Tabatabaee, 2006):
a. Primary data control
b. Controlling validity of input data to the system
c. Controlling entry of direct data to the system
d. Maintenance control of files and processing
e. Output control of the system
Internal control is the plans and techniques of the trading unit for protecting the assets, providing precise and reliable information, enhancing efficiency of the operations, and encouraging the Employees to abide by regulations and managerial methods (Sajjadi, 2006). AIS is an important mechanism for effective managerial decisions and control in organizations (Jensen, 1983& Zimmerman, 1995). Internal control is the information requirement of the organization for concentrated supervision of operations (Simons, 1987). Rushinek and Rushinek (1995) noted that designing software selection system is based on control and this kind of assessment was among their research goals. From control viewpoint, the suitability of data security is one of the main challenges of organizations (Abernethy et al, 2004). If functional controls are weak, AIS outputs will be managed wrongly and it may have negative impact on organization relationship with vendors, customers and other individuals beyond the organization. Generally, there are five types of internal controls in computerized system (Sajjadi and tabatabai, 2006):
1. Control of primitive data
2. Control methods of input data validity into system
3. Controls of entering direct data into system
4. Controls of file keeping and data processing, and
5. Control of system outputs
2. Benefits of using Accounting Softwares
Faster Processing of Transactions
According to iteducation (2007), faster processing of transactions is one of the major benefits of using accounting softwares in an organisation because they are designed to speed up financial procedures. It goes on to mention that data entry onto the computerised accounting softwares with its built in databases of customers, supplier details and stock records would ensure faster transaction processing. This is supported by smallbusiness-chron (2005) emphasising that computerised accounting software packages for invoicing in an organisation make the accounting process run faster and more efficiently. It facilitates in fast printing professional looking invoices and enhances the ability to send out invoices through electronic mail. Hence, this will usually speed up the payment procedure and recording seamlessly, fast and automatically.
A major benefit of using computerized accounting software pointed out by smallbusiness-chron (2005) is the capability to run reports to determine which customers have paid and which have not paid. Furtherly, it reveals that aging report easily shows who owes, how much and for how long which puts the organisation in control of its finances. The accounting softwares enhance the ability to determine the customers who are late-payers to minimize the amount of bad debts unrecovered. Therefore, the well-run organisation needs to rely on prompt and reliable information, and computerized accounting softwares fits this requirement well.
According to smallbusiness-chron (2005), it is easy to lose invoices especially when they are prepared manually in an organisation. They can get lost in the mail, or they may be misfiled in a manual system. However, using an accounting software package, the data is all organized in one place to be reviewed, reprinted and resent in case of problems. For instances, the organization usually can look in the system for invoices based on names, amounts, invoice numbers and the coding system. It is a fast and easy process because the software organizes data as it is entered.
Another benefit mentioned by Joseph (2006) that can be offered by computerized accounting software packages is that it can save time for organisation. Calculations for functions like payroll and billing can be performed quickly and efficiently by accounting software programs. It can also access accounting records quickly without having to sift through stacks of paper. This can allow you to spend more time working with clients or performing marketing functions to help your business grow.
Manual "number crunching" presents the possibility of human error, which can be costly to a small business owner who may be in a hurry to complete an accounting task. Computerized accounting programs can reduce calculation errors that can result in inaccurate inventory counts, billing for too large or small of an amount or incorrect sales receipt totals. Having accurate accounting information can also help you avoid tax errors that could lead to problems with the Internal Revenue Service.
When you use a computerized system, you make fewer mistakes in calculating totals or in typing, decreasing confusion. It usually allows you to include a tax percentage when appropriate, with the system performing all calculations. This is a useful advantage, especially when you have detailed invoices where hours or specific items are billed at different rates. Once a system is set up properly, you pick and choose items to be invoiced and the rest is done for you.
Tracking Projected Cash Flow
One of the most important benefits of tracking payables and receivables in an accounting program is that it can use that data to project your cash flows into the future. For example, if you have entered all of your customer billings that have not yet been received and all of your bills that are due and have not yet been paid, the accounting program can compare the money projected to come in and the money projected to go out in different time periods, such as next week or next month. This feature helps the company avoid overdraft fees, late bill payment fees and cash crunches. Although this projection can also be done manually, it could take hours.
Simultaneous Billing or Bill Payments and Transaction Recording
A time-saving feature of accounting software is the simultaneous recording of a transaction as it is occurring. For example, in a manual system, when you pay a bill, you would first write out a check and then you would have to record the check in the ledger or journal. With a software program, you can write the check directly in the program and print it out on your computer. The act of creating the check also automatically records the transaction in the bookkeeping file. Not only does this save time, it prevents possible manual recording errors.
Automatic Financial Statements
When using a manual accounting method, the ledger must be reconciled, balanced and converted into financial statements. This is time-consuming and doesn't allow you to review financial statements in real time. Without knowing your financial position or net income, you may miss potential looming crises. With an accounting software package, you can print financial statements at any time for whatever period of time you choose. So, for example, if you want to see your profit and loss for the first quarter of the year, you choose that time period and can see it immediately.
Drawbacks of using the Accounting Softwares