In any accounting department, there will be a system for collecting, storing, and processing information. This is the company’s accounting system.
Whether you’re joining a new accounting department or supporting business development in your current organisation, you need to make sure the system you rely on is fit for purpose.
As organisations grow and change, accounting systems must be able to adapt. So how do you go about evaluating an accounting system?
Defining the current system
Accounting systems are complex, covering diverse areas from sales and purchases to credit control. So before you decide what works and what doesn’t, take stock of what’s already there.
Take a methodical approach to this, working through the full process from beginning to end for each piece of data that goes through the department. It’s also important to find out what happens to that data in the workflow, before it becomes meaningful information.
The next step is to see if the system is effective in light of organisational and departmental objectives, and this can be measured by completing a SWOT analysis.
Before you start, make a list of the requirements and key performance indicators for your accounting system, so you can carry out your analysis in line with this.
Your SWOT analysis will begin by looking at the strengths and weaknesses of the system. These will relate to internal factors, such as how well it supports the business’s existing workflows.
Your analysis will then look at opportunities and threats. This involves external factors like whether your accounting system would be able to integrate with the software you plan to use in the future.
Get to grips with cash flow forecasting
Enter your details to watch the webinar with qualified accounting tutor Patricia Barlow
Taking improvement measures
When you’ve got a clear idea of where the current system excels and where it falls down, you can begin to address the weaknesses.
A weakness, for example, could be that data is duplicated, having to be entered into both a manual system and computer system. This is inefficient, and you could find better uses of team members’ time. To address this weakness, the solution could be to choose just one method of data entry.
As another example, a weakness could be that the software used for the accounts department is not backed up. This means that if the system crashes, data could be lost, and that means time will need to be spent re-inputting data. The solution for this could be to back the data up to the cloud.
Addressing all of the weaknesses you’ve identified will show you whether small solutions can be implemented to make the system effective or, whether a complete overhaul is required.
If a large overhaul is needed, the cost of this also needs to be considered. It ultimately comes down to this question: will the benefit of implementing a new system outweigh the costs?
Are you ready to supercharge your accounting knowledge? Why not start working towards a professionally recognised qualification through one of our distance learning accounting courses?