When it comes to accounting, some businesses still prefer to do things the old-fashioned way: by hand.
But while this may have been a viable option in the past, it’s no longer feasible in today’s world.
Managing your accounting processes manually comes with a number of significant drawbacks that can end up costing your business time and money.
In this post, we’ll explore the shortcomings of manual accounting and why you need to avoid them at all costs.
1. Prone to human error
One of the biggest dangers of manual accounting is that it’s prone to human error.
From simple math mistakes to more complex errors, such as misclassifying transactions, there’s a lot that can go wrong.
And when it comes to your finances, even a small mistake can have big consequences.
The last thing you want is for your financial reports to be inaccurate because of preventable errors.
Another downside of manual accounting is that it’s very time-consuming.
From data entry to reconciling accounts, the process can take up a lot of your time – time that could be better spent on other tasks that grow your business.
When your team spend hours every week on accounting, it takes away from their ability to work on other projects.
3. Lack of real-time insights
Another problem with manual accounting is that it doesn’t give you real-time insights into your business finances.
If you’re relying on manual reports, you’re only getting a snapshot of your finances at a specific point in time.
This can make it difficult to spot trends or issues early on and make the necessary changes to keep your business on track.
This also limits your decision-making ability, as you don’t have access to the most up-to-date information.
4. Difficulty scaling
As your business grows, so does the amount of data you need to track and manage.
At a certain point, manual accounting becomes impractical and simply isn’t scalable.
As your team gets bigger and your transactions increase, it will become more and more challenging to keep up with the demand using manual methods.
At some point, you’ll need to automate your accounting processes to be able to keep up with the growth of your business.
5. High costs
Those who are still stuck with manual operations think they are keeping costs down by not moving onto a modern system. But the fact is manual accounting is actually more expensive than you think.
When you factor in the cost of hardware and training as well as the opportunity cost of having employees spend their time on accounting instead of other tasks, it quickly becomes clear that manual accounting is not a cost-effective solution.
Also, when errors and inefficiencies arise, they can end up costing your business even more money in the long run.
6. Difficult to track changes
Another issue with manual accounting is that it’s difficult to track changes.
If you need to go back and look at a previous transaction, it can be time-consuming to find the right document and figure out what was changed and when.
This is especially problematic if you need to track down the source of an error.
It can be very difficult to do this manually, but with automated accounting systems, all changes are tracked and logged, so you can easily see who made them and when.
7. Missed opportunities
When your accounting processes are manual, you may miss opportunities to take advantage of available tax deductions and other benefits.
Because your system isn’t automated, it’s easy to overlook potential deductions or fail to take advantage of early payment discounts.
This can end up costing your business a lot of money in the long run.
8. Inaccurate data
Another problem with manual accounting is that it can lead to inaccurate data.
If you’re manually entering data, there’s a greater chance of mistakes.
Also, if you’re relying on paper documents, they can be lost or damaged, which can lead to lost or corrupt data.
When your data is inaccurate, it can throw off your entire accounting system and make it difficult to make sound financial decisions.
9. Security risks
Manual accounting also comes with security risks.
If you’re keeping paper records, they can be easily lost or stolen. This is a serious concern if you’re handling sensitive information like credit card numbers or social security numbers.
Also, if your accounting software is not password-protected, it could be accessed by anyone who has access to your computer.
This could lead to a data breach, which could have devastating consequences for your business.
10. Limited reporting capabilities
One final issue with manual accounting is that it has limited reporting capabilities.
When you’re manually creating reports, you can only include the information that you have on hand.
This can make it difficult to get a complete picture of your business finances and make informed decisions about where to allocate your resources.
Automated accounting systems, on the other hand, give you access to a wealth of data and allow you to generate custom reports that can help you make better-informed decisions about your business.
If you’re still using manual methods, it’s time to make the switch to an automated solution. Not only will it save you time and money, but it will also give you real-time insights into your business finances – insights that can help you make better decisions and keep your business on track.
In today’s business world, manual accounting simply isn’t viable. It’s prone to errors, time-consuming, and difficult to scale. Not to mention, it can be costly for your business.
Automate your accounting processes and free up your team to work on other tasks that will help grow your business.
To avoid the headaches that come with manual accounting, get in touch with us today!