Why Your Small Business Needs To Update Its Accounting System ASAP

As your business grows, you’ll probably find yourself running into problems tracking your transactions and gauging its overall status. While a simple Excel sheet or even pencil and paper can suffice in the beginning, eventually you will start running into problems staying on top of your books and finding the time to do them.

However, many businesses take a long time to upgrade their accounting system. In the Philippine setting, a lot of this has to do with general ignorance about the capabilities and downsides of different accounting systems. Even the term “accounting system” is, in itself, arguably obsolete and an inaccurate way to describe what may be more properly called an enterprise resource planning system.

Modern systems do more than just help you do your books. Current enterprise resource planning systems (ERP systems) are able to automate and simplify a wide range of functions that are beyond the scope of simple accounting software.

What does an ERP system do?

While older accounting systems are almost always restricted to basic accounting functions, newer ERP systems can also be used to automatically update inventories, trigger purchases when stocks of certain items run low, run a more accurate payroll system that automatically accounts for tardiness, overtime, and holiday pay. Some ERP systems are also able to perform project management functions and come with cloud functionality and storage.

Simply put, you can’t easily do all those tasks with Excel or a pencil and paper system. If you could, you will likely run into issues finding the time to keep them updated while you go on with the day-to-day minutiae of your business. This, in turn, can lead to inaccurate and obsolete data, and even mistakes in your payroll.

Why do some business owners delay implementation?

In the Philippine setting, a lot of it boils down to a misunderstanding of what a modern “accounting system” can actually do. However, while many small business owners acknowledge that they do need an updated ERP system, they may argue against it simply because they can’t find the perfect time to perform the update. They may not be able to justify the monetary and time expense right away, and they may not be sure what they want to achieve such a system. As a result, businesses may continually delay updating their system, which often means a more painful readjustment period, should they finally decide to make the needed updates.

When should I update?

Unfortunately, there are no easy answers about the perfect time to update. Each business owner will have to figure that out for themselves. But chances are that you will want to do, as soon as there is a good expectation of continued growth or if there is a high volume of transactions. Delaying further will often cost you when it’s time for an audit, as human error is almost inevitable with the use of older systems.

Another major consideration is data security. Many current systems, such as SAP Business One, offer cloud functionality, which allows you security from on-site data losses – which is a particularly common issue in the Philippines, where the use of aging data storage media is normal and the power grid is still unreliable.

Fortunately, many enterprise resource planning systems offer free trials, and some are modular, allowing you to try out a system before you actually buy or commit to permanently implementing it for your business.