What is an accounting system? Types and examples
Managing all the financial transactions that happened inside your company needs a superhero with an extraordinary brain, or we can travel to the future together in this blog and discover the incredible technology, accounting system. You’re now in the right place to know the perfect solution to all your financial issues, let’s have a small tour to learn more about the accounting system:
What is an accounting system?
The accounting system was invented for the PC in the 20th century. Before this time, people used to handle all the financial transactions manually. This system is here mainly to help you manage everything related to the money inside the company, whether it is income, invoices, expenses, or any other financial activities using specialized software services.
Managing the money inside the company is the main task you can care for, as it is the only way to decide you will succeed or fail, and the accounting system is here to help you in this task.
Purpose of the accounting system
The accounting system has many different purposes to use inside your company, but the primary reasons are to use it for managing your expenses, invoices, and funding:
Everything you pay cash to buy it like products or services considered as the company expenses. In the old days, the employees used to enter these expenses into Excel, for example, to balance and categorize it. But nowadays and after inventing the accounting system, it is much easier to enter the data faster, get an automatic balance, and categorization for all your expenses.
Each company needs official and professional invoices to build your brand image and gain your customers’ trust. The accounting system will allow you to create customized invoices and automatically keep track of paid invoices.
You have so many liabilities inside your company, part of these liabilities are taken to support the business, like bank loans or accounts payable. The accounting system will help you to track all these liabilities and update you once the payments get made or when the accounts get settled.
Types of accounting systems
We have two types of accounting systems that you can choose the most suitable one for your business. The system types are single entry system and Double Entry System. Each type has its advantages and purpose of use.
Let’s know more about the two types:
The single entry system
This type is mainly working for small businesses because of its simplicity. In small companies, they do not have so many complicated transactions that need a complex financial system. It is the reason why the single entry system is so perfect for them. It has some advantages like it is convenient and so simple that you do not have to waste money and time to train your employees on how to use it. It also does not require complex software as you can implement it on the excel program.
The Double Entry System
This type is where you put all the complicated details about your financial issues that made it more suitable for the larger businesses. The Double Entry System can provide big companies with complete records and professional financial statements that will help in planning resources for the future and decision making. This incredible system can easily detect errors and provide you with accurate results to be aware of the whole financial picture of your company.
When do you need an accounting system?
It is not easy to decide whether your business needs accounting software or not and to figure out which type will fit your company. You will have to know some points about your business abilities to help you figure out when you will need an accounting system:
The first case to use the accounting software is when you are not comfortable with the significant amount of receipts and records in front of you. This case may lead to a headache when you only think of entering it into Excel or any similar system. The accounting system will save you time and money to focus on your success and make some progress.
Secondly, you will need accounting software if it is so difficult for you to track your ins and outs of money. Once your business is grown enough, you will have many different financial transactions that need your focus, like paying for your employees, tracking your products, and much deadliness for your payments. If you do not have all these transactions written down in an organized way, like in the accounting software, it will be impossible to track your progress.
Once you find yourself spending so much time tracking your income cash, you will need an accounting system. This system will help you to track the future cash flows and to be aware of the late payments that will make the payment process more comfortable.
Features of the accounting system
You need to know all the features that the accounting system can provide to choose the suitable ones for your business. There are many features in the Double-entry system type that will ensure the accuracy of the financial results. Here are some of the main features of the accounting system:
The Accounts receivable
This feature will focus on the billing or the invoices of the customers as the accounting system will manage any payment you will receive. It will help you in:
The accounting software records everything about your invoices. It records when you will receive the money, the money is from whom, and when to expect the payment. You can then send the customers official and accurate invoices bayside on the recorded data.
The accounting system will provide you with automatic invoices that will remind your customers of their bills all the time that will never make your payments late.
Your customers can pay through the online invoices sent to them. They can pay by clicking on a button left on the electronic invoice. This process will help you to decrease the staff working on the checks and bank deposit and also provide you with a faster and more secure payment process.
To be able to pay your bills on time, you have to check the accounts payable features in the accounting system:
Organize the Purchases
This feature will handle all your purchases and organize all the expenses you have to pay. Having something to manage your bills is like a dream.
The Vendor credit
The system will help you to track all the credit vendors, whether it is returns or rewards. The credit vendors are critical as much as the cash so, using this system will help you keep your costs down.
You can also make all your payments automatically online, which is more secure and faster instead of the old ways, bank payments, or printing checks.
In the accounting system, you will have a database of the common tax forms like the 1099 and 1096. Some of the accounting systems can fill out all the necessary data electronically for you and provide it in a file with the IRS. With this feature, you will save a lot of time and never penalized for any late payments.
The system helps you to calculate and schedule the wedges needed to get pay. It also makes it easier to deposit the payments directly into the bank accounts. What is more interesting about the system is that it calculates the tax or any other deductions or reimbursements automatically.
We can not forget to tell you about the most critical feature of the accounting system that you can link your bank account with the system. This feature will provide you with tracking all your bank accounts even if you have more than one account, handling all your payments electronically, and make your checks process more comfortable it can print and process it for you to save your time.
The accounting system benefits
The benefits you will get from the accounting system are countless, but we can tell you about the most attractive ones you need to know:
- It helps make all your tasks automated
- It can Enter the data faster than the manual way.
- It can decrease the possible errors as you are dealing with numbers so, you have to avoid any mistakes.
- It also increases the collaboration with the different departments inside your company because it keeps all the financial information in one place.
- It helps you avoid any troubles with the IRS because it makes you commit to the local laws and federal tax laws.
- Finally, The accounting system saves you more money and time.
How can the accounting software help businesses in Kuwait?
To be able to compete in the Kuwait market, you have to be aware and reach accurate results so that you stick to your place on the field. In the market, it is so easy to continue once you have an accounting software of your own to manage all the financial issues the company might face. The accounting software will help you avoid common errors as the market does not have space for a single mistake. You have to be alert all the time with the assistance of the accounting software.
In the Kuwait market, you have to respect the international financial reporting standards. But it is not mandatory to use a specific accounting system, you can choose the one that suits you.
Alshamel Pro accounting software in Kuwait (Sismatix Product)
You don’t have to get confused between all this information. We will guide you for the best accounting software in Kuwait that will lead your company to a different level in the market. Alshamel Pro accounting software in Kuwait is a fully integrated business application suite that will help you manage all your finances, including Inventory Management, Financial resources, production, Payroll, and Human resources.
The accounting software in Kuwait will help your business with more than 300 implementations and provide you with:
- Making clear decisions based on real-time data.
- Detecting errors that may occur in its time.
- Reducing costs and producing better products at the same time.
- Tracking every single detail that happens in your business.
- Stick to all the promises you gave to your customers.
The accounting system and all its benefits and features are the best solution for any financial issue you might face during your company fight in the market. Having accurate results in the financial department will help you grow your business and guarantee success. Finally, you can count on the Alshamel Pro accounting system and make sure that your company finances are in the right hands.