Disadvantages of Computerized Accounting System

1. Cost: Although accounting software is designed to simplify bookkeeping and reduce the cost of accounting services, it can also be costly to set up and maintain. Many businesses decide to use computerized accounting systems once they have reached a certain level of growth.

2. Lack of Expertise: Many business owners like to keep their accounting in-house. This means that they may not want to rely on an outside service to handle their bookkeeping. In this case, they may choose to use manual systems until they have the resources to implement computerized accounting tools.

3. Heavy Installation and Training Costs:  The cost of Accounting software depends on its use. Some software goes at very high prices that are unaffordable to the business. Besides acquisition costs, installation and training costs can also be so high and beyond the company’s reach.

4. Disruption of Work: As newer versions of both the hardware and the software are introduced in the market, there is a need for businesses to update them regularly. Employees must be retrained for efficient use of such new tools. Re-installation and retraining result in a disruption of work. 

5. Loss of Employment Security: The adoption of computerized accounting software means a lot of work is done by fewer employees. Such a move at times leads to lay-offs. Where lay-offs have not been done, employees live in fear of anticipated job loss.

6. Compromised Accuracy: The accuracy of financial records is as good as the data fed to the accounting software, thus the saying,’garbage-in, garbage-out.’ If the accuracy of the data entered is compromised, the software is bound to produce faulty or misleading accounting information.

7. Potential Fraud: Since most of the financial/accounting data is stored in the cloud, professional hackers may gain access to a company’s records. Such actions may expose the assets of a business to greater risks.

8. Technical Failures:The accounting software may be rendered useless, when the premises where a business is housing are affected by technical glitches, such as regular power outages and computer virus attacks.

A computerized accounting system is a software application that automates financial records and reporting processes to make them faster, more accurate, and easier to manage. A company’s accounting system is the core of its financial management, as it processes all transactions within the organization. It reduces the manual entry of data, eliminates redundant operations, and reduces accounting error risk with built-in controls. An accounting system is a set of procedures and record-keeping systems for managing the financial and operational activities of an organization. Basically, it’s a method for tracking and managing the business’s finances.