This week marks the five-day festival of Diwali, celebrated by Hindus, Jains, Buddhists, and Sikhs around the world. During Diwali, originally a harvest festival, lamps are lit to celebrate the triumph of good over evil.
And there is another side of this day that should not be ignored. One of the most important activities observed during the Diwali festivities is the special prayers that are performed by Hindu business owners and bookkeepers to honor their ledgers and accounting systems ahead of the new financial year.
These ledgers, also fondly known as bahi-khaate or chopdas, are thick paper registers which hold all the day-to-day financial activities of the business and are the key to preparing the yearly financial reports.
But this traditional way of financial management does come with its set of disadvantages. Not only is manually managing books on paper complex and error-prone, but it also limits the ability of a business to scale up and grow.
But before we talk about the manual way of accounting and its disadvantages, let’s first delve in deeper to completely understand how important accounting is to a business.
The Importance of Accounting
Accounting is one key aspect which business owners have been typically neglecting over the years. Just as a language is the backbone of communication, accounting is the backbone of the business.
Like how we use language to communicate with the people around us, accounting is the basic language used to communicate all the crucial information that owners, managers, and investors need, to effectively evaluate a company’s financial performance.
Unfortunately though, even in this competitive business landscape, there are business owners who underestimate the importance of accounting — the right way.
If you are one such business owner who still manages their accounts manually, now is the right time to take the first step into the future of accounting.
This Diwali, ditch the old school way of maintaining your books on bahi-khaate and step into the right way of accounting — online accounting.
Here we have listed 5 reasons why you should do away with bahi-khaate and welcome an online accounting solution for your business:
1. The Need for Speed & Accuracy
The main difference between manual and online accounting is the sheer speed at which accountants can record transactions and business owners can analyze their numbers.
Accounting software not only processes data and creates reports much faster than manual systems.
Traditional manual accounting is a complicated process requiring accountants to spend copious amounts of time mathematically checking numbers in the company’s accounting information.
Simple mistakes such as transposing numbers or entering information into the incorrect column could create significant errors. Computerized accounting systems allow accountants to process more information than before by creating accurate financial reports.
Because of the efficiency and ease of use online accounting brings on board, accountants can now potentially spend lesser time preparing account books and more time analyzing financial data for decision purposes.
2. Real-time reporting
With a manual paper-based system, it can take time to locate the information from each book and compile it into a report.
The data needs to be collated, aggregated and compiled to generate a particular report. Not to mention, if there is a single mistake in adding data from one book to other, the financial reports generated will be inaccurate and decisions made on those reports can put a business into financial dangers.
But with an online accounting system, information or reports for a particular period of time can be compiled quickly, as accounting software will automatically pull all relevant ledger entries for the periodic reports.
Online accounting software like Giddh can also provide instant reports on the financial health of your business such as profit/loss statements, balance sheets and inventory reports in real time which allows faster adjustments in your business plan.
3. Tax Compliance
Compliance is one of the crucial activities for any business, more so now, because of the introduction of GST.
Businesses ideally want to be compliant, but also want to spend the least possible time on it, because of its time-consuming nature and complexities involved. With the advent of GST, it is almost next to impossible in the current day to handle all of this in manual books.
The business owners who want to record everything on paper still have to rely on outsourcing services and have to shell out an unnecessary amount of money to stay compliant.
Whereas online accounting allows for invoicing level compliance, generating easy to understand error reports and ultimately filing the right amount of returns based on accurate financial data. All of this at a bare minimum cost!
4. Data Backup
A crucial difference between manual paper-based ledger system and online systems is the peace of mind online systems. All transactions, reports, and numbers pertaining to the business are backed up the moment they are fed into the system.
It is impossible to do this with paper records unless you make copies of all pages, which in itself is a long and inefficient process. And in case of an emergency mishap such as fire or theft, you, unfortunately, would have to say goodbye to all the files and registers you maintained over the years.
With online accounting, you would never need to worry and wonder whether your data is backed up and updated. The data is safe and secure on the cloud.
5. Data storage, security & management
In the traditional paper-based accounting, where accounts are maintained in the register, it requires a lot of effort to store the crucial business data — as it requires space. A simple storage box turns into a filing cabinet which then turns into a storage area where all the files have to be stored and maintained.
Not only is it extremely inconvenient, but it is also space and financially consuming.
Most importantly, the security of the data gets compromised, as the business owner needs to place their trust in a few individuals in their organization into handling all the books and cross their finger that nothing will go wrong.
But online accounting offers a robust bank-level security for storing business data. Every single digit of your financial data is encrypted so that you-and only-you can manage and make changes to your accounts.
In short, key business processes — invoice generation, bank reconciliation, receivables, financial reporting, and tax compliance — are taken care of much faster, with the help of online accounting.
But, the most important and overlooked advantage of this solution is that it allows the business owners, their accounting team, their sales department and the investors all be on the same page so that they can make decisions swiftly and accurately.
So this Diwali, start the new chapter of accounting, start the new chapter of your business, start the new chapter of success!