Budgeting and accounting software system for the management of spending, payment processing, budgeting and reporting.
Computerized accounting is a software-based budgeting and accounting system for the management of spending, payment processing, budgeting and reporting. It computerizes and automates key aspects of budgeting and accounting and combines them into a unified database and user interface.1,2,3 It also allows the production of a variety of reports for budgeting, funding, treasury, cash flow, accounting, audit, and day-to-day management concerns.
PURPOSE & LINK TO INTEGRITY
The purpose of computerized accounting systems is to have a clear, transparent and reliable system to keep track of financial transactions. Computerized accounting systems can strengthen the financial and managerial capacity of an organization by enhancing the management of cash, debt and liabilities, using historical information to provide improved budget modelling processes, reducing costs for financial transactions, and gaining effective control over finances and budget execution.2,3,4,5
Computerized accounting systems enhance the comprehensiveness, transparency and accountability and thus the confidence and credibility of finances. Such systems also deter corruption and fraud by increasing the risks of detection. A number of features (for example automated identification of exceptions to normal operations, patterns of suspicious activities, automated cross-referencing of personal identification numbers for fraud, cross-reference of asset inventories with equipment purchase, automated cash disbursement rules, identification of ghost workers, etc.) help detect excessive payments, fraud and theft.3,5,6
- Does your organization have basic accounting procedures in place? (Also check tool Accounting & finance manual)
- Is the necessary hardware available and is staff capable of working with a computerized system?
Computerized accounting systems should:
- Give an overview of different types of annual revenues (e.g. revenue for the provision of particular goods and/or services)
- Provide insight on different types of expenses (e.g. materials, rent, staff)
- Connect billing and accounting systems: billing and collections should be integrated into the accounting system6
The installation and operation of computerized accounting systems has proven to be challenging in practice, particularly for SMEs. Successful implementation can be attained by:5
- purchasing appropriate software,
- ensuring ICT readiness among the responsible staff members,
- sound project design and management,
- a phased approach to implementation,
- adequately allocated financial and human resources
Practical questions to clarify are:
- Is the necessary hardware (e.g. computers, internet connection etc.) available?
- What are the costs of implementing such a system (e.g. training, programmes, support)?
- How to make sure that the staff is capable and confident in using a computerized accounting system?
- How to ensure consistency and comparability with the existing accounting system?
- Can billing and collection be integrated in the financial accounting system?
It is worthwhile comparing different options to find a solution that is adapted to the specific needs and size of the organization.
KEY GUIDING DOCUMENTS
USAID, no year, Introducing Integrated Financial Management Information Systems. Best Practices in Fiscal Reform and Economic Governance, United States Agency for International Development (USAID), USA, http://blog-pfm.imf.org/pfmblog/files/ifmis_bpn_web1.pdf, accessed 28.10.2015
U4, 2009, The Implementation of Integrated Financial Information Management Systems (IFMIS), U4 Expert Answer, U4 Anti-Corruption Resource Centre (U4)
Investopedia, no year, Financial Accounting, Investopedia, http://www.investopedia.com/terms/f/financialaccounting.asp, accessed 28.10.2015
USAID, 2008, Integrated financial management information systems. A practical guide, United States Agency for International Development (USAID), USA
Kenya Water Institute, 2012, Enhancing Water Integrity in the Provision of Quality Water and Sanitation Services in Kenya – Documentation Report, Kenya Water Institute
MANGO, 2012, Financial Management Essentials – A Handbook for NGOs, Management Accounting for Non-governmental Organisations (MANGO), UK
Independent Commission against Corruption, 2011, Investigation into Corrupt Conduct of Sidney Water employees and others, Independent Commission against Corruption
- BusinessDirectory, no year, Integrated financial system, BusinessDirectory, http://www.businessdictionary.com/definition/integrated-financial-system.html#ixzz2OjmYE9aA, accessed 28.10.2015
- Techopedia, no year, Integrated Financial Management System (IFMS), Techopedia, http://www.techopedia.com/definition/981/integrated-financial-management-system-ifms, accessed 28.10.2015
- USAID, no year, Introducing Integrated Financial Management Information Systems. Best Practices in Fiscal Reform and Economic Governance, http://blog-pfm.imf.org/pfmblog/files/ifmis_bpn_web1.pdf, accessed 28.10.2015
- DAI, no year, Water and Wastewater Sector Support (LWWSS), Development Alternatives Incorporated (DAI), http://dai.com/our-work/projects/lebanon%E2%80%94water-and-wastewater-sector-support-lwwss, accessed 28.10.2015
- U4 Anti-Corruption Resource Centre, 2009, The Implementation of Integrated Financial Information Management Systems (IFMIS), U4 Expert Answer
- Nordmann, D., 2012, Deepening Governance in Water and Sanitation Services, A discussion paper for Water Services Regulatory Board (WASREB)