This article discusses the advantages of using a business management system that integrates the physical inventory with accounting general ledgers. Whether starting a small business or thinking about switching from a manual bookkeeping system, using an integrated management system can more than pay for itself by reducing errors, eliminating redundancies and increasing efficiency.
Integrated Sales Invoicing – Accounting and Inventory
An interface between accounting and the physical inventory starts with the sales invoice. As a computer generated sales invoice is created, all sales activities should automatically post to the general ledger (GL) accounts. Some examples of GL accounts related to sales activities may include:
- Sales
- Cost of goods sold
- Inventory
- Cash
- Accounts receivable
- Freight
- Sales tax
- Labor
There should also be diversity with the general ledger accounts for separate sales activities. For example, if a business sells to retail and wholesale customers, they may want to track the different types of sales categories with separate GL accounts. A business may also want to separate product categories with separate accounts.
Inventory Tracking Software
Besides automatically posting the GL accounts, an integrated accounting and inventory computerized management system should simultaneously post physical inventory quantities. As the sales invoice is created, the perpetual physical inventory should be updated instantly. Real time inventory updates are important for sales activities as well as inventory efficiency.
Benefits of Accounting and Inventory Interface Software
Depending on the type of business, there can be many benefits for integrating accounting and inventory on the same computerized management system. Below are some of the benefits of this important interface.
- Reduced Workload – Virtually eliminates the majority of paperwork of manual posting of accounts as well as posting of perpetual inventory.
- Reduces Errors – When sales invoices are automatically posted to the GL, most software won’t allow an out of balance (debits and credits) condition. Pricing of inventory should be automatic which reduces pricing errors as well as extension errors.
- Saving Paper – With an interface, invoices can be electronically filed, eliminating paper waste, which saves money as well as helping the environment.
- Real Time Updates – Posting to inventory as well as accounting can be updated immediately.
When looking to purchase software for a small business management system, it’s best to have a comprehensive checklist for the accounting and inventory needs of the business. Using a checklist will enable the entrepreneur to find the best system for their business and eliminate those that don’t meet their needs. It’s also important to have a system that is user friendly and easy to use. Accounting and inventory software that’s user friendly should be the first item on the checklist.
James Clausen - Clausen received a Bachelors Degree in Business Administration in Automotive Management and Marketing at Northwood University, graduating ...
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