An integrated accounting system uses affordable and easy-to-use software. Even small businesses can purchase such a system, which includes many functions and features designed to be compatible with each other. An integrated system often includes accounts payable, receivable, fixed assets and an inventory management module -- all connected to each other and to the general ledger.
The main feature of an integrated accounting system is that information is entered once and is shared with other modules, including the general ledger. One single information database is used and accessed by all applications. This level of efficiency cannot be achieved by a system that is not integrated, where the same data may need to be entered repeatedly in different modules. For instance, if you use a non-integrated accounts payable module, you need to enter journal entries in the general ledger to recognize changes in cash, expenses and accounts payable, a huge burden to any accounting department.
Integrated systems can be designed for specific industries, such as manufacturing, where the cost accounting module is integrated with the general ledger and allows for easy transfer of information between the two programs. Sometimes programs are purchased separately, and they are integrated later. Large firms often develop customized systems in-house, which are more expensive but work very well with in-house customer service and support.
The main benefit of an integrated accounting system is the increase in efficiency. For instance, when a sale is made, inventory is decreased automatically along with the recognition of the sale in the general ledger. There is no need for manual intervention or a second step in this process -- all is done at the same time by the integrated system, a level of efficiency only available with this type of software.
When reviewing integrated accounting systems, look for long-term solutions for your business. For instance, if you plan on selling online or retail, be sure the system you select can accommodate these needs later with no major problems. Furthermore, consider the long-term costs of such a system, including new versions and staff training. If you purchase a system and don't get its new versions with new functionalities and updates, you may be missing opportunities for efficiencies in your business.