Historically, accounting was performed in columned ledger books and required hours to record relevant information. Each transaction was recorded in daily activity, then summarized into monthly results and quarterly, annual and comparative reports. One or more clerks were responsible for recording this data legibly by hand, many using ink pens that would lead to reworking a page with too many accidental ink blots. Those using pencils and erasers had some flexibility and could then "ink over" final results, making the ledger book permanent. Storing the data took lots of space and there was always risk of fire, flood or other disasters. Along with the large amounts of manual labor and repetitive, almost mindless work, there existed a risk potential for error in the data, both in recording the data accurately and in calculating the results. These errors carried forward, polluting the data and making it more difficult to understand the reality of business results for managers, owners and investors.
The advent of the mainframe computer and now the personal computer have greatly increased the ability for automation in gathering, maintaining, analyzing and reporting accounting data. Initial programs gathered data into one place. This removed some of the risk of bad information being recorded and allowed accountants to utilize better data, trading the day-to-day recording processes for additional duties each month, a prime example of technology reducing the necessary workforce.
Then the miracle that is the spreadsheet came into being. All of a sudden, accountants and managers were able to manipulate data in a multitude of ways to present information much more quickly than ever before. Mathematics and statistical analysis were now much easier to incorporate in reporting on financial results. Most companies now use some sort of spreadsheet technology within their accounting functions. Virtually all new personal computers come with a pre-installed spreadsheet program.
Accounting software has continued to improve. Every business function that generates numerical data can be and usually is connected with financial reporting. Fully integrated software packages such as SAP and Oracle, along with many others available in the marketplace, allow companies to set up how data will be input into the systems and how that data links into the accounting function for immediate and later use. There is a price tag for this level of performance, both in acquiring and implementing the software system, and in the number of users required to gather all of the data desired by the company. In today's business environment, all large companies have systems of this nature, and need them up and running to ensure they can remain competitive.
Other software packages offer more limited capabilities that are more easily maintained by a smaller user group. These would mainly be used by the small business owner who is starting and/or growing her company within her financial constraints, and can expand the user base as the business increases in size.
One concern is how user-friendly the system is, meaning how can users input and extract data in meaningful forms with the end result being a timely, efficient and cost-effective use of business resources to achieve the desired results.
All of this data has to be kept somewhere, and access to the data needs to be effectively restricted to those approved to access it. There are minimal security measures available in all computers now, but for multiple-user databases and reporting systems, there needs to be more. Accounting software packages have taken this into account and allow for security set-up based on business function, based on customer user setup or a combination of these and other factors, to be managed by a system administrator.
Data storage and backups are now easier to handle. Companies can utilize external permanent storage devices such as CDs, DVDs and zip discs. Electronic data storage options include external hard drives and tape drives that are easily separated from systems and controlled either on-site or off-site. For larger data concerns, there are even companies who store and secure data in one or more off-site locations to further dilute the risk of data loss.
A recent advent in technology is business intelligence (BI). Basically, this is an analysis tool that allows all sorts of business data to be summarized in virtually limitless formats depending on the user's requirements. Data is gathered daily or even up-to-the-minute and imported into the BI software database for use in analysis as needed. A common use is a dashboard, showing many key performance indicators (KPI's), that is updated within the BI system. Three common KPI's are sales volume, average revenues per unit sold and daily production results. Decision-makers in a company can use this information to guide them in how to move forward.
Accountants who once were frantically creating spreadsheets for management now can create a report within the BI system and make it available to whichever users they choose. Portability and access of data is also improved. Some BI systems allow for web-based reporting so users can log in to the system to access their reports from wherever they are. Security and integrity of data available this way has led to continued innovations as well.
Business intelligence has traditionally been used as just another way to report information, but not necessarily used to improve a business. Companies are now seeing the benefit in reviewing what data they need to gather and how best to gather that data. Once this is accomplished, they can then develop useful reporting that prompts or encourages use of the data in making better decisions for the company. It will be interesting to see what new advances will come next.