integrated accounting system

What is an integrated accounting system?

An integrated accounting system is a type of software that combines major financial accounting functions into one application. Replacing several discrete systems or programs eliminates the need for separate books or records for ordering, costing and other management accounting purposes. Integrating these features helps standardize procedures for recording transactions and disseminating financial information and interconnects the reporting activities of companies' different functional areas such as point of sale terminals, offices and stock facilities.

Integrated accounting systems furnish information regarding the cost of each product, job or operation as well as comprehensive information about the profit or loss of an entire organization. These systems help management achieve and maintain control over operations by enabling companies to determine marginal costs, variances and abnormal losses or gains. Additionally, integrated accounting systems can be used to estimate, report and monitor a company's job costs as well as track and convert employee time into payroll. These systems can also handle additional processes such as inventory purchases, assembly and sales and sending information like statements and invoices to customers or vendors.

Core features of integrated accounting systems

Most integrated accounting systems offer core and non-core feature modules, all of which have the same user experience and are seamlessly interconnected. Core modules include the following:

  • accounts receivable and accounts payable ledgers.
  • Bank reconciliation.
  • General ledgers.
  • Purchase orders.
  • Stock inventory.
  • Billing and bookkeeping.

Non-core modules are optional; examples include electronic payment processing, debt collection, payroll and time sheet management, departmental accounting and support for multicurrency or value-added taxation. Some systems can also be connected with enterprise resource planning (ERP), inventory management and customer relationship management (CRM) systems.

Benefits of integrated accounting systems

A key benefit of an integrated accounting system is that information is entered once and shared with other modules, including the general ledger. One information database is used and accessed by all applications. Not having to re-enter data from one system to another reduces the likelihood of human error and eliminates the need to reconcile various ledgers and functions, which update automatically and in real time.

This means the financials are always up to date and that sophisticated accounting operations, such as job costing and commission calculation, are performed automatically just by processing the orders. Additionally, maintaining one set of accounts avoids duplication of efforts and provides decision-makers with accurate information in a timely manner.

How to choose an integrated accounting system

Today, companies of all sizes have adopted integrated accounting systems and there are many products and vendors from which to choose. In some cases, systems are purchased separately and integrated later. Large firms might develop customized systems internally, although such systems are the most expensive and are designed to work with in-house customer service and support.

Integrated accounting systems can also be designed for specific industries or regulatory environments. When choosing an integrated accounting system, companies should define a clear idea of what objectives it needs to accomplish. A few considerations could include what types of financial reports need to be generated, what are long term financial goals, what additional features are required and how many users need access to the system.

This was last updated in June 2023

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