Computerized Accounting Information Systems and Small Businesses

Computerized AIS and Small Businesses
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Computerized AIS and Small Businesses
“Accounting Information Technology in Small Businesses: An Inquiry” by David Fordham and Carol Hamilton depicts that many small businesses use accounting practices that cannot be categorized as integrated computerized accounting information systems (AIS). Although the authors found no specific definition for a small business, they chose the criteria of firms with fifty employees and below. They preferred this definition since multiple studies used it, the Center for Entrepreneurship, Small Business Development Center, and the Institute for Entrepreneurship. Fordham and Hamilton found out that the dominant accounting system used by numerous small businesses was Intuit’s Quickbooks. The majority of small businesses used a word-processing template, pencil-and-paper processes, spreadsheets, and Excel, which do not qualify to be integrated software. Those using integrated systems had specific software packages to perform operations, not a general-purpose AIS, such as Quickbooks. The paper evaluates the findings from Fordham and Hamilton’s article and suggests more reasons why small firm owners are not using AIS in their businesses.
In-person interviews were used for 1,852 small businesses instead of surveys, which effectively gathers first-hand data from the participants. In particular, 107 small firms were excluded since they were franchise operations, used outside bookkeeping or accountant, or were outlets of bigger companies (Fordham & Hamilton, 2019). In 1,625 small businesses, owners were available and willing to answer various questions about their firms' accounting practices. Besides, 53 had family-member workers, the largest firms had 45 employees, and owners operated 174 without assistance from additional workers. The study had a positive response rate of about 93% (Fordham & Hamilton, 2019). For sure, the number of small companies with owners present was high, which facilitated a proper understanding of how such firms manage their accounting activities. The small businesses dealt with include dental practices, restaurants, gift shops, dry cleaners, tanning salons, and automotive mechanics. Others were gasoline pump repair shops, railroad signal repair, communication-tower erector, weekly newspaper vendor, a sign painter, and professional exhibition displays. Above one-third of small businesses, 578 of 1,625, did not use computer applications in bookkeeping and financial accounting (Fordham & Hamilton, 2019). In reality, not many small businesses use AIS since even owners do not understand how to use such systems in their accounting practices. Many small firms used handwritten check registers, checkbooks, sales tickets, manual purchasing records, spindles, and card inventory control systems.
Fordham and Hamilton’s findings show that 15 companies used pegboard billing systems. Approximately 88% of the small businesses interviewed used some type of technology for recordkeeping purposes. The common tools used were calculators, adding machines, vendor-provided credit-card readers, and simplistic cash registers (Fordham & Hamilton, 2019). A few used purchase and invoice order printing and others banking applications through the web browser. Notably, 578 small firms did not use any computerized tool for their accounting practices. About 300 of the 578 businesses, owners, and employees did not understand the double-entry accounting principles. Indeed, 391 firms used a computer tool, such as Excel, Google Spreadsheet, WikiCalc, TrackVia, and OpenOffice (Fordham & Hamilton, 2019). Many small businesses using computerized applications had industry-specific software instead of general-purpose accounting packages. Besides, 508 small companies used accounting software packages that were designed for use in a specific line of business or industry. In that light, it can be deduced that many small businesses did not understand the difference between industry-specific and general-purpose accounting software. That is why owners implemented the software they thought was appropriate for the business without considering how to perform accounting practices. About 44 firms, less than 3%, used renowned general-purpose accounting software, such as Peachtree, Quickbooks, MYOB, Microsoft Office Accounting, Sage, Simply Accounting, and DacEasy. About 33 small companies used Quickbooks, and only 31 of them used the software as an integrated AIS (Fordham & Hamilton, 2019). Despite few companies using integrated general-purpose AIS, Quickbooks was found to be the prevalent commercial accounting package.
Many small businesses did not have the criteria for selecting an accounting software package to use. For the 44 firms that used general-purpose AIS packages, 16 admitted that their system choi...