Keeping your finances safe is one of the most important factors to consider when running a business. Tracking important transactions, whilst safeguarding company and client financial details is vitally important and companies can choose one of two ways to do it.
Historically paper records, or paper trails, were the way businesses kept track of every transaction, decision, and meeting. Recording and filing every single piece of information on paper and physically filing it away was the norm not so long ago.
Thanks to improved technology, business accounting apps and software simplify the whole process, meaning anyone from multi-nationals to lone entrepreneurs can record their data digitally, saving valuable time and money.
Which is best?
Both paper and digital trails offer advantages and disadvantages for companies of all shapes and sizes. Below we’ve taken a closer look at the pros and cons of paper versus digital.
The Advantages of a paper trail:
- Security: Important information is safe from hackers and potential cyber-attacks. You can’t hack a filing cabinet.
- Proof: Paper trails are a valuable tool in providing proof that all essential procedures and laws have been followed.
- Physical Evidence: You have a firm method of tracing conversations and processes from the very beginning. This is hard physical evidence that cannot be tampered with.
- History: Provides a detailed history of important company information that otherwise may have been lost.
The Disadvantages of paper trail:
- Security: All paper files must be disposed of in a safe and secure way to ensure important client details and financial information is not stolen. This is both time consuming and costly.
- Space: Storage could become an issue for your business – there are only so many files you can keep neatly tucked away before they start to overflow cabinets and incurring storage costs.
- Human Error: Reliant on the information being recorded correctly in the first place – chances for human error.
- Time wasting: Searching for physical files can be time consuming, resulting in information not flowing through the company quickly enough.
- Gatekeeper: Paper files are accessible only by the employee who knows the filing system and location.
- Back-Ups: In the event of an accident the files could be lost forever as there are no back-ups.
- The Environment: Many companies are aware of their carbon footprint and seek to reduce their impact on the environment by reducing paper usage. Paper trails are not environmentally friendly.
The advantages of a Digital Trail:
- Security: Digital accounting software provides peace of mind that all sensitive data is safe and protected. Password protection ensures the information is only available to authorized users, while digital documents can also be tracked.
- Back Up: Copies of files can be backed up and stored in the cloud to prevent loss of any data. In the event of unforeseen accidents, the company can continue to operate from anywhere.
- Faster Payments: Electronic invoices speed up the entire payment process and improve revenue flow. An emailed invoice with convenient payment options provided, means customers receive it immediately and are offered easier and quicker and more secure ways to pay.
- Space saving: By storing documents in the cloud, every single expense, email, receipt and more, is stored without taking up any physical room on site.
- Time saving: All records are easily accessible, anytime and anywhere so no time is lost sorting through files or looking for a lost bit of paper. Information is readily to hand and not locked away in a storage room.
- The Environment: Going paperless is great for the environment.
The disadvantages of a Digital Trail:
- Security: Company financial data kept online can be prone to cyber-attacks. It is important to use a reputable software that offers enhanced security features.
- Human Error: Any system is only as good as the people using it, so ensure you enter all information and don’t forget to store files.
- Cost: As with paper trails, digital incurs a cost, but the overall operational savings the business makes more than make up for it.
The simplicity with which businesses can manage their accounts in today’s digital world means there can only be one winner. Thanks to modern accounting software, anybody can maintain fast, accurate and secure financial records that are easily accessible, saving even the smallest business valuable time and money.