What is a Manual System?

A manual system is a bookkeeping system where records are maintained by hand, without using a computer system. Instead, transactions are written in journals, from which the information is manually rolled up into a set of financial statements. These systems suffer from a high error rate, and are much slower than computerized systems. Manual systems are most commonly found in small enterprises that have few transactions, and which operate from a single location.

Disadvantages of a Manual System

There are several problems with a manual system. First, it relies on a high level of accountant accuracy in the entry of transactions, so an inexperienced accountant will likely enter a number of mistakes. It can be quite time-consuming to manually find and correct these errors. A second concern is that they require a large amount of documentation, which would not have been the case with a computerized system. This can be a major problem when a company’s operations are transaction-intensive, and require large numbers of supplier invoices, customer invoices, employee compensation payments, and so forth. The result can be a large amount of storage space, which can be expensive when a business is located in a high-rent district. A third concern is that it results in inefficient recordkeeping when a business expands into multiple locations, since all transactions must be sent to the central location for recordation into the manual system. In total, these concerns are significant, and should drive most company owners in the direction of using a computerized system.