Category Archives: Accounting

Storm Clouds Ahead

Many businesses look to minimise their accounting and bookkeeping costs as they will often see it as an expense with little benefit. Their push to save money will often end up costing them more in the medium to long term. You either do the job right or not at all.

Many start-up businesses come with the idea that they can save costs by maintaining a list of income and expenses in a spreadsheet and providing that to their bookkeeper or accountant for processing. This is certainly doable and can be cost effective initially, especially when the lists of income and expenses are relatively small.

But, as your business grows, you will get to the stage of having too much information to manage in a spreadsheet and inevitably mistakes will be made. A proper bookkeeping system is designed with checks in place to ensure that when (not if) a mistake is made, the mistake is easily identified and able to be corrected.

Hunting for errors without a proper bookkeeping system will add considerable time and cost to your costs no matter how good you think your spreadsheet is and no matter how diligent you think you are.

Xero and similar accounting systems go one step further by providing direct feeds of banking data into the accounting system, reducing the amount of manual processing and thus reducing the chance of errors.

If you are thinking short term only and not preparing for growth, the growth will be challenging.

Choosing your Accountant

I was recently asked by a prospective new client what I thought to be the most important consideration when looking for a new client. From a client’s perspective, all accountants seem very similar, offering similar services. Most even charge similar fees. But there is 1 key element before all else that will determine if your engagement with your accountant will be a success or not.

Simply, you must choose your accountant by whether you can communicate with them. This is not just a matter of your accountant speaking the same language, nor just your accountant speaking in terms simple enough for you to understand. You must choose your accountant based on you feeling comfortable to contact your accountant and asking for help.

You will need to discuss personal matters with your accountant. You will need to expose your finances to your accountant and allow them to comment and critique your financial (and sometime non-financial) behaviour. Without you as the client being able to talk to your accountant, your accountant will never be able to offer you the full support you need and deserve.

Communication works both ways. You should want your accountant to be your partner in your success, someone that will give you honest feedback and be your supporter when appropriate. You also need to make your accountant feel comfortable that they can pass on news that you may not like (I have yet to meet anyone to get excited about paying their taxes). You need to learn to trust your accountant over time, but having some initial doubts is healthy.

After finding an accountant that you feel comfortable communicating with, it is also important that they are not just competent at completing your compliance work but also work with you to solve problems and challenges you may face. It is also important that your accountant has the right experience to be able to assist you. It is important that your accountant is willing to push themselves for you too. It is important that your accountant can understand your situation and circumstances, and suggest solutions to any challenges you face.

Finding an accountant is easy. Finding a good accountant is not so easy. Finding the right accountant for you can take several false starts but the price for settling for an accountant you can’t communicate with will be detrimental to you and your business.

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Single Ledger Cloud Accounting

I have been involved in Cloud Accounting since 2008 when I saw the benefits of a single accounting ledger in the cloud for my clients as a way to fundamentally change their business for the better, improving efficiency and reducing the time for compliance.

Historically, accountants would manually collect invoices, receipts, bank statements and other relevant documents to compile a set of accounts and allowing for the preparation of annual tax returns.

The introduction of the GST saw the introduction of more computerised accounting systems such as MYOB and other desktop based software but these systems were designed more to ease the extraction of specific reports than ease of data collection. Quite often, the benefits of a desktop based computerised system never justified the added hassle and costs of the system.

Many new and existing clients are still asking me about the benefits of cloud accounting with a single ledger, especially over their traditional desktop based accounting software.

Cloud accounting and the single ledger provide significant benefits in terms of automated data collection and entry, and the added convenience of an accounting ledger able to be simultaneously shared and accessed between business owners, bookkeepers and accountants. There is no longer the need for an accountant to send adjusting journals to the bookkeeper or business owner. There is no longer the need to struggle with swapping data files, and no waiting while someone else does their work.

While the automation helps reduce the compliance time and costs, the biggest benefit to business owners is from the live access available to accountants and the ability for real-time advice on financial matters. For too long business owners and accountants have accepted not knowing the financial status of their business for 6 to 12 months after each year. Accountants can now advise on matters as they occur and be a true partner for success.

This is co-operative accounting as it should be.

Why Xero?

I am often asked why I recommend Xero over similar competing hosted accounting systems and the simple answer is in the Xero community. From the start, Xero understood that the most important aspect of any system is in the openness of the system. Xero have created a system that encourages cooperation between other specialised cloud-based systems as noted in their extensive add-on list.

As the Xero user base has grown, I have also noticed a significant increase in the number of good bookkeepers gaining experience in Xero. These bookkeepers who already have extensive experience with desktop based accounting software are also seeing the benefits of the single ledger in the cloud.

It is this fast growing network of Xero partners that makes easy the choice of Xero as the cloud based accounting system. It is easy for a business to extract its accounting data and move to another system. It is now easy to find another bookkeeper or even a new accountant.

While Xero is not the only cloud based accounting system the DFK Richard Hill team and I work with, it is our preferred.