How do you know if you have a great bookkeeper or just an average one?
- Great bookkeepers take the time to do things right the first time
Great bookkeepers hurry slowly. There are many shortcuts that can be taken to speed up the bookkeeping, but they often come at a cost. There is usually more than one way of entering a transaction into accounting software, and each method has different costs and benefits. A great bookkeeper knows which short-cuts are genuine time-savers and which ones could potentially cause issues down the track.
- Great bookkeepers understand your business
A great bookkeeper will do more than just reconcile your bank accounts. They will take the time to understand your business, why you do what you do, and they will try and establish better of ways of doing what you’re currently doing as well as help you understand the things that you’re not doing and perhaps should be doing.
- Great bookkeepers ask questions
You know what they say about assumptions. Correctly allocating your transactions means that your bookkeeper is going to need to ask you questions on a regular basis in order to understand your transactions. Sometimes this may seem painful. But it’s important to get this right as errors can have compliance and tax implications that your accountant may not notice but that an audit would discover.
- Great bookkeepers know what they don’t know
A great bookkeeper won’t enter transactions if they don’t know whether what they’re doing is right. They would rather acknowledge that they don’t know something than enter a transaction that they know may cause grief later. They will stop, look up resources, speak to you, their peers, their professional association and perhaps even your accountant. Their professionalism demands it.
- Great bookkeepers do their homework and stay up to date
The amount of legislation that a great bookkeeper needs to know is substantial. That legislation also changes constantly. That knowledge assists you to become and remain compliant so that you can have peace of mind that those important aspects are being taken care of. In addition, technology is having an enormous impact on the way that small businesses go about performing their bookkeeping. A great bookkeeper embraces the changes in technology and introduces the improvements to your business to make your processes smarter, more efficient and therefore more cost effective.
How we used to do bookkeeping, and how we do it now
Bookkeeping 1.0 – the old way
The traditional method of bookkeeping involves having your bookkeeper attend your office, sitting down in front of a computer, and processing paper documents into desktop accounting software. Data needs to be typed in manually one field at a time, and bank reconciliations typically happen once the bookkeeper has received a paper statement from the bank or downloaded a transaction listing from your online banking platform. Paperwork needs to be filed and stored for the requisite 5-7 years and documents can and do go missing if they are removed and not returned. It requires a large amount of human labour to perform these tasks. Your bookkeeper typically does this at set intervals, usually weekly, monthly or quarterly, and reports such as a Profit & Loss and Balance Sheet are usually only available after these processing sessions.
Desktop software requires that each computer is manually upgraded when new software is released. Superannuation rates and tax tables need to be updated manually at the end of each financial year, and this needs to be repeated for each computer that uses the software, as once the data file is upgraded to the new version, it cannot be opened by a computer using an older version of the software.
It is a little known fact that approximately 25% of the average annual accounting bill of businesses is related to the costs that the external accountant incurs in getting the data out of your backed-up desktop accounting data file and into a format that they can work with. Costs include, but are not limited to, opening files in the correct version of the software, having Administrator passwords for unrestricted access and correct versions of the data file, (and issues when entries are made in that particular period after the data file has been sent to the accountant).
Bookkeeping 2.0 – how we do it now
The contemporary method of bookkeeping involves having your bookkeeper work remotely using supplier bill processing software that uses optical character recognition to scan PDF documents and extract the supplier name, invoice number, invoice date, amount, GST and currency. Instead of the bookkeeper needing to manually enter all of this information, they merely need to do a quick check to ensure that the software has extracted the correct information, after which the data as well as a copy of the source document, are pushed into your cloud accounting software. This means that supplier bills are stored in the software and no paper filing is required. If a copy is needed, it can be downloaded and printed and the original remains.
Less labour is required and this can be done on a daily basis for even 15 minutes at a time. Your data file ends up being much more up to date because your bookkeeper can log in and perform work when needed. This means that reports such as your Profit & Loss and Balance Sheets can be run much more frequently, giving the business owner greater and more frequent insights into their business performance.
Bank reconciliation can happen on a daily basis as bank feeds automatically import yesterday’s transactions every morning. This saves having to log into Internet banking to find out which customers paid you the day before.
Cloud software gives you the flexibility to use your accounting software on any device with an internet browser. Invoices can be created on an iPad and issued to your client in real time. It is also no longer necessary to do software upgrades, as the software lives in the cloud, much like Google Mail or Hotmail. Superannuation rates and tax tables are updated automatically too.
In addition, Xero accounting software has enormous flexibility for add-ons. This means that data that is often duplicated in another software package or an Excel spreadsheet, can be connected to Xero, eliminating duplication and redundant data. For example
- a retail shop or restaurant may need to roster staff, have staff clock on and off securely and have automation in place for interpreting awards to correctly pay the right loadings and penalty rates to simplify payroll;
- a tradie might need a software package that sends automatic reminders at specified intervals chasing overdue invoices automatically;
- a construction company might need to be able to quote jobs, track their sales pipeline, create and track jobs, including expenses and labour costs to subsequently bill clients in an accurate and timely manner;
- A manufacturer might need to handle inventory, ingredients with batches and expiry dates and manage the sales of these products.
All of these solutions and more can be linked to Xero accounting software, driving enormous back-end efficiencies, not only in your bookkeeping, but also your administrative overheads.