For a long time I have felt that the accounting industry is ridiculous. We, as accountants, ask business owners to maintain their own accounting records. This is something they are not trained to do, generally don’t have any inclination for and indeed adds no value to their business. Then the accountant comes along some time after the year end, takes the accounts away and produces the statutory accounts thus making it possible to calculate the profits and tax liability.
Problems with old style accountancy
Probably the biggest problem with the old way of accounting practice is that business owners have no idea how the business is doing on a monthly or year to date basis. Neither does the accountant for that matter, thus making it very difficult to offer useful advice when there are no numbers to rely on.
There are other problems such as business owners having the cost of employing a book-keeper or training a member of staff or spouse to keep the accounting records. This in turn creates other issues when key tasks such as regular bank reconciliation, or upkeep of sales and purchase ledgers is done incorrectly and the business owner has to pay to fix these problems.
It has become very difficult to remunerate directors’ tax efficiently using dividend planning without properly prepared accounts. This is because the Companies Act stipulates that for a dividend to be legal it must be referenced to a properly prepared set of accounts. Hence interim accounts, with their associated costs, must be prepared in order to use this form of tax planning.
How things have changed
The banks have been offering online banking for quite some time. Anyone can log in and see their bank statements in real time. Gone are the days when we had to wait a week or a month to see what transactions had passed through our bank account. However, it has taken the accounting software industry quite a while to catch up but finally they have. Now programmes like Xero Online Accounts and others allow online bank feeds to pass bank data directly into the accounting software. This has revolutionised accounting by providing access to real time information for accountants and business owners alike.
Real time information
This simple facility now allows accountants like us to take client data directly from the bank and from that take care of all the client's book-keeping. Because the book-keeping is always up to date and correctly processed by us we can provide monthly accounts only days after the month end.
There is only one set of accounting records and these records are accessible by all with transactions fed in directly from the bank, financial data is always up to date with no duplicates and ease of access for viewing or working on. With Xero the records are cloud based and so backed up automatically meaning that data is also very safe.
Costs are reduced as transactions do not need to be keyed by hand and reconciled to paper bank statements.
Clients can cost effectively outsource their accounting compliance and management reporting and tax planning without ever having to worry about learning about accounts or hiring a book-keeper.
For business owners in need of up to date management information and reduced administration overheads there is now a solution available, and the best news is, it’s a very cost effective one.