Over the past decade, there have been enormous leaps in the accounting technology available to business owners. Improvements to Xero and MYOB have provided greater access, visibility and control over day-to-day data.
This has led to a shift in the role of accountants from pure number crunchers with spreadsheets and calculators to hybrid advisors who assist with interpreting the information at your fingertips and preparing reports for compliance and analysis.
The intricacies of accounting software
The benefits of using accounting software are significant for your average SME. But given the simplicity to initially operate the system and code transactions, how much time have you invested to learn the intricacies?
Are you treating your payables and receivables correctly? Do you have loans or hire purchases and are they being tracked? Are you splitting out personal spending from business expenses? Are your payroll expenses or payments to IRD going to the correct code? Is your chart of accounts fit for purpose? And after all that, how accurate is the information that comes out when you run your monthly profit and loss or GST report? Do the reports line up with how you think the business has been performing?
If your records aren’t up to scratch
In today’s fast-paced environment, accountants are seeing an increase in clients who require analysis and advisory services with a short turnaround to assist with lending, shareholding, cash flow, profitability and growth.
In many cases, we are asked to provide real-time advice – taking the figures presented at face value. But if those reports are not a true reflection of the business, the resulting advice may not lead you where you want it to be or, worse, it could be detrimental.
Accountants commonly encounter situations where a client is using Xero and they are looking to draw down a mortgage for various reasons. To facilitate this, the bank requires several reports showing the income and equity positions of the company. Accountants are more than happy to assist, and it should be a simple task. But if ledgers haven’t been looked after properly, the reports won’t show an accurate picture of the company’s activity.
The same principle applies when clients need a short-term lending facility to assist with cash flow – for example, during the pandemic. Again, the lending provider wants reports as part of the application process, and ledger information needs to be up to standard to produce accurate reports.
The outcome could be costly
It can take a significant amount of time to tidy a ledger so that the reports are correct, which leads to a delay in approval and settlement as well as increased accounting costs – not to mention the stress, worry and anxiety that comes from these situations being drawn out. In the end, any savings from doing your own bookkeeping are now offset by the time needed for accountants to fix prior errors.
When we encounter these situations, we try to organise training in the relevant accounting system so that, at any time, information is up to standard for internal or external decision making. Sometimes, our offer is accepted and we see an improvement in the quality of the data. Other times, the training is declined and we find ourselves in an annual loop of spending significant time sorting the same easily avoidable issues.
When clients have a higher skill level around maintaining their accounting system, we can prepare useful and meaningful reports the next day and often have approval for a facility commencement shortly after. There is reduced stress, cost and difficulty at a crunch moment, all because the ledgers are ticking along cleanly week to week.
Think about this
Which of these situations more closely reflects your experience? You invested a significant amount of time to upskill yourself, your team and your business – how much time do you spend learning about the system you’re using to track your financial progress? Are there areas for improvement or efficiency? Tidier and more reliable data also opens avenues to accurately prepare forecasts and predict cash flow to assist with future business decisions.
Quality information is an essential cornerstone to set, track and achieve your business goals. Accountants are equipped to tackle the compliance work for you, but we can also offer training in multiple systems and empower you to embrace that DIY attitude. And once you’re set up on your business journey, we are happy to put down our spreadsheets and calculators to provide advice as you work towards your goals.
FOR MORE Contact your local Baker Tilly Staples Rodway advisor.