A Bookkeeping Revolution

The world of accounting and bookkeeping is changing. It was a decade ago that I decided to upgrade our small business from spreadsheets and Word documents to a proper accounting system.

bookkeeping revolution

Thankfully, cloud accounting had just become a thing, and companies like FreeAgent and Xero were coming of age. Ten years ago it was perfectly normal for small businesses to hand over a shoebox full of receipts, invoices and bills to their accountant at the end of the year. Our faithful accountant would take them away, then come back with a report that we never looked at. It always felt slightly wrong to me. So much work went into producing something that was essentially just for compliance so we could pay our taxes.

Surely there was more value to be garnered from this great data source?

Being a process person, I was frustrated by the inefficiencies of our financial reporting. But the reward for changing to a better process was never clear. We’d still get historical data that we probably wouldn’t look at. In the early days of running a business, cash, in my opinion, is the only financial metric that really matters.

A few weeks ago, I was talking with a successful small business based in Glasgow that works with an established accountancy firm in Scotland. They told me that at the end of the month they send over a spreadsheet to their accountants, who enter everything into their cloud accounting system. Meanwhile, they maintain a spreadsheet to figure out who to pay, and who to chase for payment. A lot of work is required to maintain this spreadsheet, and consequently, there are two sources of truth, the client spreadsheet, and the accounting software.

Ten years in and cloud accounting software is now mainstream. Even Sage, who dragged their heels for so long, have relaunched their “Sage Business Cloud”. Cloud accounting has become table stakes.

Businesses are now looking for integrated solutions and real-time reporting. They’re looking for accountants and bookkeepers who really understand technology and how to deploy it effectively. They need trusted advisors to educate their clients on what an efficient system should look like. They need to introduce bookkeeping practices, and bookkeepers, that can make their clients’ financial processes run simply and efficiently, with one source of truth and complete visibility on cash flow.

Welcome to the future

A well run business needs good data, and financial data is a huge part of that. Good data needs to be two things: accurate and timely.

For too long financial data has been one, but not the other. It has been accurate, but not timely. The key way for this to change is to start with bookkeeping.

It used to be OK to reconcile the bank transactions every month or even every quarter, but now it’s just not enough. Weekly, or even daily, reconciliation is the new normal.

What has changed?

Bookkeeping software has been a huge help in bringing about this change, and that’s been made possible by the advancement of text recognition software and the fact that everyone has a camera on their smartphone. Tools like Receipt Bank and AutoEntry have led the way to become a platform that all bookkeeping can be managed from. With more and more invoices being sent via email, it’s easier than ever to forward them on to the bookkeeping software of choice. This software then imports the data, down to line item detail, and sends it on to the accounting software of choice.

bookkeeping revolution

But life can be made even easier. With the addition of tools like HubDoc, which logs in to your suppliers’ website to grab your bills and automatically save you time.

Beyond that, the world of expense reporting is also changing. Expensify makes handling and submitting expense claims as easy as just taking a picture – no other data entry required! In the US they are even reimbursing claims automatically within 24 hours!

The next stage of this lies in tools like Pleo, Expend and Curve, which all give even more control to the budgeting and management of expenses. These tools issue employees dedicated cards, with software to track all the expenditure, budgets, and receipts.

What does this mean for bookkeepers?

It’s an incredible opportunity!

Tell your clients you’re moving on. Give them a choice to come with you.

Making Tax Digital (MTD) is a great time to do this.

Speak to your customers and ask them what they really want. Show them what is possible.  

Become an advisor, or work with someone who can help with this.

What does it mean for businesses?

Don’t stand for less. If your bookkeeper is holding you back, find one that wants to embrace all the technology required to generate the up-to-date reports you need.

Real-time financial reporting (especially around cash flow and cash management) is something you should have access to.

You’ll also have happier employees from an expense claim point of view. No one likes filling in arduous expense claims.

Start the budgeting process, and track budgets to actuals each month.

Use a reporting tool like Fathom or Spotlight if you need to take the insight further.

Summary

Solid bookkeeping is the cornerstone of your financial data. If you don’t have up-to-date data you can make decisions on, then you’re not taking advantage of all that the cloud accounting revolution brings.

Finding the right bookkeeper and accountant is crucial to help connect the dots and build the software solution you need to grow and manage your business.

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Further reading:

The Future of Accounting: Part 1

The Future of Accounting: Part 2

Time saving bookkeeping workflows and tools by HubDoc.

 

Sign up for a free 14-day trial of Float today and discover how you can move your cash flow forecasting into the future.

Colin Hewitt

CEO and Founder of Float, cash flow forecasting made easy.