Do you need a bookkeeper if you use cloud accounting software?
It depends on the business size and financial skills of the owner.
When Cassandra Scott, a contract bookkeeper, attended a panel discussion three weeks ago on the topic of accounting in the cloud, she heard something a little alarming.
“We were following a Twitter stream for those that couldn’t attend. One tweet came through which said, ‘If you’re using (cloud accounting program) Xero you don’t need to have a bookkeeper’. That piqued my interest,” says Scott, director of Laurus Bookkeeping, a Queensland business.
Cloud accounting programs have leapt ahead of PC-based equivalents by automating tasks such as entering and coding bank transactions. Most can receive feeds from banks which automatically update transactions every day. The programs can automatically categorise regular transactions within the chart of accounts.
A properly set-up cloud accounting program can automate a lot of data entry and make bank reconciliation a push-button affair. The technology jump has sparked a passionate debate within the financial community about the role of bookkeepers and when they are required – if at all.
Rhys Jones, an accountant with Queensland firm Rush and Associates, says half his small business clients don’t use a bookkeeper, and all of those businesses are using Xero, the most popular cloud accounting program.
Jones says sole traders using Xero don’t need a bookkeeper’s services once the program has been set up. “I think Xero is tailored very well for those sole trader-type businesses. It’s nice and easy for them and they seem quite comfortable doing it themselves.”
Once a business starts adding employees and needing help with payroll, deducting tax and calculating super, “they might need help from a bookkeeper there”, he adds. But even businesses with several employees might not use a bookkeeper if the business owner had a good grip of accounting principles, Jones says.
“I wouldn’t put a figure on it and say after five employees you need to get a bookkeeper. It all comes down to how capable they (business owners) are. On a lot of occasions they are capable of doing it themselves, and for example they just call us and if they have any problems we can help them out very quickly. On those occasions they don’t need a bookkeeper.”
Accurate data for the right price
Scott says some accountants have a “very naive” perspective when it comes to bookkeeping. “I don’t think there’s a great understanding in a lot of the accounting practices of the value that bookkeepers can add to a business or a progressive accounting firm.”
Bookkeepers give a guarantee that the financial information handed over to accountants is free from errors which lets accountants work on higher level activities than number checking, Scott says.
“If I could see a client and earn 10 grand why would I be doing a $25-an-hour job? That’s ridiculous.” While automated bank feeds reduces some data entry, there is still plenty of other information that needs to be entered into an accounting program accurately, such as contracts, invoices and expenses. A bookkeeper is trained to make sure that all these details are coded correctly and under the appropriate tax provisions.
An expense mistakenly filed as claimable could expose a business in an audit by taxation authorities; invoices for some jobs might be exempt from GST. A business takes on some risk by trusting its employees to make these decisions themselves. It also ties up staff in a job outside their expertise which could be more expensive than employing a bookkeeper.
Next page: Bookkeepers climb the skills tree
Rob Huggins recently moved his two-principal life insurance firm, New Zealand-based Blue Crest Insurance, to Xero. He says he is not interested in getting rid of his bookkeeper.
“My hourly rate is in excess of $200-300 an hour. If I could see a client and earn 10 grand why would I be doing a $25-an-hour job? That’s ridiculous.”
Blue Crest’s bookkeeper enters expenses, rent from subleases and commission statements, and works out which insurance policies sold attract GST according to legislation. Training the support staff or a director to do the same job wouldn’t be cost or time effective, Huggins says.
“Using a bookkeeper and having Xero is the best of both worlds. I’ve got instant data and someone who knows how to do it and is efficient.”
One point agreed by accountants and bookkeepers is that cloud accounting will change the roles of both professions. Government regulation is also forcing bookkeepers to professionalise.
In Australia and New Zealand government agencies have been making it more difficult for people to work as bookkeepers by introducing exams and accreditation to weed out untrained bookkeepers producing poor quality records. Professional bookkeeper associations have sprung up in New Zealand and Australia.
Lisa Martin, director of New Zealand-based bookkeeping practice GoFi8ure, says the stereotype of a bookkeeper is changing.
Bookkeepers are not someone who “comes in and shakes a few pieces of paper around and produces a GST return but rather someone who performs the financial control functions in your business; debtors, creditors, general ledger coding, reporting, GST returns, payroll and keeping on top of all that stuff and reporting to the business owner.”
Martin says cloud accounting removes some of the arduous data entry and makes information more accessible but can’t carry out the functions required to push money through a business.
“Just because you can raise invoices quickly and easily in a cloud software system and then email them out doesn’t mean that somebody at the other end is going to pay. You still need someone to chase debtors for you,” Martin says.
The on-site adviser
Cloud accounting is forcing accountants and bookkeepers to define their areas of expertise more carefully. In some cases the two occupations might swing into competition.
Scott says many accounting practices offer bookkeeping as an additional service, particularly where there’s been no easy way to collaborate between a client, an accountant and a bookkeeper. But cloud accounting programs can be accessed simultaneously by many users in different locations and consequently accountants are losing exclusive access to clients’ data, Scott says.
And with the automation of data entry, bookkeepers are turning to higher-level services and taking greater control of finance operations, including compliance. “Many of the functions that accountants undertook in terms of preparation of accounts is more than competently handled by a professional bookkeeper,” Scott says.
Sometimes accountants have shown outright hostility. “Some accountants embrace the work a bookkeeper does. I have other accountants who refuse almost point blank to have any dialogue with a bookkeeper on any issue associated with the client,” Scott says.
New school, or progressive, accountants are not in competition but form a tight partnership with bookkeepers, who have a much deeper understanding of their clients’ businesses because they work on site, Martin says. They have hands-on experience working with workflows, processing documentation and managing the business’ supply chain.
When a bookkeeper walks through the door he or she can answer all the questions the business owner has been sitting on that week, Martin says. “How much does Harold get paid? Who can we start chasing for money? What’s my residual GST debt? Xmas is coming, can we afford all the holiday pays?”
Accountants that have gone from school to university and straight into practice don’t have the same hands-on experience, Scott says. Accountants can give advice on tax or investment strategies but a smart bookkeeper can consult on workflow and business processes, she adds.
Martin agrees with the opportunities for professional bookkeepers. “Then people actually might think more about us as advisers in their business rather than just some backroom girlie who does the payroll and deals with money,” Martin says.