Aurelian Group - your digital business

Whose business is it anyway? - know your books!

07.01.19 05:00 PM By Matt Koopmans

Many entrepreneurs and small business owners outsource their accounting and bookkeeping needs, so they can focus on the growth of their business. And most bookkeepers do an excellent job of keeping the books away from the continuous descent into a state of total disorder - and accountants, in particular tax accountants, transform the books into a representation presentable to the tax authorities. They clean out the mistakes that cost you more money than you should be spending on tax (we are not talking tax-avoidance - just unwittingly overpaying your dues). With this post, I am making the case that entrepreneurs and small business owners in general are too reliant on the services of bookkeepers and accountants for the mundane tasks, and you are not getting the value out of these services that you should be getting.

Keeping your books in order is not as hard as you may think

It is not that hard

Keeping your books in order is not as hard as you might think. You need a basic knowledge of bookkeeping to understand most of the transaction flows, and once you get the debits, credits, assets and liabilities correctly, you'll find that there is a certain elegance in the simplicity. If it sounds like an alien language to you, then do yourself and your business a favour and take up a class in bookkeeping - either online, in person, or via a book.

It is not that time-consuming

When you are busy with the day to day activities of your business, you may think you don't have the time to keep track of your books. This may very well be true. I am not making the case that you can do without any assistance of a bookkeeper of an accountant. In fact - it is a great sign that you are busy with your customers, so you can afford to hire someone for your bookkeeping needs. However, we should stop and reflect on what exactly we are outsourcing. If you collate your receipts in a box (maybe accompanied by a spreadsheet) so your bookkeeper can appropriately account for your expenses, then you are not making good use of these services. Even if we don't account for the time you buy from your bookkeeper, you are still spending the time to collect and categorise the receipts, as your bookkeeper will need some background on what was spent for what purpose. I have reflected on this in my blog post "How much are your business expenses really costing you?". It comes down to the type of work you are outsourcing - if it is something that requires a specific expertise that you don't have in-house, or cannot be automated in any way. In the case described, one could argue that the task of recording receipts is not overly complicated once a system has been established. With the right expense management system, this can be highly automated, from scanning the receipts via a photo on the mobile to the actual posting.

Invoices are customer facing documents - don't burn your trust

It is not just a matter of smart outsourcing - where the money you pay is for expertise or on tasks that you simply cannot (yet) automate - it is also a matter of keeping in control of your business and the customers. For example - if you let your accountant do the invoicing - you outsource a key customer interaction. The invoice is the reflection of the agreement of funding for service or product with the customer. This agreement is made by you, and any differentiation between that and the invoice reflects negatively in the customer experience. For example- when  you agree on a specific price or payment term, and the invoice does not reflect that - it gives the impression of a disconnected system (because it is a disconnected system). So, your customer calls you - you explain that this will be sorted - but... no new invoice is sent, nor a credit note provided. Worse - your accountant sends a reminder to pay. Not your accountants fault - just doing the job you pay for. The question is: why is an accountant needed to invoice? It is a completion of a sale - the tendering of the transaction. The journal postings that happen in the background are a function of the system setup, and do not need manipulation of the general ledger to reflect sales tax, accounts receivable, or cost of goods sold entries. It is a matter of control - you either are in control of when you invoice, what the terms and conditions are, and how you negotiate dispute resolution.

Recommendations

  1. if you are not yet comfortable with the concept of accounting and bookkeeping, then do a course (LinkedIn learning has a great set of courses on this topic)
  2. be clear on what you wish your bookkeeper to do, and what your accountant should do
  3. set up your systems (with the help of a consultant) so that most tasks generate transactions in your ledger automatically according to posting rules
  4. give your bookkeeper/accountant access to your general ledger and journals to manage the corrective and exceptional transactions
The key is in point 3 - if you execute this well, it will save you a lot of time, and your business a considerable amount of money. The secret is to keep it simple - analyse your business, how many distinct sources of income do you have, and how do you account for it? Are there tax implications on the specific income sources (i.e. international versus domestic). Do the same for our outflows. It is highly recommended to get assistance on the setup of your system from a systems consultant, and then advice from your accountant on your account structure. DO NOT automatically take the accounting system your accountant recommends you - in the end, the only thing an accounting system does is generate balance transactions, and provide profit and loss reports. Ultimately, all accounting systems do the same thing, what is important is how the transactions from YOUR actions (such as invoices, logging expenses) flow into the accounting system. The more this is automated, the more in control you are, and the more money you will save.

Zoho Books and Zoho Expense or Zoho One
Zoho Books and Zoho Expense are ideal for the soloprenuer, the micro-business, or for businesses that just started. It contains a full-fledged accounting package to manage your bills and invoices, and it integrates with your bank for daily statements. Your accountant has a free login to the system - you can have your accountant do the invoicing, but typically you do this directly (either from your computer or from your phone).
If your business is larger, you have more moving components that can generate transactions, such as subscription systems, or project delivery, or inventory systems. With Zoho One, you take control over all these components, and have it flow neatly into your accounting package (Zoho Books and Expense are included in Zoho One, but you can choose to use your existing system should you like to do so). Read more here.
Whether you choose to start with Zoho Books, or go direct to Zoho One - your business suite will grow with your business. In case of  Books, any additional Zoho packages you choose have logical integration points already configured for it; you add software when you are ready, and your transactions flow from one system to the next. Read more here.

Matt Koopmans

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