3 challenges for owner-managers who want to invoice and keep accounts

Following the last post about tips on how to find an accountant, I met several owner-managers who were on the look-out for an accountant. This search generates some interesting discussions that I’d like to share with you. It is a well-known scenario: an owner-manager starts invoicing in Word, then administrates everything in Excel and also does his or her VAT.  At a certain point, the whole keeping up with records becomes a bit much, so the owner-manager starts looking for a convenient tool that creates invoices and processes purchasing invoices. Which is when fun online tools like MoneyBird and MoneyMedic present themselves. These tools are free to start with, but it soon becomes clear that it’s necessary to transfer to a paid version. Owner-managers who are pretty much on top of their accounts will soon notice that besides invoicing, the actual accounting side of things – recording sales and purchasing invoices – takes up more and more time. A small amount of invoices is manageable, but after a while, successful owner-managers will see that good accounting requires special skills. There will always be special situations where it’s not clear how to do the accounts the right and correct way.

Those are THE moments to look for some extra help in the form of an accountant who does the odd job on a regular basis and checks if everything is done properly. That is mandatory after all, but you also don’t want any trouble with the tax authorities, and in case of credit applications the bank expects you to generate a clear report from your accounts. In their search for an accountant, owner-managers notice that they all use proper accounting packages like Exact, AccountView and Twinfield.

Challenge 1: How do I supply the accountant with my invoices in an efficient and tidy way?
The accountant will indicate that he or she can import various formats. But how can I be sure this happens the right way? What happens with the different VAT rates, foreign currencies, part payments, the rounding off of figures, etcetera, etcetera? It will become pretty clear pretty fast that this all seems a lot easier than it really is. Printing invoices on paper or in PDF formats and sending them off goes against common sense; surely it can be done in a different way and online. The fact remains, however, that sending invoices to an accountant with a note asking whether all the data have come across alright still involves a manual action.

Challenge 2: The accountant will be doing the accounting, but how do I keep track of outstanding accounts?
Let’s imagine the first hurdle is taken and that the accountant sets to work. Your next question might be how and where you can find the summary that shapes your report. Which system, for instance, will tell you which debtors haven’t paid yet? Is that your own spreadsheet, your online invoicing or the summary the accountant makes? It is, after all, the accountant who has correctly processed every invoice, including the bank statements that tell you who has paid what and what you have paid yourself. It should really be possible to log in online, from a distance, to get such a summary. And, you might ask, how does it work when I have multiple bank accounts, when my clients pay in various ways and start paying in instalments?

Challenge 3: Reports to third parties including VAT
The beauty of being an owner-manager is that you don’t have to file the annual accounts with the Chamber of Commerce. That saves a lot of time and money, especially when everything is processed manually. There are plenty of examples of private limited companies whose accounts are processed so efficiently, that they can have their annual reports ready within days. Declaring VAT is a form of reporting that can also be done by simply pushing a button instead of the still frequently used, old-fashioned way of copying amounts, sometimes manually, onto a VAT form. Still, owner-managers will at some point feel the need to get hold of the various summaries themselves to monitor how things are going. They will also notice how third parties will want to have access to their accounts. These might be the tax authorities, the Chamber of Commerce or a bank that needs some additional information in connection with an extra facility. Most of us haven’t noticed that for some time, the government has been working on a standardised way of exchanging financial reports between parties. They’ve been looking for a way that no longer involves fussing with Excel sheets and other information, but one that makes every exchange electronic, eliminating paper and snail mail. This standard is also called the SBR or XBRL. You don’t have to remember this term, but it does give you an indication whether a certain accountant efficiently processes accounts or not. Wouldn’t it be awful to spend hours on creating and sending reports for every little thing?

These three challenges were specifically picked out for owner-managers because they shine a different light on invoicing and accounting. It’s good to give these challenges some thought, because when owner-managers find themselves in these situations, they will want to make headway. My advice is twofold: when you’re looking for an accountant, read the 5 tips as described in one of the previous posts. Once you’ve found one, start working from one online environment together. This means you’ll either start accounting using an invoice application or you’ll start invoicing using your accounting application. Always keep efficiency in mind and remember: accounting and invoicing are matters of secondary importance. Running your business should always come first. Good luck!