Topaccountants

Mobile accounting app or voice?

2012-05-02T08:31:53Z

I read with interest Dennis Howlett's piece this morning discussing the adoption of cloud accounting in the UK. What caught my eye in particular was his assertion that:

"the user experience of the future is going to be dominated by what can be delivered on smartphones and tablet devices"

Now, I can agree that "consumer" software vendors need to have a strong strategy for mobile devices. I am less convinced regarding accounting software - at least when we are considering anything other than the smallest micro-entities (e.g. one man band limited companies).

Of course, cloud accounting software vendors need to have mobile capability, because in certain situations, such as expenses management, there are clear advantages in being able to process transactions "on the go". However, I believe that only a small subset of the functionality of an accounting application needs to be available to mobile users.

The reason I made my distinction between very small businesses and larger ones above, is that, once we get past the one man band stage, the business will have other members of staff - typically helping with admin.

In my experience the owner of a small business will be much more likely to telephone the office and ask if a customer they are just about to visit has paid their last invoice, rather than fiddle around looking that information up on their mobile phone. Likewise, if they are just about to go into a meeting with the bank manager, they would call in and ask their bookkeeper what the current, reconciled bank balance is first.

In any but the very smallest businesses, there are other members of a team "back at the ranch" available to be called upon to answer accounting queries quickly and easily. The small business owners I have worked with over the past 20 years are skilled at getting the information they need from their people in this way.

So, yes, I think that some accounting functionality makes sense delivered via a smarthphone but I think the scope of such functionality should be quite limited.

Smartphones have a ubiquitous, really neat app called Voice - and we should recognise that in many cases it's the right tool for the job.

The tax gestapo

2012-04-22T12:08:39Z

The UK is skint. We have a huge national debt and a government trying to get the annual increases to our borrowing (the budget deficit) under control. Since the deficit is the difference between what the government spends and what it receives by way of taxation, and since we are (supposedly) "all in it together", tax is now a political football.

The tax regime in the UK is complicated. Too complicated. It has got this way because, historically, politicians have either not been interested in it or have been unable to understand it. So when we get a situation as now, when every politician wants to use tax as a platform for their own agenda, we have the recipe for confusion, dis-information and the scapegoating of individuals and companies.

The phrases "tax avoidance" and "tax evasion" are being thrown around by people who don't really know what they are talking about: or are being abused by those who should know better but have their own political dogma to serve.

The Government are thinking about introducing a "General Anti-Abuse Rule" or "GAAR", which could in essence mean that it would become illegal to plan one's affairs so as to reduce the burden of tax - even though one would still be following all of the tax rules.

If a GAAR was implemented, we would have the prospect of a board of directors sitting down to budget and plan for a coming financial year and asking themselves the question: "Right, is there anything we can change in the way we do things so that we can make sure we are paying as much tax of all kinds as possible?"

Yes, it is nonsense.

I'm with Lord Clyde on this. He said:

"No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer's pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue"

Ayrshire Pullman Motor Services v Inland Revenue [1929] 14 Tax Case 754

Those vociferous and accusatory voices of the growing UK "Tax Gestapo" should read the above words. Twice. Then shut up.

We are getting a new car, we don't want to own a car

2012-03-21T10:46:45Z

Is this really a good use of valuable resources?

Our existing car must be replaced. We don't want to own another car but, unfortunately, it's one of life's necessities. So we have to bite the bullet, again.

Cars are expensive to buy, expensive to insure and expensive to maintain. And then there's the fuel costs. I well remember telling my teenage sons, after they passed their driving test, that owning a car feels like burning £20 notes all day long.

I fully appreciate that many people could not earn a living without use of a car. For the vast majority of us though that's not the case. This is a typical day's agenda for our vehicle:

08:30 - 09:00 Commute to work
09:00 - 17:00 Languish in work car park
17:00 - 17:45 Commute home (includes shopping on way)
17:00 - 08:30 Languish on driveway overnight

Of course, the car is more employed over the weekend, and some week nights we do actually leave the house, but I would say the above timetable is the most common overall.

What a waste. A waste of money and valuable resources. So much investment in a technological marvel that only gets used maybe 2 hours in each 24. Not really "sweating the assets" are we?

Services are springing up to address the need for occasional car use but, whilst these are the first signs of a new approach, they are only really practical for those of us living in the city. And they don't solve the commute need problem.

When someone cracks the way to match the millions of cars sitting idle most of the day and all night with people who need to use them we will have a much more sensible car use/ownership model. One that saves everyone money and helps save the planet.

Faxing - remember doing that?

2012-03-20T14:50:50Z

Following on from my post about my decline in printer use, I am struck today by another piece of hardware that seems to be going the way of the dinosaurs - the fax machine.

Although the principles involved were being established in the 1860s, I remember the fax machine being introduced into the accountancy firm I worked at in the 1980s. At the time it seemed a wonderous device and, although it only became useful once the "network effect" kicked-in (after machines were widely adopted), quickly became the default way of sending documents urgently.

We only had one fax machine in the office because they were expensive at the time. Often there would be a small queue of people waiting to use it and when it was my turn invariably it decided to have a "paper jam" or the paper roll ran out receiving. Still it was a useful bit of kit.

Writing this in 2012 I honestly cannot remember the last time I received a fax, or was asked to send one. Although PC-fax and then fax to Email services quickly came along to replace the standalone fax machine, it seems that the very idea of faxing seems to have simply died away.

Of course the Internet and especially email, with its ability to transmit digital copies of original documents rather than pictures of the documents, was the nemesis of the fax. Even the signing of documents can now be handled by software instead.

What was a marvellous new service has become a distant memory in the space of just 30 years. As the pace of technology change has increased substantially since the 1980s, today's losers in the race will be forgotten even quicker still.

Are we in a post-printer world?

2012-03-16T13:28:15Z

Do you have a printer at home? Does it get used?

I have a colour printer that I haven't used for at least six months. It does a great job when asked, it's just that I obviously haven't had the need.

Not so long ago, buying a printer was the second thing on your shopping list, after you had bought a PC - how else to get your stuff "out" of the computer to pass to someone else?

Of course, nowadays we live in a connected world and getting information from your machine to any number of different devices, owned by any number of different people is easy.

From a business perspective, printers (and paper) no longer make sense. A business recipient wants the information you send in digital form. If you send them paper, they have to go to the trouble of digitising it themselves - either by re-keying using their own PCs or scanning. Even a consumer recipient is nowadays more likely to prefer an emailed PDF that they can effortlessly save. The whole digital to analogue to digital loop is pointless.

Paper costs money, needs handling and consumes trees. Letters need stamps envelopes and, maybe, licking.

Not so long ago, in my accountancy firm every member of staff had their own, personal laser printer on their desk. Now it's just one networked printer in the office - and that gets used much less than you'd think.

Kodak failed to convince the world that we still needed film in the age of the digital camera. The likes of HP, Epson and OKI will lose the battle to convince us that we still need printers.

The budget, who cares?

2012-03-13T16:19:07Z

George Osborne will deliver his Budget speech next Wednesday

It's that time of year again and the interweb is alive with accountants trying to make the Budget sound like an interesting event.

It is for them. It's vitally important that accountants know what changes are going to be made to the UK tax system, otherwise they are in no position to undertake tax work for their clients or advise them properly.

However, their clients have only a passing interest in the Chancellor's proposals. When he stands up to speak next Wednesday they won't be listening, they will be busy running their businesses, or off somewhere enjoying the fruits of their labours.

Of course business owners know that tax changes are important and will affect their pockets, but they expect their accountant to tell them the bits they need to know, the bits that directly impact them. The rest, the detail, is just noise.

So, I wonder why accountancy firms are so keen to Blog or Tweet about the Budget live or hold "Budget Breakfast" events the morning after. Why they spend time and good money buying Budget Guides and Tax Data Cards (handy pocket size!) to give away to their clients - as soon as humanly possible after Mr Osborne sits down.

Clients don't want information, they want to be looked after. They don't want to assess and understand, they want to be advised.

This is a clear case of less is more. Don't send your client a thirty-page guide to everything in the Budget (even though it might look really nice) call him or her and spend ten minutes explaining the bits that they need to know about.

That will demonstrate that you care about the right things.

Accountants' second opinions

2012-03-12T11:12:32Z

Last Friday Steve Fewster tweeted a link to his blog post where he asks whether he should get a second-opinion on his company's financial accounts, from another accountant (or two). You can see that my response was to ask what insight he thought another accountant might be able to provide and Steve then replied that he "didn't know what he didn't know", so could not answer - over to me.

Sometimes exchanges like this get you thinking in a slightly different way about things you have known for years. Although I knew, instinctively, that just looking at the year-end accounts numbers would reveal nothing of value Steve assumed differently.

As a small business owner-director he assumed that the time and expense involved in having full financial statements prepared by his accountant meant that the results of the process must have real value: in those final numbers there must be business management gold. And what struck me was that this was a perfectly valid assumption for him to make.

It was, however, an incorrect assumption because the only value an accountant can add to a cold review of the numbers in isolation is perhaps to assist the business owner in understanding how to read them. Once the client knows these basics, and how to calculate the gross profit margin and compare it with last year, there really is little insight that the accountant can provide.

It is time that the profession was very clear with clients about what they are paying for when they commission year-end accounts. They are paying for something that is needed for compliance purposes: they are paying to keep HMRC and (maybe) Companies House happy.

Small business owners need to know that detailed, up to date management accounts, produced at least monthly during the accounting year, are where the value lies: that's where the business management gold is hidden.

In asking the question about the value of getting a second opinion, Steve exposed the fact that, as far as year-end accounts are concerned, there is no value in the first opinion.

Xero not pausing for breath

2012-03-08T20:31:43Z

I wrote back in November of last year that Xero would either need to raise more capital to continue its aggressive growth strategy or else pause for breath. Following a private placement totalling $20 million in February, we learned today that a further $15.6 million has been provided by existing shareholders.

So with an extra $35 million plus in the kitty, I think we have our answer.

Aiming to conquer the markets for small business accounting software in New Zealand, Australia, the UK and America, Xero has always positioned itself as a global player. Becoming a global player costs money and the company has so far proved adept at raising (and spending) it.

Less well-funded rivals would argue that they do not harbour similar world domination ambitions, that they are concentrating on home markets and therefore do not need to be envious of Xero's deep pockets. An alternative view could be that they realise they do not have the table stakes for the global game.

Figures in NZ $

It's bookkeeping Jim, but not as we know it

2012-03-06T16:00:11Z

I have a good chat earlier today with Euan Brown of Total Accounting.

Euan is a forward-thinking accountant who has re-positioned his father's chartered accountancy firm; away from traditional, year-end compliance work and towards outsourced business process and management accounting services.

He told me that his clients don't want to be involved in any of the bookkeeping, payment processing or payroll for their businesses - they let Total Accounting handle all of that. Instead, they just concentrate on growing their business using the up-to-date, accurate management information produced by the firm for them.

Clients value the financial information being provided to them at a time when it is still useful for decision-making. This focus on adding value is, of course, good for the accountant-client relationship and protects the firm against downward fee pressure.

Euan has also realised that being deeply embedded in a client's day to day finances and administration processes means that he is in a much more secure, long-term relationship with them.

I disagree with his choice of Sage as the bookkeeping engine, because I think there would be real benefits in this scenario of using an online service, but otherwise I have to applaud Euan for envisioning the future of the profession and taking steps now to take advantage of the new opportunities to come.

New deregulation to cost small accountancy firms up to £1 billion?

2012-02-24T12:27:59Z

The EC this week agreed to exempt "very" small companies from accounting and financial reporting obligations. This ratified proposals aired in the spring of 2011 and created the new concept of the "micro-company".

In August 2011 the UK's Department for Business Innovation and Skills (BIS) produced its discussion paper "Simpler financial reporting for the smallest businesses". It is important to note that this paper widened the scope of the proposed deregulation to include non-incorporated "micro-businesses": incorporated businesses and their non-incorporated cousins together being referred to as "micro-entities".

Based on the prescribed turnover, balance sheet and employee number criteria (and the increase in the thresholds between the date of the BIS paper and the new EC directive) it seems that around 5 million UK businesses will quaify as micro-entities - that's almost all of them.

The numbers on pages 8 and 9 don't add-up for me, but the paper suggests savings in accounts production costs of between £60 and £235 per micro-entity per year. I suggest those are conservative numbers, but if we use, say, £200 as the typical saving that's £1 billion per year saved by small businesses - and therefore lost revenue to the small accountancy firms that service them.

Can this be correct? Have I (or the BIS) got the numbers wrong somewhere?

If not, this must be a wake-up call for the profession. Firms must make sure that they re-position themselves to offer alternative services to make sure they retain the £200 per client spend they will otherwise be losing.