What do a pastry chef, a construction project manager and a creative design director have in common? As small-business owners, each followed their passion and interest so they could spend their careers doing what they love (which does not include hours of accounting and bookkeeping).
Traditionally, businesses install an accounting program locally on their computer and spend hours entering and reconciling bank transactions. Cloud Accounting is revolutionising this by having the business’s account files online directly communicating with their bank of choice – where anyone with granted authority can access specific areas of the data. It’s the new Dropbox/Netflix of accounting.
I have witnessed the ease this creates for our clients and strongly feel that they should all be implementing this. There is an excellent potential to enhance our clients’ businesses with Cloud Accounting – let me show you.
The files remain in real time, all the time
Imagine as a business you have trialled Cloud Accounting.
By doing this, you have ensured:
- no more backups
- no more file corruptions
- no more entering in bank statement lines
- no more bank reconciliations
- no more calculating how much to pay employees
- no more effort.
With a cloud accounting system, the business transactions are imported on a daily basis with jobs, invoices, profit and expenses easily monitored and reviewed when you want.
You can make better decisions, spend more time in your business using your expertise or free up time for the things you enjoy in life. You can access your files anywhere in the world as long as there is an internet connection. For example, you can process your employees’ pays while attending a business conference in Singapore. The time put into reconciling and evaluating the business accounts is significantly reduced.
What ATO compliance?
In my experience, business owners’ top priorities include:
- generating income
- controlling expenses
- managing employees
- managing debtors
- building new networks
- creating new initiatives
- and much more.
Australian Tax Office (ATO) compliance is not on that list due to the complexity and to the fact that it is constantly changing. However, businesses must comply with the ATO requirements and the compliance obligations of doing so are changing every year.
Cloud Accounting systems allow you to stay on top of this complexity by automatically updating tax rates, superannuation rates, handling SuperStream requirements and offering single touch payroll. As well as these items mentioned, there is also the provision of Taxable Payments Annual Reports for contractors, PAYG payments summaries for employees, tax declarations forms and with anything else the ATO wants to come up with next.
The obligations of ATO compliance has the potential to cause a great deal of damage to a small business and means the directors (who are the key drivers of the business’s revenue and direction) must often spend a great deal of time working as essentially administration employees. These obligations mean that directors, who are usually not experts in the field of taxation, are required to spend endless hours evaluating, updating and understanding all the new government requirements. If errors are made, there is the potential to put the business at risk if the ATO comes knocking for an audit. The negative consequences due to un-lodged reports and incorrect information can be huge.
Cloud Accounting automatically updates all ATO rates and tax obligations overnight. With the business file in the Cloud, it allows authorised users (like the nominated accountant) to log in, review and advise on important matters to ensure the business remains compliant. The pressure taken from the directors is immense and means they can turn their attention to higher priority matters.
We miss nothing
As the businesses accountant, we see every transaction, which means that the transactions are getting reviewed constantly by an experienced Charted Accountant on a daily basis. There is no limit to the number of linked bank accounts allowed, and we will make sure all of the tax deductions the business is entitled to are received. Business cards can be tapped overseas; creditors can be paid via Bpay, stock from suppliers can be purchased from all over the world, debtors can make late payments. We see it all the next day and can provide prompt, expert advice on real-time data.
Putting the cash ledger on autopilot
So, you have decided to scrap the old paper ledger and fiddly excel spreadsheets in favour of the Cloud. Let’s have a peek at how that decision has panned out.
As a business director, you link your bank accounts, so bank transactions are now importing into the new Cloud Accounting system on a daily basis. You create bank rules for these re-occurring business transactions that automatically code transactions into the nominated account based on the original wording of the bank transaction. You produce invoices with automatic reminder emails for all your debtors to ensure you get paid on time to help manage your cash flow. You set up your regular employees and give access to staff to complete timesheets and leave requests that automically flows into their pay runs that you approve and pay each week. You notice that the superannuation liability is increasing from the review of the balance sheet and the due date is approaching, you pay your employees’ super with five clicks of the mouse with a security code sent to your mobile.
You even purchase a new car (lucky you!) and have no idea how to account for it, so you scan and save the purchase invoice statement into the Cloud Accounting system next to the transaction and call your accountant to discuss and review the statements online together from the same file.
How much time did a business with ten employees and 1,000 transactions per month just save? At least 20 hours in the month. That’s more than two business days of productivity cloud accounting just clawed back. The potential for it to save even more crucial business hours is endless.
As a Chartered Accountant, my aim with businesses and bookkeeping is simple – to give time back to the business. As the old saying goes, time is money, and everyone can use more time.