Bookkeeping is swinging from a community of sole traders serving a handful of SMEs each to highly organised bookkeeping businesses with hundreds of clients.
For both groups, it’s clear that cloud accounting and online automation are critical to providing accurate bookkeeping at scale and at a reasonable price.
Everyone in the industry knows Receipt Bank, a bookkeeping tool which automatically adds supplier invoices and receipts to cloud accounting programs. The company launched a dashboard for bookkeeping businesses last year called Practice Platform.
The dashboard tracks metrics for a team of bookkeepers. It shows how many unreconciled transactions are sitting in a client file, the length of time since the last reconciliation, and the percentage of transactions that have been automated.
It also includes stats on the clients. For example, it shows the average time elapsed between the creation of a receipt and when it was entered in Receipt Bank. Clients who take too long to enter their receipts may need a little help with their processes. (Upsell to training on accounts payable management?)
I was curious about how well this dashboard worked for a bookkeeping business. So I met up with Tim Hoopman, CEO of Cornerstone, a Gold Xero partner, QuickBooks Online and MYOB bookkeeping company.
Sholto: What’s been the impact of Practice Platform in your business?
Tim: We got involved right at the beginning because like any other dashboard it pulled all of our clients into one environment, and gave complete visibility and accountability back to the team.
Sholto: How often do you use it?
Tim: I don’t go into it a lot. In five minutes I can see the status for all the clients and sit in the staff meeting quite well educated. I know how many unreconciled accounts there are. It helps you predict issues before they happen.
Sholto: How does it help?
Tim: We can’t really do anything in our business when it comes to BAS, compliance reporting and financial reporting without having all the information in the system and reconciled. We can predict that we’re not going to hit a BAS deadline if there are 350 unreconciled lines.
I can see that staff will be complaining because they are behind and will need to scramble to get things done.
Sholto: What do the staff think of it?
Tim: There are tools that make lots of things visible to the business owner. Some people love that, some people are afraid of it.
I couldn’t understand years ago why one employee acted and behaved like he did. He didn’t really like Xero – he said, “It makes me too visible.” With desktop software there is no visibility, you could catch up when clients asked for it.
Sholto: How do you use Practice Platform?
Tim: The way I look at it is fragmented into different sections. How many unreconciled items in Xero vs items in Receipt Bank? You can compare them. If there are unreconciled lines in Xero then assume that 50 percent are expenses, so there should be roughly that number in Receipt Bank. Others would be sales invoices and transactions from bank feeds.
Sholto: And if there aren’t 50 percent of those transactions in Receipt Bank?
Tim: If they’re not in Receipt Bank then the client hasn’t done what they’re meant to do. We have expectations that the client needs to meet for us to do our work. Customer service has the responsibility for obtaining the information from the client as well. We have to then call client.
Sholto: How frequently do you have to contact them?
Tim: We would give them a week and after that we would contact them and say we haven’t reconciled. We reconcile fortnightly for the bulk of our clients. But we still want the documents daily. Receipt Bank is compulsory.
Sholto: Why do you make it compulsory?
Tim: One of the reasons is that we talk about using a filing cabinet. We move them from document storage on a server to an online filing system that’s easily searchable. We have to sell the benefit for them not just us. If they don’t like answering queries and use Receipt Bank efficiently we will waste less of their time and ultimately their bookkeeping will be cheaper.
Sholto: How do you get clients to commit?
Tim: We’re really clear upfront when we have our initial discussion. We quote what we’re going to do for them and when and what they need to do in return. If you provide a “what’s in it for me” that has a time and cost benefit you will often get them on board.
Sometimes that cost benefit they will look at themselves. For example, they might not need to email all the documents to Receipt Bank (if they set up an automatically forwarding email rule). A lot of them will enjoy the benefit of getting rid of that.
There’s a cost and time benefit for you and your team. Some people take to it really quickly, from day one. Some have to be taken more of a journey.
Sholto: How do you take people on that journey? Do you have to create training for your clients?
Tim: Receipt Bank has standard training documents we can send to clients showing how to use the system.
Sholto: What about emailed receipts? We’re seeing a lot of them now.
Tim: We have learned to work with the clients’ email receipts by directing them as a CC. Now I pay for my movie ticket via PayPal, catch an Uber, my hotel email receipt – it’s bypassing having to touch any of that paper.
If it’s a supplier I use all the time, like Telstra, I change the email to the Receipt Bank one so it goes direct to Receipt Bank. Over time I just change all the emails.
Sholto: How many of your clients’ receipts are automatically entered in Xero?
Tim: In the Practice Platform dashboard there’s the “no-hands” column. It shows how much is automated. It is 70% on most of our clients – that equals the percentage of receipts or invoices that are not touched in Receipt Bank. We have rules set up for the supplier so it goes straight through Receipt Bank and is posted in Xero. For example Telstra always goes to telephone expenses and is always paid from the same bank account. We know that the information has been entered correctly and is sitting in Xero.
Sholto: Why create automation rules in Receipt Bank rather than Xero?
Tim: To automate any documents coming into Receipt Bank. If you don’t make the information correct in Receipt Bank then you will need to fix it in Xero.
We have small accounts where a lot of stuff is coded in Xero.
But there’s a limit to how much you can automate. If you automate 100% you will lose accuracy. My main example is Coles. Coles could be Coles Express (petrol) or Coles supermarket (office supplies).
Sholto: So if not 100 percent, what is your target for automating bank rec?
Tim: We have a target for 80 percent auto-syncing in Receipt Bank to Xero. if you set a target you can generally get there and it’s good for improvement in the business. One of the things we do really well is test the technology and see how far it can go and deliver a return to the customer.