Almost everyone is familiar with different types of applications used on the phone, tablets and computers. With the advent of online accounting, numerous bookkeeping applications have been created to help improve accuracy and speed of processing receipts and bills.
The most common applications helping in bookkeeping tasks are Receipt Bank, Entryless and Shoeboxed to name a few. These bookkeeping applications are able to connect to software such as Xero, Quickbooks Online, Free Agent, Zoho Books and Kashflow and some of these applications offer different level of automation, from fully automatic to something what I call semi-automatic.
Bookkeeping applications are a game changer and can save enormous amount of time and money, provided these are used correctly. Over last few years we have encountered many businesses trying to use some of these applications and making a mess out of their accounts, and we had clients which asked us to take over their bookkeeping after they started noticing that their suppliers balances do not agree, and their current accountant and bookkeeper did not help to resolve the matter. It turned out that accountant and bookkeeper decided to let one of above mentioned application work in fully automatic mode and did not perform checks on the results often enough.
What should you pay attention to when using bookkeeping applications?
- Always check what information are transferred from applications to the chosen accounting software
- Check regularly if your automated bookkeeping application performs as expected
- Check regularly if invoices are recognised accurately and if all information needed is transferred across from application to accounting software
- Make sure that multi currency invoices are not being automatically posted to your accounting software and make necessary adjustments in the application before posting such invoices
- Always check if multi currency invoice has been recognised correctly
Business A have been using services of their accountants for many years. Accountants convinced Business A to use Xero online accounting software. Business A needed help with processing in excess of 310 bills per month. Accountants decided to connect one of above mentioned bookkeeping applications to Xero and set it up to run automatically. Application was running on autopilot for about 14 months. Due to the volume of bills and usually long payments terms Business A did not notice in advance that there is something wrong with accounts. Bookkeeper did not reconcile statements from suppliers and was adamant that there is no mistake on bookkeeping part. Eventually calls and reminders for overdue payments became more intense.
Business A asked us to have a look at their accounts and help them understand what has happened. When we start looking into Xero it took us about 3 hours to figure out that the cause for discrepancies was an automated application. We discovered that by comparing attached pdf of the invoice and amounts in transactions recorded by xero. We have also found that there were other anomalies such as credit notes posted as invoices and the other way round, wrong invoice numbers and wrong dates picked up by fully automated bookkeeping application.
We have presented our findings to managing director of Business A. We were tasked with taking over ongoing bookkeeping completely and rectifying issues caused by automated application. It took us 3 months to just untangle mess created by application and to post appropriate corrections. Business A understandably changed their accountants.
Automated applications can make a huge difference in a way you your bookkeeping department performs. If you decide to use application like that at least consider implementing frequent checks on its performance, as rectifying mistakes can be time consuming and it is costly.