- 40% of Xero’s customers are first-time accounting software users
- Many may not use accountants or bookkeepers
- Technology not the best answer
Most agreed that problem transactions could be spotted easily by following a best practice of checking statement balances either monthly or quarterly, according to the frequency of work for the client.
But what about businesses using Xero who don’t have a bookkeeper or accountant to set them straight?
Xero has done a great job of expanding the accounting software market. At its 2011 Australian conference Xero claimed that 40 percent of its customers were moving from Excel rather than a desktop accounting program. Xero is their first experience of accounting software and this is why the reliability of bank feeds is arguably more important for Xero than any other provider.
If that percentage is still correct, 60,000 of its 150,000 business customers have never used accounting software before. Now they’re paying several hundred dollars a year to use Xero. Will they spend several hundred more for accounting advice too?
Undoubtedly they would benefit from a bookkeeper showing them the ropes and setting up the account properly. But when you’re counting dollars, you’re going to give it a go yourself first.
There must be an awful lot of sole traders and micro businesses happily ticking green boxes in Xero’s reconciliation screen, trusting that the bank feeds are correct. Which most of them will be, as Chris Ridd, Xero’s managing director for Australia, points out.
But when a large expense is missing, or an invoice is paid twice, a business with a small cash buffer can receive a nasty surprise.
John Power, CEO of BizTools, makes the excellent point that paper bank statements (and online accounts) are sometimes incorrect too. “There have been cases of banks’ systems incorrectly charging account fees or interest charges and statements have needed to be reissued,” Power says.
Most businesses would assume their paper statements are accurate – the banks should have an obligation to tell their customers to check them. I believe that obligation passes to the accounting software companies delivering bank feeds.
I’m guessing the reason banks don’t tell customers to check their paper statements is the same for cloud accounting companies and bank feeds. They don’t want to sow any doubt in the integrity of the system.
Xero already has a solution of sorts. Xero’s bank reconciliation report shows the difference between the balance in Xero and the balance in the bank account. The difference between the two is explained by missing or duplicated transactions, unpresented cheques and future dated transactions, or an incorrect starting bank balance.
Apparently the two differing balances were once shown on Xero’s dashboard, which gives a financial snapshot of business. But Xero received “a lot of feedback” from users that didn’t like seeing the balances out of whack, so it was moved to the Reports section.
I can see the logic. Remove the confusing balances from the dashboard because DIY business owners lack the accounting skills to understand why they differ. But doing so leaves businesses vulnerable to errors in bank feeds which, although rare, are very undesirable.
The best solution I can see: Xero must encourage its mass of DIY business owners to step up to using professional bookkeepers (or BAS agents). It’s the only way to guarantee a 100-percent result. Healthier books equal happier businesses.
For further discussion: BoxFreeIT has launched the Cloud-Powered Businesses LinkedIn Group to discuss cloud accounting and other cloud software in an open-to-all-comers, vendor-neutral forum. Join the Group and discuss bank feeds or whatever topic takes your fancy with professionals passionate about using cloud software to improve their businesses.
Image credit: ICAB Tutorial