Switches to cloud accounting program Xero.
Justin Doobov (pictured on right) went through the same ritual at the end of every quarter. He would pull out a plastic sleeve containing receipts from his credit cards, online payments and cash receipts for his Sydney-based mortgage brokerage business and match them up with every transaction on his bank account statements.
“The credit card would say you bought paper from OfficeWorks and we would dig around and find the receipt, match it to the credit card statement and make sure it was the right amount.
“I’d check out how much GST that was, then write the GST and a code for printing and stationery next to the transaction on the actual statement,” says Doobov, managing director of Intelligent Finance.
After several laborious hours Doobov annotated GST and account codes for each transaction on his credit card and bank account statements, which he then sent to his accountant to key into MYOB.
The accountant would then email back financial reports such as profit and loss and Doobov would sit back down with his bank statements and check that the data had been entered properly.
While Doobov used an accountant and an accounting program, he rarely viewed financial reports analysing the metrics of his business; instead he used them to check for errors in the accountant’s data entry.
“We were running the business but flying blind with the accounting side,” Doobov says. “Because MYOB was a bit complex I stayed away from it. If I needed a P&L I would contact the accountant.
“I was hesitant to ask for stuff besides the bare minimum. I didn’t want to be racking up a bill to view my financials unless it was 100 percent necessary. So I was cautious with that.”
Making the shift
Doobov heard about cloud accounting programs from his accountant who was in the process of trialling one of them, Xero. Doobov pushed his accountant to add him to the trial in September. He hasn’t looked back since.
“It’s fantastic,” Doobov says. “Instead of having to match it at the end of the quarter, once a week I log into Xero, click on synchronise, and it pulls all the data from my bank account. So while the transaction is fresh in my mind I will code them straight away.”
One of the key benefits is the time saved in matching receipts to transactions and calculating GST, Doobov says. The cloud accounting program can create rules that automatically categorise transactions according to reference number or account.
“If the reference content says ‘XYZ’ that means it’s parking expenses or someone’s salary and it will remember it,” Doobov says. He estimates that up to 60 percent of transactions are categorised by rules.
Doobov is also spending more time reviewing his business’ financial performance. Instead of looking at just profit and loss statements once a quarter, he dips in once a week to look at profit and loss and other reports in real time.
“It helps me plan for certain things and helps me balance things out from a cash flow point of view.” Doobov can spot the trends in the business and monitor problem areas in expenses. For example, he realised he was spending a lot on IT.
Previously “I was too busy trying to rush through the BAS report because it was always done at the last minute. I might have an invoice from January that I’d be checking in April. It was a lot of time, effort and stress, but now I actually enjoy doing it. I can code things in 5 to 10 minutes,” he says. “And it’s giving us more accurate data.”
Another attraction is that he no longer has to send his MYOB data file backwards and forwards with his accountant. Instead the accountant can log straight into the Xero interface through his web browser.
Doobov estimates that he has halved his accountant’s workload and expects to see concurrent drop in accounting fees. Doobov has clawed back five or six hours of his own time each quarter, he adds.
Room for improvement
One area that Xero falls short is in payroll. While the cloud program does have a payroll module, it doesn’t calculate tax.
“I would like to type in that a person worked 10 hours and got a bonus of $5000, and it would automatically calculate the amount of tax and pay that automatically. It doesn’t do any of that. It’s just a record,” Doobov says.
Doobov says he assumes the vendor “doesn’t want to step on the toes” of cloud payroll providers which provide leads to Xero. He says he will look at cloud-based payroll systems that integrate with the accounting program but “I’d prefer to have it all rolled into Xero”.