How do you keep your books up to date? Most people manually type in business income and expenses, but that’s costly and tedious. Amanda Hoffmann has been a bookkeeper for eight years and she says there’s a much better way.
Amanda Hoffmann – BAS agent, My Office Books
This guide is brought to you by Xero and our Xero partner, Amanda Hoffmann, because we share a passion for helping businesses everywhere thrive.
Small business means big busyness. On most days, you’ll deal with customers, make marketing decisions, follow up sales leads, and manage operations.
After all that’s taken care of – there’s the accounting to do. That often requires hours of mind-numbing, unproductive data entry. As a bookkeeper, I see the headaches that accounting paperwork can cause, and how online accounting software can help.
Hamish hates accounting data entry
Hamish is a client of mine who runs a landscaping business. His vehicle is his office, and he often makes purchases on the fly.
At tax time, he used to lose an entire day hunting for receipts in his truck and around the house. He’d never find them all, so he’d have to ask suppliers to send copies. He’s busy growing his business so he hates things that slow him down – and this definitely did.
He had to put paying work on hold just to take care of his accounting paperwork. As his bookkeeper, I did Hamish’s data entry, but just getting the information was an ordeal for him.
But Hamish loves automation
After seeing all the pain that accounting data entry caused him, I suggested Hamish try accounting software. He was reluctant at first. It was just another thing to learn and he was already short of time.
But then I explained how it made data entry go away.
He could photograph receipts and the software would record the data in his accounts.
Payment into, and withdrawals out of his bank would also be automatically recorded in his accounts.
He wasn’t convinced immediately. The idea of changing habits led him to procrastinate at first. But now, after a year using the technology, Hamish says he doesn't know how he ever managed before.
Four reasons to ditch manual data entry
No matter how quickly you can type, it’ll never be fast enough. There can be a lot of numbers to enter. Plus you really need to double-check what you've entered, which takes extra time.
Data-entry errors occur even when people are well-rested, 100 percent focused, and excited to be entering the data – none of which is ever true.
Whether you enter the data yourself, or pay someone else to do it, accounting paperwork has a cost. It takes a long time for people to get good at it.
It’s open to misinterpretation
The person who enters data is often given piles of invoices with handwritten notes. These can be hard to read, leading to:
– extra phone calls to clarify details
– data entry people making assumptions and mistakes
What is ‘automation’ and how does it work?
Smart accounting software automates data entry. Instead of a person organising and manually typing data into your accounts, the numbers flow in automatically:
Income shows in the money-in column.
Expenses show in the money-out column.
This happens because of two innovations:
1. Data streaming direct from your bank
Many business bank accounts now talk to accounting software. When you make a transaction, all th details show up in your accounting software that night. You just need to choose accounting software that can receive bank feeds.
2. Apps that read your paper invoices for you
Now you can get data from a paper receipt (or invoice) into your accounting software without going anywhere near a keyboard. With an app like Receipt Bank, you just photograph the receipt or invoice on your phone. Optical character recognition technology then reads the document and tells your accounting software who it’s from, when it was issued, what it’s for and how much money is owed.
The upside of automating data entry
Automation solves the major problems with accounting data entry by saving time, reducing costs and eliminating human error.
Bank reconciliation and tax compliance become so much simpler. There are no missed receipts, deleted emails or avoidable phone calls to ask for copies of lost invoices. Once bank feeds are running, you can create rules to automatically categorise costs, or break down the tax components.
The speed and efficiency of automated data entry can transform your business. No matter how much you grow, or how many transactions you do a day, your data entry workload won’t increase. The right system can handle a lot of volume without creating any more accounting paperwork.
Saving 60 hours per month
I used to manually enter data for a property investor using their desktop software. They had a big portfolio and I had to make sure expenses were correctly allocated to each particular property. The process was tedious, and made worse by faded and coffee-stained receipts.
After converting their accounts to Xero and connecting Xero with Receipt Bank, I reduced accounting data entry by 60 hours a month. It was a massive time and cost saving for their business.
How to automate your accounting data entry
It's not hard to get manual data entry out of your business and your life. Just connect with the right technology and the right people.
Get online accounting software
Look for software that enables bank feeds and has receipt-reading capabilities (or can integrate with a receipt-reading app).
Get an accountant or bookkeeper to set you up
You can set up accounting software and bank feeds yourself but it might not be quick. A trained professional will handle it far more efficiently.