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Changing the relationship

Posted 9 years ago in by Rod Drury
Posted by Rod Drury

Following on from my last article on small business processes, we are seeing accountants now starting to think about new ways of working with their clients.

In the traditional desktop world, where client accounting information is stored on premise, it is a cumbersome process for accountants to get visibility of financial information.

Here is what needs to happen for an accountant to review your numbers:

  1. You need to have your numbers up to date – as best you can.
  2. Make a copy of your accounting data file.
  3. Courier a data disk, or send the entire data file insecurely over email to your accountant.
  4. The accountant has to have time allocated to load the data.
  5. They try to work out what version of the accounting software the data file requires.  (Some accountants actually have programs written to load the right program.)
  6. They look at the numbers and normally see a bunch of errors.  They may fix those errors but as they are operating on a copy of the data and you are still working away processing invoices those changes don’t get sent back to you, so your financials are out of sync and the errors remain in your system.
  7. They will extract a number of reports, and perhaps bind them in a summary report and send them to you.

Therefore the accountant has to invest 1-5 hours just to review the numbers. Most small business customers will not pay the several hundred dollars of fees the accountant has to charge in this disconnected model.Therefore accountants very rarely do monthly management accounts for their customers. The oft-quoted Bruce Sheppard said “you employ accountants and turn them into bookkeepers.” Disconnected technology and processes that arise from that technology have been the barrier.

Yet in this current credit crunch, banks won’t be able to rely on numbers that are up to a year old. Banks will demand from many businesses to provide up to date financials and regular monthly management accounts for loans to roll over.

The banks themselves will be under pressure to do this because of their BASEL II and other risk management requirements.

Small businesses, accountants and banks are on a collision course caused by traditional, disconnected, desktop accounting software and the credit crunch.

Another example of how the current desktop technology is holding business back is that many of the common accounting packages do not have Fixed Assets functionality. Because the accountant is so disconnected they tend to clean up fixed asset transactions at the end of the year, in their internal, practice side systems.

We couldn’t believe it !

Without keeping your fixed assets clean your monthly management reports will be inaccurate. At year end accountants have to spend a lot of time just cleaning up fixed asset transactions.

We are very excited that we are starting to see accountants changing the way they engage with clients and their service offerings. With online systems, like Xero, they can easily connect to their clients’ data and within a few seconds they can do a small amount of monthly processing.

This includes:

  1. Scanning the data to identify any exceptions or strange stuff.  We have a General Ledger Exceptions report that helps identify abnormal items.
  2. Processing any Fixed Asset disposals or acquisitions.
  3. Reviewing the standard reports and identifying any suggestions or concerns. These comments can be recorded directly in Xero.
  4. A monthly management report can be exported in nicely formatted PDF document.  Here is a sample: XeroManagementReportSample.pdf (100kb)
  5. We suggest your accountant sends your monthly management report to your bank manager. You may need your bank manager to be your champion for new loans or rolling over existing facilities so building a trust relationship with them will help. (Xero guide: make your business fundable)

As the accountant is on top of the numbers each month, the numbers are correct.  This is fantastic for the business owner who actually knows now exactly where they are at.  For accountants this makes end of year processing  a snap which means accountants are effectively spreading their workload back over the year. That is a great thing for them.

Connected accounting changes the relationship between accountant and client.  The accountant really can be the proactive adviser and coach what small businesses want.  I often say to accountants they should take a few clients out each month, and arrive with their annotated Xero management report, step through it and set goals for the next few months.  Then see who pays for the coffee!

This is a mindset change for many accountants.  The connected model eliminates the big barrier to accountants getting intimately involved with their clients in a cost effective way. We’re excited that many accountants are seeing the opportunity and making the change.  This will make business better for everybody.


Carlin Archer
March 20, 2009 at 3.21 pm

Hey Rod, met you at the X-Media lab in Auckland (Ecobob). Finally about to make the change to Xero along with moving accountant.

Xero | News about online accounting software for small business » Blog Archive » Accountants loving the challenge
March 23, 2009 at 11.36 am

[…] our CEO Rod Drury blogged about the changing relationship that accountants are having with their clients and the dynamic nature of accounting itself. No longer the static and […]

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