RSS feedsEffective financial management is essential to the success of any business. According to Department of Trade and Industry estimates, more than 10,000 businesses in the UK fail each year because of poor cashflow planning. With the right software and systems in place, many of these failures could be prevented, but startups and small businesses often struggle to identify the approach that is best for their business.
‘A lot of people start out by doing the books manually,’ says accountant Mike Bulcock of Bulcock & Co, ‘because it seems cheap and easy.’ However, they soon discover it isn’t and so move on to spreadsheets. ‘They keep the costs low and they’re relatively simple to use,’ he adds.
As Google can quickly demonstrate, there are lots of spreadsheet models and templates out there to help small businesses with cashflow forecasting, producing business plans and profit and loss accounts, plus various other aspects of small business bookkeeping. Accounting firms also create models and templates for their small business clients. As it would be impractical to design an Excel spreadsheet for each individual client, firms tend to tailor spreadsheets for particular organisations.
In many instances, spreadsheets are the best way for the firm and clients to exchange financial information, particularly as there is no longer any need to save them on disks and exchange them by post. ‘You can email them quickly and easily,’ he points out.
This alone is not enough to keep small businesses and their accountants glued to the spreadsheet, however, because developments in technology and changes in the marketplace have made moving to the next level a lot simpler and cheaper than it used to be. ‘The next logical step is online bookkeeping,’ suggests Bulcock. There is a growing number of offerings, including Kashflow, Liberty Accounts and Sage Online 50.
Online options
Because firms are providing bookkeeping software as a service, clients do not need to be concerned with installing and maintaining any applications software, or networking multiple PCs to enable them to share data. Anyone with a PC, a telephone, and an account with an internet service provider can gain access to the company’s financial data. ‘I think the online approach is going to be increasingly popular,’ says Bulcock, ‘because it fits perfectly with the way many companies are run.’
He adds: ‘Small businesses invariably end up doing their accounts at night,’ because the rest of their time is taken up with the day-to-day running of the business. Using an online bookkeeping system means clients can work on their accounts anytime it suites them, from anywhere with internet access, and the accountant can support them more easily. Bulcock says he can look at the client’s data at any time and the approach makes it easier to do closedowns and year-end accounts. ‘It’s the way forward,’ he says.
At the moment, Bulcock has just two clients using Sage Online 50, but he expects more clients to take this approach in the future. ‘I think Sage timed the release of [Online 50] well,’ he says. ‘A few years ago, businesses were frightened of online banking; now they’re much more receptive.’ That’s one of the reasons why Bulcock only recently started encouraging clients to take this approach, even though online accounting applications have been around for some time. He also wanted to be able to woo clients with a familiar name. ‘Sage has the advantage over the other online offerings because it’s such a strong brand,’ he explains.
Cameron Baum was a little more adventurous as a firm. In February 2006 it set up webbookkeeper.co.uk to provide existing and new clients with an online bookkeeping service. ‘Clients often popped in and asked us to recommend bookkeepers, but there seemed to be a shortage of them,’ recalls Mark Asherson, the firm’s senior audit manager. At the time, Sage had yet to release an online version of its product, (though IT Inside Out was providing a service based on Sage Online 50) and Cameron Baum decided to offer clients an online bookkeeping system from Liberty Accounts.
‘People who have been using spreadsheets can make the move to online accounting easily,’ he says, ‘because they are used to having tight control over their financial information.’ Offering more than one option helps the firm service a wider range of clients.
‘We added Sage because it’s the market leader,’ says Asherson, but it also works better for larger or more complex businesses. ‘Liberty was easier and cheaper to use. For smaller, owner-managed companies, I think it works best,’ he says.
As businesses grow and change they need different things from a bookkeeping system, so Sage Online 50 can be the next rung on the evolutionary ladder. ‘We have moved one of our clients from Liberty to Sage,’ says Asherson. ‘The client wasn’t happy with the Liberty interface,’ he says. ‘They thought it was difficult to look at with high-volume transactions, so we thought Sage would be better for them.’ Opting for an online system from a specialist supplier with a wide range of products should also make any future system upgrades easier to manage as the business grows and changes.
Packaged solutions
Yet despite the many advantages that an online system can offer small businesses, many still prefer to take a more traditional approach and go for an entry-level,
off-the-shelf offering from, say, Sage, Intuit or MYOB. They can make doing the books a lot less painful and help even the smallest organisation to turn their financial data into useful business information.
But installing a package and finding out how to use it to benefit your business is not easy to do without the support of a bookkeeper or accountant. ‘It’s not just a case of going out and buying software,’ says Bulcock. ‘Clients need the reassurance of being able to talk to an accountant.’
He says guidance is often vital. ‘Even the simplest bookkeeping package can be too complicated for many small businesses,’ he adds, ‘so you can’t just leave them to get on with it.’
There was a time when cost was the main barrier to moving up from a spreadsheet to a bookkeeping or accounting package, but this is no longer the case. ‘The price of software is much lower now,’ says Bulcock, ‘so people tend to make the leap a lot sooner.’ But this doesn’t make the move any easier. Although entry-level products are often sold as commodities and accompanied by free support for the first 30 days, small businesses tend to need more hand-holding than the software supplier can provide.
When clients are left to go it alone, the results are often disastrous. ‘I’ve seen the state the books can get into when an inexperienced person sets up an accounting system,’ says small practitioner Margaret Baldwin, who trades as Monitor Bookkeeping Ltd. ‘It’s not unusual for me to be called in to restore order from the chaos.’
Although specialist software suppliers would have small businesspeople believe that their entry-level products can be installed and set up without the help of a finance professional, this may be a false economy – not unlike sticking with a spreadsheet when the alternatives can offer so many business benefits.
Three cheers, three choices
BETTER THE DEVIL
‘I’m a sole trader and have been doing my accounts using spreadsheets for the
past five years,’ says Sam Allington. ‘My accountant wanted me to swap over to
an accounting package, so I gave it a try.’ After a few months, Sam decided to
go back to spreadsheets. ‘I only know a bit about spreadsheets, but that has
never been a problem,’ he says. The accounting package, on the other hand, was
hard to use. ‘When I told my accountant, he tried to sell me a half-day training
course.’
TALKING TECH
Mary Palmer, a freelance project manager, says: ‘I used to do my bookkeeping
with Excel, then I’d email it to my accountant. I looked at various packages and
didn’t like what I saw.’ She was, however, impressed by the online system from
Liberty Accounts. Palmer is always on the move and likes being able to access
her accounts from her laptop. ‘It didn’t take long to master and I had to let go
of my Excel spreadsheets at some point. Now I wouldn’t go back.’
TRADITIONAL VALUES
Carl Need, managing director of Maintenance Solutions GB, used Excel for two
years, but his business soon outgrew spreadsheets. ‘I didn’t consider online
bookkeeping because of what might happen if I lost my internet connection,’ he
says. Instead, he trialled Business Basics from MYOB on the recommendation of a
friend. ‘The hardest part of the changeover was transferring the data,’ he says.
Now Need can do most of the financial administration himself. ‘It’s good for
VAT, and I can see how old my outstanding invoices are,’ he says, adding: ‘I
couldn’t do that with Excel.’
Lesley Meall is a freelance technology journalist
For more go to
www.online50.net
www.libertyaccount.com
www.kashflow.co.uk
