Pop quiz: how was your profit for the first half? If you can’t tell me, I’m a little disappointed.
I believe everyone in business should be able to access their business’s profitability regularly – something that’s not always guaranteed from a spreadsheet.
I have seen some pretty impressive spreadsheets in my day. Spreadsheets with funky colours, fonts, bolded and italicised headings to make the numbers look a bit more ‘sexy’.
These spreadsheets capture your business’ income and expenses to enable preparation of a BAS or a tax return, but the accuracy of these spreadsheets can leave a bit to be desired.
Invariably a few cells have been omitted from a formula, cells aren’t cross checked and, to be honest, we need to take more time checking the accuracy of the data.
I would say that only one in 10 spreadsheets that have ever come across my desk generated a Profit and Loss Statement.
Without having access to your business’s Profit and Loss Statement, how can you see how your business is performing? It’s like driving a car blindfolded.
Cloud-based accounting offers both affordable and quick access to the data.
Some people only get their figures once a year when their accountant gives them the numbers in preparation for a tax return, but with cloud accounting you can access the numbers daily, weekly, or monthly.
I have had clients that have been a little skeptical about changing the way they do things when it comes to their bookkeeping.
They start out worrying about the cost of changing things, but by the end of the process the dividends are clear.
They feel more organised, in control and have their figures up to date.
OK, so how does this cloud accounting work?
- Decide on a cloud accounting product and subscribe. Whether you’re big or small, MYOB has the tools you need to succeed in business.
- Set up opening balances, or have your accountant do this for you.
- Set up your ‘bank feeds’ for all your bank accounts, credit card accounts and loan accounts. What happens here is that the online accounting software ‘talks’ to your bank and all of your bank transactions will be automatically imported into your accounting file on a daily or weekly basis.
- Once bank feeds are active, you can set up rules. Rules tell your online accounting software that there is a particular type of transaction (eg. mobile phone, fuel or electricity) you want to record each time it sees a particular bank transaction description.
Once you have set up a rule, you never need to record that transaction again.
MYOB automatically allocates that transaction – it’s automatically entered, coded and any required description is in the journal memo as per how you have set up your rule.
All you need to do is approve the allocation.
Once you have all your income and expenses imported in your file, you can start to generate reports and start to understand where you are going in your business instead of driving blindfolded.
The Christmas break is a great time to make some changes in the way you do business and embrace cloud accounting.
As things tend to be a bit slower for most of us, you may find you have time to refresh your bookkeeping system.
The beauty of having access to your numbers more regularly is that you will be able to see how your business is travelling and can take action if things are going wrong.
Now I would like to remind you of the saying “garbage in, garbage out.” It is important that care is taken to set the bank feed rules up diligently.
To get the most benefit from your online accounting software, make sure you let your accountant know that you want your file to be as accurate as possible during the year and to provide you with any feedback.
Have an open mind, embrace the technology and start feeling more empowered by your numbers and the reports you generate.