Posts Tagged ‘SaaS Accounting Software’

What eclipses the view of your business finances?

On August 21st, I look forward to a sight my eyes have never before beheld: a total solar eclipse. A safe and optimal viewing experience requires proper preparation. Some of the best information I’ve found online is this article from Forbes and an interactive map from the Washington Post. Similarly, a spectacular view of the financial performance of your business isn’t going to happen by accident. Planning the who, what, where and how of your business finances is key to producing meaningful financial data.
  1. Timely.  If you miss totality of the solar eclipse which lasts about only two minutes, you’re out of luck. The same timeliness principle applies to financial information. If you’re making decisions based on data several months or years old, you’ve missed out on opportunities to make critical decisions for your business. Today’s technology enables you to do accounting in real-time. Are you taking advantage of it?
  2. Where.  For a view of totality, you need to be in the right place in the narrow path the moon’s shadow crosses the Earth. For the place of accounting data, consider the cloud. While there are many factors to consider if the cloud is right for your business, it offers many benefits such as mobility of accessing your accounting data anywhere.
  3. Security.  Don’t look at the sun without protection! Just as you should take great care of your eyesight, be sure to secure the sensitive information in your accounting software. Use strong passwords and evaluate the security of the data center or server where your data resides.
If you’ve tried doing your accounting on your own and found something is obscuring your view, consider outsourcing it. It will help you spend more time at the planetarium with your family.

Set amount thresholds in Xero bank rules so fixed assets aren’t expensed

One of my favorite things about Xero, an online accounting software, is its ability to automatically categorize transactions based on a customized set of rules.  While other accounting software have some built-in automation features (such as pre-filling information from the last entered transaction for a payee), Xero is unique in that it categorizes transactions when they match certain conditions for payees, amounts, references, etc. While this automation can save a lot of time classifying transactions, it could also result in misclassifications if bank rules are applied carelessly.  For example, if both office supplies and fixed assets are purchased from a payee, additional conditions may be required in the bank rules so that transactions are classified correctly.  In the screenshot below, I created a bank rule so that amounts less than $500 spent at Best Buy are classified as office supplies expense (I’m using this amount as an example – consult your tax advisor to determine if a transaction should be expensed or capitalized). Xero rule with threshold amount On the reconcile screen, Xero prompts me to apply the rule for the amounts less than $500, but not for the $1,053.62 which may need to be categorized as a fixed asset.  That transaction is left open, forcing me to investigate it further and properly classify it. Xero reconcile with bank rules  

Do you put social media links on your invoices? It’s easy with Xero

A creatively designed invoice can be so much more than a collection tool.  Links to social media websites are simple additions to electronic invoices providing opportunites for increased visibility and contact with customers.  Plus, they add a little color and fun to an otherwise boring document. While I was exploring settings in Xero, the social links area caught my attention.  When activated, it adds Facebook, Twitter, LinkedIn and Google+ icons to online invoices.  This is one of Xero’s many new invoicing features introduced in December 2012 and is a small step into the exciting world of Social Accounting. Social Media Links in Xero  

Bank rules in Xero for fixed amount checks

One of my favorite things about Xero, an online accounting software, is its ability to automatically categorize transactions based on a customized set of rules.  While other accounting software have some built-in automation features (such as pre-filling information from the last entered transaction for a payee), Xero is unique in that it categorizes transactions when they match certain conditions for payees, amounts, references, etc. For example, I set up an automatic monthly payment on my bank’s online banking site for a recurring expense with a fixed amount.  The bank sends the payment with a paper check.  Xero does not import a payee or description for these particular transactions.  Xero imports the amount of the check and “CHECK #XXXX” for the reference.  Even with this limited criteria, these transactions can be automatically categorized with the rule shown in the screenshot below. Xero bank rule for check Creating the automatically categorized transaction in Xero and reconciling it then becomes as easy as clicking on the “OK” button.  Though setting up the bank rules takes some time on the front end, it saves a ton of time in the long run.

Cool feature alert – attach receipts in FreshBooks

A couple months ago, FreshBooks added an awesome feature to its online billing and accounting software: attaching expense receipts to invoices.  I am a big fan of the integrated document management, which makes digital documents always available for quick and easy retrieval.  Plus, receipts can be attached in several file formats from whatever device is convenient.  Check out this video from FreshBooks showing users taking pictures of receipts with smartphones and tablets.
Since it looks so easy in the video, I tested attaching receipts from each of my devices. On my desktop computer, I clicked on the “attach image of receipt” link while adding a new expense.  A “choose file” button appeared below the link, and after I clicked on it, a file explorer window opened.  I navigated to the file’s location on my computer and double-clicked it.  That was easy enough to meet my expectations. After tapping my finger on the “attach image of receipt” and “choose file” buttons on my tablet (a 10.1″ Samsung Galaxy Tab 2), it prompted me to select an action from several options as shown in the screenshot below.  I chose the camera function.  After I took a picture of the receipt, it was automatically uploaded and attached to the expense in FreshBooks.  I don’t think it can get any easier than that! FreshBooks attach receipt tablet My smartphone, which runs on Android, is capable of doing the same thing as my tablet.  However, I can’t quickly launch FreshBooks, enter the details for a new expense and attach a receipt with my smartphone’s small screen and cellular connection.  My solution is to use Evernote, one of my favorite mobile apps for taking digital notes.  The Evernote widget includes a camera button for quickly uploading pictures.  I uploaded a picture of the receipt with the Evernote app on my smartphone, and when I was later on my desktop computer, I downloaded the image from Evernote’s web application.  I then went to FreshBooks, added a new expense and attached the receipt image. If you have questions or are seeking the help of a FreshBooks Certified Beancounter and CPA in Las Vegas, please feel free to contact me.

Adjusting journal entries in Wave Accounting

Wave Accounting, a free online accounting software, has a very easy interface for non-accountants to automatically import and classify bank transactions.  Accountants who primarily use other accounting programs might need some time to get used to Wave Accounting’s interface.  I recently needed to make some adjusting journal entries in Wave Accounting and the screen to enter them wasn’t quite where I expected to find it. To make an adjusting journal entry, click on the Settings tab.  That seems strange to me since I don’t consider journal entries to be a setting in accounting software, but where else would it go? Under Wave Setup, click on Journal Transactions.  Then, a screen appears with a layout that will be familiar to accountants.  Wave Accounting has some nice features here, including the ability to create a new account by clicking the plus button, and yes, debits must equal credits (so much for my attempt to corrupt the system).

Business Process Obliteration

Even though more than two decades have passed since it was written, the principles in the article “Reengineering Work: Don’t Automate, Obliterate” by Michael Hammer are still relevant to business process reengineering today.  It was published in the July-August 1990 edition of the Harvard Business Review.  Like my last post about the article “IT Doesn’t Matter”, this is required reading in my MBA class at UNLV and I found it worth sharing (and I’ve found blogging to be an effective way of learning the material, so thanks for studying with me). Accountants seem to have the reputation of sticking with the status quo and doing everything the same as last year, so there is a lot that I (and you, if you are an accountant) can take away from this article.  Hammer explains that many companies apply new technology to “automate” old business processes, but in many cases, those processes should be reengineered or completely “obliterated.” Hammer promotes the idea of discontinuous thinking – meaning that managers should challenge old rules and eliminate inefficient and obsolete processes.  An interesting example that Hammer provides is Ford Motor Company’s implementation of an invoiceless processing system in the 1980s to eliminate paper matching and payment authorization procedures in its accounts payable department.  This radical change resulted in big savings and efficiency improvements. Fast forward twenty years.  With today’s technologies, including mobile devices and cloud computing, there are more opportunities than ever before for reengineering.  I hope to be able to break the accountant stereotype by thinking outside the box and seeking out innovative ways to use technology.  One of these days, my conversation when I return home will go like this: “Hi honey, I’m home!” “How was your day?” “It was great.  I obliterated a few old processes today.  How was yours?”

Are Bank Import Features Driving Reconciliations to Extinction?

I guess I’m an “old school” guy when it comes to accounting for my personal finances.Shot in the back by Bank Import I enter transactions into QuickBooks in real time.  Whenever I write a check or pay a bill online, they immediately go into QuickBooks.  I save all of my receipts, put them in a folder, and enter them in batches at least once a week.  These are important processes for me because I am always aware of the amount of cash I have available despite the balance that shows when I log into my bank’s online banking website. Once a month, the bank statements come (electronically, of course).  I reconcile the transactions I entered manually to the bank statements.  Whenever there is either a discrepancy or an transaction on my bank statement that is not in QuickBooks, I investigate it.  Usually, it is because a receipt is still at the bottom of a plastic bag from a grocery store.  Sometimes, though, I have discovered errors or other things that resulted in me getting a refund during the process of reconciling bank statements. Recently, I have been experimenting with a few SaaS (web-based) accounting software tools (go to fellow CPA blogger Shane Eloe’s blog for some useful reviews).  Most of the SaaS accounting systems I have tested do not have the ability to reconcile bank accounts, but they do import and/or sync with bank transactions.  So, are we near the time to say goodbye to the bank reconciliation as we know it? I think the bank import and sync features can be big time-savers and eliminate much of the drudgery that goes along with redundant data entry.  Data such as the date, payee, and amount are automatically imported, leaving it up to the user to classify the transactions.  With some of the SaaS software packages, the program learns from past experience to automatically classify transactions and matches up the data being imported with what the user has already entered to eliminate duplicate entries.  Awesome stuff. My concern is that over-reliance on the online banking features and not reconciling bank accounts will lead to problems.  A user that imports bank transactions instead of entering them as they happen will not have the same grip on cash flow.  That user would probably also be more inclined to just accept what is on the bank statement rather than verifying that the bank activity is correct.  For a user that uses one of these SaaS accounting software packages for a business, it raises all sorts of questions for the CPA or accountant who prepares the tax return:
  1. What if the cash balance on the balance sheet is significantly different than the ending balance on the bank statement?  Without a bank reconciliation, determining the reason for the difference would be a nightmare.
  2. How does the tax preparer know that there were outstanding checks or online transactions that occurred and are deductible in a given year, but did not clear the bank (and therefore not imported) until the next year?
If you’ve discovered a solution to these problems and questions, I’d love to hear from you.  Please leave a comment below.
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