Do you need a bookkeeper if you use cloud accounting software?

It depends on the business size and financial skills of the owner.

When Cassandra Scott, a contract bookkeeper, attended a panel discussion three weeks ago on the topic of accounting in the cloud, she heard something a little alarming.

“We were following a Twitter stream for those that couldn’t attend. One tweet came through which said, ‘If you’re using (cloud accounting program) Xero you don’t need to have a bookkeeper’. That piqued my interest,” says Scott, director of Laurus Bookkeeping, a Queensland business.

Cloud accounting programs have leapt ahead of PC-based equivalents by automating tasks such as entering and coding bank transactions. Most can receive feeds from banks which automatically update transactions every day. The programs can automatically categorise regular transactions within the chart of accounts.

A properly set-up cloud accounting program can automate a lot of data entry and make bank reconciliation a push-button affair. The technology jump has sparked a passionate debate within the financial community about the role of bookkeepers and when they are required – if at all.

Rhys Jones, an accountant with Queensland firm Rush and Associates, says half his small business clients don’t use a bookkeeper, and all of those businesses are using Xero, the most popular cloud accounting program.

Jones says sole traders using Xero don’t need a bookkeeper’s services once the program has been set up. “I think Xero is tailored very well for those sole trader-type businesses. It's nice and easy for them and they seem quite comfortable doing it themselves.”

Once a business starts adding employees and needing help with payroll, deducting tax and calculating super, “they might need help from a bookkeeper there”, he adds. But even businesses with several employees might not use a bookkeeper if the business owner had a good grip of accounting principles, Jones says.

“I wouldn't put a figure on it and say after five employees you need to get a bookkeeper. It all comes down to how capable they (business owners) are. On a lot of occasions they are capable of doing it themselves, and for example they just call us and if they have any problems we can help them out very quickly. On those occasions they don't need a bookkeeper.”

 

Accurate data for the right price

Scott says some accountants have a “very naive” perspective when it comes to bookkeeping. “I don't think there's a great understanding in a lot of the accounting practices of the value that bookkeepers can add to a business or a progressive accounting firm.”

Bookkeepers give a guarantee that the financial information handed over to accountants is free from errors which lets accountants work on higher level activities than number checking, Scott says.

While automated bank feeds reduces some data entry, there is still plenty of other information that needs to be entered into an accounting program accurately, such as contracts, invoices and expenses. A bookkeeper is trained to make sure that all these details are coded correctly and under the appropriate tax provisions.

An expense mistakenly filed as claimable could expose a business in an audit by taxation authorities; invoices for some jobs might be exempt from GST. A business takes on some risk by trusting its employees to make these decisions themselves. It also ties up staff in a job outside their expertise which could be more expensive than employing a bookkeeper.

Next page: Bookkeepers climb the skills tree