Fantasy accounting software

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I've been asked to muse on what I'd like an ideal accounts package to do for me and my clients, assuming I were still in practice in the way I once was with responsibility for a firm with 800 clients, many of whom were self employed in one form or another.

This is a tall order. It requires me to challenge the very perception of what accounting practice is about. Is it, as is still very often the case, a labour based supply where the main role of the firm is to process data that the client does not want to, or is told they cannot, do for themselves? This is the traditional ledger based perception of accounting where the task is one of record keeping and the subsequent transformation of data into a format acceptable for filing with statutory authorities of various forms.

Those forms are necessary, but the role of the accountancy firm in doing that is now in question. A good software package should mean that the amount of reprocessing of client generated data to ensure that those necessary forms are accurately prepared is kept to an absolute minimum. This challenges those firms who make their profit using relatively low paid staff to churn numbers out of the factory as quickly as possible, but without relating to the client the process involved. That's never been a model I have bought into.

So, good software should now in effect be an outsourcing tool. It ha to ensure that the client can process their own data with the smallest likelihood of error arising. That means double entry must not be apparent within it: clients do not understand this and there is no reason why they should.

But there's a much more important issue than avoiding this negative; the software must positively encourage accurate processing. So simple data entry of the type that conventionally involved entry of date, invoice number and supplier name is not good enough. I can look at the output from such a system and never have the remotest idea as to what the entries mean.

Most small businesses (and remember, that is the focus of this discussion) have a low volume of transactions. Some, such as car parking at a regularly used station are repetitive (I probably have more such entries in my accounts than any other, for example). But those items apart, transactions tend to form part of a narrative tale that describes the activity of the business. That narrative needs to be recorded so that the client, accountant, tax authority and any other user of the information understands what the entry is about. For that reason all transactions of above a pre-set limit agreed with the accountant (£100 being the sum that springs to my mind) would require a free form narrative description to be input to justify the entry. Noting could enhance my use of data more than that and it would also abolish the ludicrous time spent asking clients for information as to the reason for incurring expenses to re-allocate their sundry expense and repair costs.

Then I'd want to have the option of being asked by a client how to account for an item from within the system. There are always going to be situations were the client will not know what to do with a transaction. So I want them to have the option of mailing me as they're processing the data to ask for my opinion on whether the items is tax allowable or not, is an asset or not and even whether it should be included at all, or not. In the meantime I do not want the system to lose track of this transaction or the fact that the enquiry has been made. I want that transaction to be posted into a holding suspense awaiting allocation whilst I could reply to save the client having to re-key the data when the answer comes back. And I'd like my reply to be embedded in the system as part of its audit trail. If ever the decision is then challenged the client then has the defence so often used by larger companies that an opinion on the matter was sought and that the error that followed (if that is agreed to have occurred) was innocent on their part so that no penalty is due.

All of which clearly says that I would want to be able to see the clients records from a distance, and to have the ability to post to them - with their permission if need be, or at least with an automatic audit trail being communicated to them so they were aware of my involvement.

What's the reason for all this so far? I want to maximise the chance of compliance by my tax-paying client so that the risk of their falling foul of the Revenue is minimised as far as possible without me having to read every single petty cash voucher they post. This is largely a protective function.

Then I want proactive functions. I'd like to know when unusual transaction occur. For example, if no posting has taken place on the system for a while I'd like to know. The client might need a call. If a large sales invoice (or maybe purchase) occurs (and pre-agreed limits could be set) I'd like to be told by mail. This might suggest a time when advice is needed. If capital expenditure of above a certain level is recorded I'd like to know. Special care might be needed.

What else? I would want the system to monitor critical events. What are they? Try these:

1) Sales exceeding VAT registration limits (or falling below them) when the client is not registered or vice versa;
2) Persistent payments to a sub-contractor suggesting a pattern of employment is being created;
3) Over dependence on one customer;
4) Excessive debtor days;
5) Bank overdrafts near limits;
6) Excessive drawings in relation to profit;
7) Loans being made to directors.

You get my point I hope: these are risk events. I want to be able to help at these times to ensure that problems are averted. This is added value.

That's what I want to supply. And I want to be told without the client having to call me. Email is needed. Although I will, of course, be dependent upon the client keeping their records up to date.

What else? Easy transfer of data to usable reports. This will include good quality accounts formats but as importantly other information in a form that the client will understand. This might include who are their biggest customers? What was the seasonal pattern of sales? What was the product mix? How do costs break down? Have their been changes over time? Is cash flow sustainable? When will pressure arise? For example, can a report be produced showing that sufficient cash reserves are being retained to cover tax liabilities (a serious issue given that so many people appear quite unable to save)?

And I want all of this to he capable of being dumped with ease into my submission to the Revenue that supports a tax return, because I believe that this is vital whatever they say on the processing of data. Remember that whilst enquiries are chosen without any reference being made to supporting information supplied, including that in the 'white boxes', enquiries can also be resolved by reference to them. I think this an essential part of client service. And for that reason I want accounts that tell a story. Because for many people their self employment is a life narrative. This information should be a record of that process. And as such they should be able to add free text explanation, or even files, whenever and wherever they want if it helps them to make the accounts system an integral part of their management process.

Am I being optimistic? Sure as heck I am. Is it possible? Why not? Is anyone trying? I think so. FreeAgentCentral asked me to dream. I have no commercial ties with them.