Lisa Greenwood: The True Power of Computerised Accounts Software

During my career I have seen the transition of clients using manual records, ranging from a carrier bag of invoices to beautifully maintained simplex books, to the use of computerised accounting software both on a desktop and in the cloud. Many businesses use accounting software in its simplest form to record day-to-day entries and not use the full functionality of the program. Accountancy software, if set up correctly and with some forethought, can provide an excellent source of financial data to help the business go forward.

Accounts software should always be set up to provide the most appropriate information for the business and not for the accountant. It is important to work with the client to assess what information they would like to manage and what data is crucial to the business operation. Often businesses will think that there are limitations to reports that the software can produce, whereas thinking outside of the box can ensure that it provides everything it needs.

A couple of areas that are frequently set up incorrectly or underutilised are the nominal coding structure and the use of departments.

Starting with the nominal code structure, all systems have a standard code list incorporated in them and this is based on very generic nominal codes. Too often, businesses use these codes “straight out of the box” and they are not always the most appropriate ones for a business to use. Recently I saw a client who is involved in the rental of motor vehicles and currently they measure only “vehicle running costs” as an expense heading. When I asked about how they cost a job or prepare a mileage rate it was based on gut instinct and not fact. The one nominal code included fuel, repairs, road tax, servicing and insurance and therefore really was not helpful in terms of analysing data. Additional nominal codes were created to separate out all the component costs in order that further analysis could be obtained easily. It is also really important to ensure that sensible descriptions are included within the narrative element of entering a purchase invoice. For example if posting a rent invoice it should be the period that the rent covers, if posting as a supplier invoice there is no need to enter the supplier name as this can be found easily without it.

The same company has approximately 50-60 vehicles of varying ages and again has no formal mechanism by which to determine the costs and income of each vehicle. In order to deal with this we have used the department code field and created each vehicle as a department. This means that the associated income and costs can now be recorded not only against the relevant heading but against a specific vehicle.  As the company uses fuel cards which monitor the mileage of the vehicle, this is noted in the extra reference field. This means that for each vehicle using data downloaded into excel, we can obtain a rate per mile for each vehicle on each cost element. Data entry takes no longer to do but needs more consideration to ensure that the relevant fields are completed. However now the company has the ability to review a profit and loss account for each vehicle.

The power of this information will be really useful as it means that fact can be used when replacing vehicles, pricing models can be adapted and better decisions can be made regarding new or older vehicles.

Making Tax Digital will see more businesses having to get rid of manual records and adopt a computerised system instead. This should be looked on as an opportunity and not a burden. The quality and type of information available at a touch of button far exceeds that from a manual system.

This is one simple example of how a little thought into the structure of an accounting system can really add value to a business. All of the accounts staff at Lambert Chapman receive training on Sage, Quickbooks and Xero to name a few. It is never our intention to force a particular program on a client but to help them select the most appropriate program for their use.

Posted by Lisa Greenwood