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Clients using software to do their own Bookkeeping

Doesn't one strap line promise, "your accounts, done"?

The issue of getting an erroneous set of books from clients has come up on AW before, but perhaps not from the angle that has come to my mind today.  Myself and a fellow Practice owner (more experienced than me) often talk about the state of clients' bookkeeping, and how much effort can be involved in correcting their mistakes - specifically when they use accounting software.  Of course, pretty much the only reason that clients do their own bookkeeping is to avoid the cost of a competent person doing it for them.  However, it often seems that tracing and fixing the errors takes more time and effort on our part than if we had done the bookkeeping in the first place, but the [clients'] expectation is that we are not providing the service, and so we don't charge for it.

Perhaps this needs to be turned on its head and, when a client wants to do their own bookkeeping, we should actually be charging the same, or more, as we would if we were doing it for them.

Of course, some may argue that we could incorporate the expected time into our fees, but that is likely to make us uncompetitive - especially in the current world of automation and AI, and a new online "your accounts, done" for 2p per month volume-based "accountancy" business popping up every month.

Just throwing this out there to get some thoughts from AW members...

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By DJKL
21st Feb 2018 19:34

Some clients can be fair bookkeepers if told what to do, though must admit I prefer bespoke Excel sheets to off the shelf software as it is often faster to correct/tidy.

An effort re education pays dividends, if you tidy their books quarterly make a list of errors corrected as you work and discuss these with client each quarter, that can eradicate the repeat ones and lead to better firm profitability.

I do not see how increasing your charging rates is going to make your more competitive compared with charging for extra time, are these not one and the same under different guises?

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to DJKL
21st Feb 2018 19:49

Good tips there - thanks.

I was saying that increasing rates would make us less competitive.

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21st Feb 2018 20:40

Thank you. I was just about to raise a post like this one on AA. You have put it better than I would have.

It is also an issue we are facing with some of our clients. It does take time to sort out clients bookkeeping. Software providers are selling it as easy DIY bookkeeping. That does not help when it comes to fees.

Going forward I intend to charge for sorting out the bookkeeping if it takes over an hour per quarter.

I am interested to read other perspectives.

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By DJKL
to FirstTab
21st Feb 2018 21:12

Well I already charge, but I am an hourly charger (in arrears), a somewhat endangered species it seems.

Having a very small client list (being part time) does of course help training clients.

I view front end time (which may not get fully billed) as a worthwhile investment but I do not lose many clients (one moved and one retired in last ten years) so I get the payback.

Even simple things like giving them a card wallet labelled "tax docs for accountant" that they hand to you each year works, pointing out that chasing them costs money if they slip up and forget something and adding a line on the fee note re same has an impact re later years.

I had one a few years ago missed giving me a P45 covering a small amount of income (a number of short employments in year plus had a business), of course HMRC noticed the return was missing the data. I sorted for them (with no penalty) and then issued a distinct fee for this, extra £200; actions have a cost is a good lesson to impart.

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to DJKL
21st Feb 2018 21:54

I recall one particular lecturer telling us that if, during his auditor training days, they'd managed to get the sales control account (or for that matter the P/L) at the local steel works down to a difference of less than £50k they'd stop at that juncture and pat themselves on their backs.

Which put yours truly in mind of the materiality concept. Having built an XL workbook of "working papers" in which control accounts write off their differences in the Revenue's favour, I feel that is just deserts for those clients who simply cannot be bothered to write up and/or balance their books. So we reconcile the bank, and the rest becomes their loss (and the Revenue's gain!).

Strange times, in which clients are more mindful of their accountancy fees than their tax bill. Still, we aim to please!

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to I'msorryIhaven'taclue
21st Feb 2018 22:33

I really like this idea! The thing, for me, is that I would be torn between doing this and my duty to do the best job for the client and ensure HMRC are getting the correct amount - no more and no less.

It's also a good point regarding clients being mindful of accountancy fees over the tax bill. This is very frustrating. I've recently had a client move 2 of their services to their bookkeeper because they said they saved so much more with the bookkeeper. The thing is, I was charging less than half of the amount they said they were saving, so I don't know how they calculated such savings!

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to Philosophic1
22nd Feb 2018 12:21

Well I suppose there's a balance between your agency duty to the client to do the best job possible, and your overriding money laundering duties to ensure the client doesn't underpay HMRC.

But I don't subscribe to the "not a penny more, not a penny less of tax" viewpoint. Instead, we do the best job we can for the client with the material we are given. So in many cases a client, having been furnished with a draft set of accounts with control account differences written off in the Revenue's favour, can make an informed choice whether to treat those draft accounts as a start-point (either by getting his bookkeeper to bring the books up to scratch, or by hiring us to correct the bookkeeping); or treat the draft accounts as an end-point and suffer the additional tax.

Not so long ago we'd have dabbled around for many hours or sometimes even days with poor bookkeeping records, effectively correcting them for free within our working papers. For me there's a danger in that (aside from the obvious economic dangers of working for free) in so much as once you pick the head out of the puddle by starting to correct the client's records then you're committed to doing it properly. I guess that sums up my present approach: done properly, or not at all.

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to I'msorryIhaven'taclue
22nd Feb 2018 14:56

Yes - that makes sense. I was going to bring in the whole 'true and fair view' issue, but then that's ultimately the client's lookout, and we're covered by our engagement letters.

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21st Feb 2018 21:48

If one of our clients wishes to do bookeeping themselves that is fine however, we do explain from the outset we are not going to spend hours checking the work they have done.

we have some software that will check for errors and we send the report back to the client to correct themselves.

We also have some clients on a supported service and others that hand the bookeeping over to us. Basicly we give them the choice depending how much they want to pay.

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21st Feb 2018 22:16

Some really good points and insights here already. Thanks!

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By Jim100
21st Feb 2018 22:31

I try to stay away from the book-keeping and charge a one off fee to set everything up for them which includes Cloud Accounting and integrated with the Apps so its nicely automated. I will then setup payroll and other bits. Provide the training and just let them get on with it. I charge a one off fee and then little bit for ongoing support. Clients seem happy with this and prefer using software rather than using excel which is time consuming plus saves them money in the long term and they get a better understanding of their financial data. Normally there isn't much to do in terms of correction when producing the Accounts - I would like to believe it is due to the training provided

With Making Tax Digital may bring more problems with book-keeping.

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to Jim100
22nd Feb 2018 07:43

Jim100 wrote:

With Making Tax Digital may bring more problems with book-keeping.

And who would've thought that, Jim ?

[chorus] Everyone !!

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to Jim100
22nd Feb 2018 10:55

Wow!

A double post - over three hours apart !!

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21st Feb 2018 23:06

For decades this was the norm, ie you had a band of clients who were accounting literate, or employed a bookkeeper, and so the year end work was not that onerous but the rest, either made a half hearted effort, and a mess, or did what they could on spreadsheets and we were left to pick up the pieces at the year end.

The problem was always that, even if we made an effort to train them, or point out where they kept going wrong, we and they just did not have the time during the year to supervise their bookkeeping.

Then six years ago, I moved two of them onto cloud accounting and a revolution begun. This sounds a bit dramatic I know but, within a couple of years, clients who had never done bookkeeping were doing a great job, and those who had struggled with the antique desk stuff like Sage, were enjoying fresh and intuitive software.

All but a couple of tiny clients now use cloud accounting and keep accurate and up to date books, which I can monitor and where I can use the inbuilt fixed asset registers to do the depreciation in real time and I, or even the clients, can account for significant adjustments as the year progresses, eg prepayments.

Consequently the average time it now takes me to prepare the year end accounts is 20% - 30% of what it was 6 years ago, meaning I can spend my time on more valuable stuff.

Key to all of this is that you can train far easier in real time, watching what they are doing and if they get stuck or make a mistake, it's dealt with at the time and they are far less likely to repeat it. Compare that to the 30 mistakes you'd find with a set of books you hadn't seen for a year and having to feed that back to the client in the hope some of it would sink in, by which time they were into the new year and destined already to have made another 15.

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to Paul Scholes
22nd Feb 2018 13:07

Sounds like you're well on top of it, Paul. This sounds very much like where I am aspiring to get to in terms of organisation and Practice profitability. I have very small client base at the moment, so it's a good time to start pushing this way of working.

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to Paul Scholes
23rd Feb 2018 13:40

Im with Paul here cloud QuickBooks has been a great change. I am able to dip into accounts at anytime. I can agree where the line is with clients. So i have one client who simply does his own invoicing we do everthing else but we have a live bank feed and receipt bank account. We get receipts monthly and the quarterly VAT is easy to do. I have others where tbey do it all and i submit the VAT after casting an eye over it for obvious mistakes. In all cases control accounts are not allowed to drift and once accounts are done the software matches the actual accounts and the year is locked down with a password that i dont share with the client so all my opening balances for thd next year are locked in.

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22nd Feb 2018 13:29

So whats new clients have been doing their own book-keeping since the introduction of income tax and some have been using software for the past 30 years!

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to paulgrca.net
22nd Feb 2018 14:21

paulgrca.net wrote:

So whats new clients have been doing their own book-keeping since the introduction of income tax and some have been using software for the past 30 years!


What's new - or rather different to traditional bookkeeping - is that the client now decides which nominal account to allocate the expense. Previously, they just said they'd paid something and we decided.

Whether that's a burden is a different matter. All one can say is - it depends.

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22nd Feb 2018 14:05

Philosophic1 wrote:

I've recently had a client move 2 of their services to their bookkeeper because they said they saved so much more with the bookkeeper. The thing is, I was charging less than half of the amount they said they were saving, so I don't know how they calculated such savings!

Why not offer to review the books after say 3 months of the new bookkeeper? The client has nothing to lose, and it'll flag any deficiencies early doors.

When we used to actively market a bookkeeping service we used the strap-line "Are You Double-Paying for your Bookkeeping?", and went on to elucidate that many people end up paying their accountant to correct the mistakes made by their bookkeepers. Cue some rah-rah along the lines of we get things right first time, so that you only pay once.

We only stopped using that when the penny dropped that the majority of clients were not hiring a bookkeeper but instead DIYing it (which by the time we put things right for free meant that, far from double-paying for their bookkeeping, they were paying zulch for it!).

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to I'msorryIhaven'taclue
22nd Feb 2018 15:04

Great idea! Thanks for that.

I must admit I felt very defeated that day, and was ready to throw the towel in; especially given the amount of hand-holding and running around I did for that client - all part of the service. After 16 years in employed Accounting roles, I'm still working on the resilience needed in Practice. I have much to learn!

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22nd Feb 2018 14:02

Double-post (only three seconds apart though).

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By Ammie
23rd Feb 2018 12:43

All this depends largely on the quality of the client and their attitude towards bookkeeping.
Good quality clients progress and produce a clean reliable set of records. The poorer client will never change until they are forced to by authority.
I have both types of client.
Software is fine when used competently and a nightmare when not. Often it can be in such a mess its quicker to start again.
Bar minor bookkeeping corrections, I charge for material additional work and provide the client with opportunity for avoiding the costly mistakes in the future by training them. Only a few learn!
I would rather earn a profit from client failings rather than HMRC, as suggested.
Its a fine balance, as I am unhappy with producing rubbish on the basis that the input was rubbish, as ultimately it will have my name on it. At the serious end I would part company with the client.
MTD will stress test the sloppy and complacent!!

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to Ammie
23rd Feb 2018 13:06

Ammie wrote:

The poorer client will never change until they are forced to by authority.

You imply that the poorer clients (I assume by "poorer" you mean "not good", as opposed to "not wealthy") are merely being vexatious by not producing well-kept records.

Sometimes, they're just not up to it.

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By Ammie
to lionofludesch
24th Feb 2018 14:02

If they are not up to it and cannot accommodate it then they need to find someone who is or maybe business is not for them, it's not a reason to "wing" it.
"Horse for courses" so to speak.
If they are happy to have a go and pay for any additional work that is fine, if not it's just trying it on.
We all need time to learn and if progress is being made then great and commendable.

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to Ammie
22nd Mar 2018 15:47

Ammie wrote:

If they are not up to it and cannot accommodate it then they need to find someone who is or maybe business is not for them.

That's very understanding of you.

Of course, not everyone can just walk into a "proper job". Some people are self employed because they have no other option. Sure - they're not suited to business but they do what they do to the best of their ability.

Unfortunately, their ability isn't up to much.

I have several self employed clients who'd like nothing more that to go to work every morning, put in a day's work and collect their wage on Friday. Sadly, they live in the Real World.

I don't tell these people to sod off because I can't be bothered. But, still, feel free to kick them when they're down if you wish.

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to Ammie
23rd Feb 2018 14:27

"All this depends largely on the quality of the client and their attitude towards bookkeeping"

I'd have agreed with you a few years back with regard to their bookkeeping abilities, ie when we had just Sage & QBs to chose from, but these days there are 30ish systems out there and so it's much easier to match the books to the client's abilities.

As far as their attitude and quality is concerned, I got fed up trying to coax those clients into the reality that running a business includes a basic understanding of, and respect for, finances, that I asked them to either pay for a bookkeeper or get themselves someone else to hack off.

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By Ammie
to Paul Scholes
24th Feb 2018 13:55

Spot on!

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23rd Feb 2018 12:47

I just kiss the tablet, smile and submit to HMRC. That is how you're supposed to do it isn't it?

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24th Feb 2018 14:10

I am happy for clients to do their own bookkeeping but I do throw in the warning that it will cost more to fix their accounts if they mess it up. It’s important that they are aware of that possibility and their responsibility from the outset.

Generally I think we are poor at teaching our clients how to do bookkeeping. We concentrate on the mechanics of what to input and where. Instead we should have the perspective of what the end result should demonstrate, in particular the balance sheet accounts. Clients who are totally lost when faced with this concept shouldn’t really be doing their own books because they lack the ability to sanity-check their own work.

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to andy.partridge
24th Feb 2018 14:27

andy.partridge wrote:

Generally I think we are poor at teaching our clients how to do bookkeeping.

That's true.

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