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The Unconventional Guide to Work

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What's The Future of Bookkeeping? Lets Take a Look

Bookkeeping is a proud and ancient profession. The earliest accounting records date back 7,000 years, and were found in the ruins of ancient Babylon, Assyria and Sumeria. These tokens recorded the growth of crops and herds. Later, as kings rose to power, they hired "bookkeepers" to manage their stores and tax collection.

Bookkeeping has come a long way since those days, and has seen many changes and innovations to business. But as more and more accountancy work is being automated, many bookkeepers are looking to the future with trepidation. Is bookkeeping becoming redundant?

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Example of ancient Babylonian accounts.

It is a Truth, Universally Acknowledged, that Desktop Accounting is Becoming Extinct

Just as the ancient token system gave way to more advanced methods, so too are we experiencing a paradigm shift in bookkeeping methodology. More and more business owners are shifting their processes online, especially as smartphones and mobile technology are becoming increasingly intuitive and available. Business owners want to be able to access their accounts anywhere in the world, from any device.

With Xero's cloud-based accounting software, accounting is becoming increasingly automated. We're living in the age of the paperless, mobile and global office, and there's little call for data entry or book-balancing. As a bookkeeper whose business model has revolved around data entry for literally thousands of years, the prospect can be quite scary.

But it doesn't have to be.

The Books are Changing, and so are the Bookkeepers

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Instead of fearing the impact of cloud technology, bookkeepers should be embracing it. Cloud-based accounting makes bookkeeping much more efficient. It is not the harbinger of doom for your business, but a tool you can use to improve your system.

Think about it. You have access to all the information you need, 24 hours a day. Neither you nor the client has to print out screeds of paper or travel across the city to deliver files. You can run your bookkeeping business from any location, and work with clients from all corners of the globe.

Xero is free for accountants and bookkeepers, and you don't have to worry about upgrading your licence every time there is a change – that's all taken care of for you as part of your subscription. Your software outlay is significantly reduced. For the client, the low-monthly subscription fee is definitely manageable. To a large extent, the automated bank feeds and rule-based reconciliation mean a large chunk of a bookkeeper's time is now freed up. What are you going to do with this time?

Well, you could take on more clients, for one. More clients = more revenue. And that's always a good thing. As business (particularly small business) flourishes in the wake of the global recession, more and more people will need the services of a bookkeeper. Cloud-based accounting software will never eliminate the need for bookkeepers, because a person needs the financial knowledge to understand what is happening with these programs. Most business owners would rather outsource this to someone with the knowhow than learn themselves.

Alternatively, cloud-based accounting is opening up opportunities for bookkeepers to expand their role. As long as the bookkeeper doesn't go outside the parameters placed on their business through the relevant legislation, they can add many new services to their repertoire.

Any part of business where a sale, payment, or invoice is involved comes under the bookkeeper's umbrella. Think of additional services you might be able to provide under payroll, accounts payable, accounts receivable, stock, point-of-sale, e-commerce, etc. It's all about helping your client to become more efficient and giving the client advice about the best way to record their information.

The blog BoxFreeIT interviewed Rob Comelli, CEO of the Association of Accounting Technicians, about the future role of bookkeepers in Australia. He had some really interesting insights into the value bookkeepers can add to their businesses without breaking the rules around being a BAS Agent.

Collaboration Opportunities between Bookkeepers and Accountants

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There can sometimes be tension between the two camps, as bookkeepers and accountants can sometimes view their services as competitive, rather than complimentary. By forging a collaborative relationship with an accountancy firm, you can offer your clients the best of both worlds.

Xero published a blog post describing the collaborative relationship between an Australian-based bookkeeper and accountancy firm. Toni McCulloch from Accounting North explains that the main benefit of working closely with Briohny de Vere of Bees Knees Bookkeeping was that she could trust incoming information to be accurate and fully reconciled. This allows the accounting firm to focus on the issues of profit, cashflow and growth for the business.

With the old desktop accounting systems, there was always a gap between the bookkeeper's and accountant's work, and this often caused friction as each saw their role as separate and didn't communicate with the other. But if both parties are using Xero, they can access all the information at the same time, and adding WorkflowMax into the mix means collaboration and job tracking are made even easier.

So how should this relationship work? Generally, the day-to-day accounts functions would be overseen by the bookkeeper, who can defer to the accountant if any tricky problems arise. Accountants will generally work on company set up, depreciation, and getting the best result at tax time. Bookkeepers can take care of any overflow work from the accountant, and can bring up any issues they notice with the accountant before the year end.

Accountants and bookkeepers can also pool resources when generating leads and finding new business, and can refer clients to each other, increasing wealth for all concerned.

Xero take a proactive approach in encouraging accountants and bookkeepers to work together through training, webinars and the Xerocon conference.

But What If I Don't WANT To Change?

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Well, you don't have to. Nobody is forcing bookkeepers to embrace cloud-based accounting.

The truth is, not all bookkeepers are keen to embrace cloud-based technology. And there are plenty of clients out there who feel the same way. Many business owners will resist change even more than you, and will want to keep using the same systems they've used for decades. If you're not keen on learning new technology, then focus on providing bookkeeping solutions for these clients.

Just be aware that these cloud non-adapters are a rapidly shrinking market, and their business profits are often shrinking as well.

Perhaps it's time you thought about your reasons behind resisting change? Is it that you feel too old to reshape your business? Are you scared because you're being taken out of your comfort zone? Do you feel overwhelmed by the technology? Perhaps if you educate yourself more on what cloud-based accounting software can actually do, you might change your mind? There's only one way to find out …

Positioning Yourself As A Consultant

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So what do you do if your client wants to cut overhead by doing their books themselves? With the economic recession still at the forefront of many business decisions, clients business owners are taking a hard look at their expenses, and cutting back on professional services such as bookkeeping is their first cost-saving strategy. With cloud-based accounting, a client is able to automate so much of the process; they may come to believe you are replaceable. This is the biggest concern of bookkeepers in the changing environment.

But it's important not to write that client off immediately. We all know that bookkeepers provide value beyond simple data entry, but the client might not understand that. By listening to their problems, you might be able to come up with a solution that could benefit you both.

You could demonstrate that, looking at their time on an hourly rate, it is more cost-effective for them to hire you than it is for them to do the books themselves. You might, for instance, be able to use their financial reports show them where they can trim fat from their business in another area.

If they are truly set on doing their books themselves, they will probably need some training in order to understand how the system works and what they need to do month-to-month with their accounts. After training they may need on-going support as they learn the intricacies of the system. And who better to provide this training than you?

Show them ways of improving their efficiencies in other areas, perhaps by using workflow management software like WorkflowMax, saving them money and increasing their productivity. A bookkeeper can be particularly effective in the area of business-based technology. Demonstrate your value through the extra advice you provide.

Offer a pared-back service where you only perform some of your usual tasks and they conduct the rest. For example, you could do the bank reconciliation each month, or offer a quarterly review of the books. This will help your client identify problems before end-of-year, but won't be as expensive as your full bookkeeping service. This type of work alone could satisfy a freelance bookkeeper's workload.

This type of arrangement is good for your bottom line too because your fee as a trainer and consultant should be at a higher rate than what you’re charging for basic monthly bookkeeping services.

Action Steps for Bookkeepers

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So what can you do right now to help facilitate change within your business? Here are some simple steps that bookkeepers should be thinking about right now if they want to grow and flourish in the future.

  • Get familiar with the technology. This means not only learning all the features of Xero, but also learning about the add-ons, such as WorkflowMax, and the value they can provide to your clients. This means using the different available technology yourself, attending all your local training sessions, utilizing online training tools, and attending events such as Xerocon.
  • Learn from Thought-Leaders in the Accounting/Bookkeeping Space. One of the best ways to figure out the future direction of your accounting business is to see what others have done and learn how they did it. You can do this by attending industry conferences, such as The Bookkeepers Summit and Xerocon, and also by reading case studies and blog posts online. The Pure Bookkeeping Blog, The Freelance Bookkeeper Blog and Xero blog are great places to start.
  • Figure out your new offerings. The role of the bookkeeper is shifting from data entry, to data management. Brainstorm the types of services and packages you might offer to clients. Think about where your skills and interests lie, and talk to your clients about where they're feeling stuck in business. You might be able to add value by offering software solutions to help clients manage payroll, e-commerce and point-of-sale, or assist clients who want to do their own accounts with monitoring services.
  • Learn new skills. Look for gaps in your skillset that might prevent you from providing your new offerings (as decided in 3). Now is the time to start training yourself to give business advice and build on your IT skills. Learning more about solutions-focus, networking and marketing your business could also be extremely beneficial at this crucial stage of your business.
  • Think about how you might rebrand your business. Are you moving from a bookkeeping model to one of an indispensable business consultant? Remember, "consultants" get paid more than bookkeepers, so you might want to alter your branding to reflect the changes in your business model. For this stage, you might need the advice of a branding agency, graphic designer or copywriter.
  • Forge new collaborative business relationships. There are many people and companies offering complimentary services, such as accountants, tax agents and cloud-computing business advisors. Team up with these people to share resources, offer referrals and give advice to each other. A strong network will help your business thrive.
  • Work together with the technology providers. Ensure they continue to provide the best software solutions for your clients. You are often the people closest to the day-to-day business, and provide valuable insight into what they need.

It's a brave new world for bookkeepers out there, but that doesn't mean the role of the bookkeeper has ended. On the contrary – bookkeepers are more important than ever, but technology is changing their role from that of data entry to one of data management.

By exploiting the new cloud-based technology available through companies like Xero and WorkflowMax, bookkeepers are able to increase their efficiency and become more productive and profitable than ever. The information bookkeepers can impart to business owners makes them a valuable source of advice, and that's always worth paying for.

Bookkeepers with an entrepreneurial spirit are expanding their services to include wider consultancy, and are collaborating with accountants and other B2B services to get better results for everyone.

Bookkeeping is far from dead – it's just evolving. The bookkeeper who collaborates and progresses will always find work.

How is your bookkeeping business changing with technology?

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