Today financial information is digital.
A study by the Canadian Payments Association in 2018 revealed cheques now represent only 14% of payments – down from 97% in 1985. So the bookkeeping techniques and workflows are being re-engineered as we speak. Done right bookkeeping workflows should resemble the flow shown in the infographic below:
What we used to call bookkeeping doesn’t really exist any more. Certified Professional Bookkeepers automate connections between their clients banks and accounting software. Effectively these bookkeepers are attempting to function as accountants.
Effectively bookkeepers are trying to carve out a niche in the small business accounting market for themselves. They work with software vendors and get “certified”. They then offer expertise in particular accounting software packages and document management systems.
This present CPA practitioners with a dilemma:
Do you offer in-house bookkeeping services to compete, or try to find a good bookkeeping firm to partner with?
If you offer in-house bookkeeping you should be reviewing the work and your hourly rate may take a hit. What’s more you’ll need to sell bookkeeping services to keep your staff busy. If you work with a bookkeeping firm they can quickly add $150 to $200 per month (or more) in a combination of software licenses and bookkeeping services.
If your small business client comes to you having paid around $2,000 or more in bookkeeping there’s an implicit understanding that the year end fee will be reduced to compensate.
This is particularly galling since the monthly financials aren’t generally well understood by most small business owners – if they are even accurate.
The story is the same as it was 30 years ago. I still remember a new technology client in the 1990s came to me and expected a discount because “all of the bookkeeping was done”. The problem was that virtually none of their US-dollar denominated transactions used the correct exchange rate. While the bookkeeping firm had recorded “almost all” of the the transactions, I still had to figure out which of the 1.5% of transactions were actually missing.
As a result I was forced to convert all of the transactions denominated in US dollars to the appropriate rate AND scan all of the Canadian dollar transactions to identify the the missing transactions.
All of which resembles a complete re-work.
In the end my client was appreciative when his company received over $300,000 in tax refunds for eligible scientific research and experiment development work.