Aral Balkan

I run a small business. I don't have a bazillion employees. All of my transactions go through my business bank account. So can anyone tell me why I spend thousands of pounds on fees and go through endless aggravation every VAT quarter and at every business year end to do my accounting?

My bank has all the information it needs to automatically prepare my tax returns. Most of what my accountant does is move figures around from one place to another and ask me what this transaction was for and what that transaction was for. Worst case scenario, I should be able to log on to my bank account, add some meta information to categorize expenses and income and click a button to have the bank file my VAT returns and taxes.

Can you imagine a world where the accounting costs of small businesses begins to approach zero?

As it currently stands, accounting expenses are just another tax on small businesses. One that could easily be reduced dramatically if banks wise up to this amazing business opportunity.

Yes, business opportunity.

Of course it will cost my bank a good sum of money to implement such a system but just think of the rewards: The first bank to offer this value-added service (which I would definitely pay extra for) will corner the market in small business accounts.

At a time when banking has become a commodity and banks are desperately trying to differentiate their services by one-upping each other on percentages, an automated accounting solution for small businesses would be a killer feature, a unique selling point par excellence.

So, dear banks, would you like to steal my idea and make a zillion bucks with it? Please, go right ahead. And, if you need help in implementing it, I'd be more than happy to consult with you to make it happen.

Comments

• One thing to say in the negative about RBS though is they seem to do software updates on the last Tuesday of the month, which is great cos if the fail (as they have done last two months) it makes running payroll on the Wednesday (to make the last Friday payment terms my employees are paid to) something of a stressfull task :-)

  by pete on 2009-01-07 11:37:51

• +1 for FAC. &+1 to Melanie's comment about making bookkeeping a pleasure from someone with a pathological hatred of numbers; it's so easy it only takes a few minutes each month, and maybe an hour max at year end tax return online. As a professional tart I feel obliged to tout my 10% discount referral here, but it's still worth it without this: http://www.freeagentcentral.co.uk/?referrer=278nm879

  by Tom Coady on 2009-01-07 05:17:16

• Thanks for the thoughtful comments and suggestions. Rachel, I know I'm lumping bookkeeping up with accountancy here but for some businesses the former is really mostly what they need. You're right, I would still have an accountant exactly for the reasons you state, but it's mostly the manual reconciliation and bookkeeping that's making my life hell. And manually exporting things from one system only to have my accountant print it out and then enter it into another system (or whatever it is they do) is just mad. I've been meaning to look into both FreeAgent and Xero. I think I may finally do it (thanks, Rachel, Mel). Might be worth looking into this Nixon Williams thing too, Paul, but after a cursory glance it looks like it's only for freelancers/contractors not limited companies. Thanks again for sharing your thoughts and for your helpful suggestions. Pete, I'll keep hoping for the RBS wonder app, then! :)

  by Aral on 2009-01-06 14:27:21

• Hey there Just read your post, we started using FreeAgentCentral (www.freeagentcentral.com) back in October and I think it does most of the things you are talking about in your post. FAC allows you to upload your bank statement and then easily reconcile, it also gives you a running total of corp tax and VAT (and it deals with the flat rate scheme). As it is an online service I can give our accountant a login so she can keep an eye on what is going on. Best of all they use getsatisfaction.com for customer service so if you have any questions you get a quick response. For a ltd company it costs £25 per month. I can actually say that I almost enjoy doing the books now (and no I don't get commission but I am quite evangelical about FAC at the moment). Hope that helps, Mel

  by Melanie Burke on 2009-01-06 14:05:12

• Uh oh, Aral, more "products" for the bank to sell us (which means something they'll probably consider to generate more revenue in these more judicious banking times where fractional reserve bears less fruit and increasing risk ;) I'd appreciate it for one though, or at least a better GUI to interact with the bank... Sometimes these internet banking "applications" (in the loosest sense) seem archaic. Is there any good reason you can only view your account transactions going back just 1 month using HSBC Business banking? Gives a very small window for debugging any errors when reconciling without sifting through stacks of paper. Yeah you can export that "recent transaction list" to Excel which might be compatible with Quickbooks etc but it's excruciatingly basic. You have to become an expert in accounting and taxation just to keep books with these disparate systems! (Or yeah the resulting complexity of tying these things together sustains a whole industry for people as pointed out by Pete, like the sound of RBS bankline btw, out of my league though).

  by Richard Leggett on 2009-01-06 14:19:26

• I agree with the comments about bookkeeping vs. accounting. I do my bookkeeping (+1 for FreeAgentCentral) and have my accountant look over it all to complete the return. He also advises me on plenty of related questions that only a accounting professional can really answer, unless tax planning is a hobby of yours. I would not trust some automated system provided by a bank (of all people) to get all the finer detail right. So the accounting costs for small business will never approach zero - and that's ok like that. Even the guys at FAC say that in most cases you should still have an accountant alongside their product. Dare I say, using FAC has made my bookkeeping almost pleasant, and I typically pay my accountant £350/year or so for the other stuff.

  by Wolf on 2009-01-06 15:00:06

• feel you pain dude. Does seem somewhat crazy that small business (with say a turn-over of just a few hundred '000) to have to fork out for accounts to do what amounts to an easy task that is not that difficult to automate. Depending on the complexity of your business banking there are services close to this in existence already. RBS for example, who I use have a bankline service for business which turn-over is in excess of £1.5m. It's great, and automates jobs like Bank Rec's and summarizing deposits against payments etc for any period you like. It's also really useful to have the scans of any cheques and paying in slips available to view at any time. It still doesn't file you return though :-(. A really only makes life easier for your accountant. The intention here being that there is a time-saving which they should in turn pass on to you. RBS are apparently they are working on the Make-The-User-A-Cup-of-Coffee version at the moment ;-) Problem is, this would put '000 of accountants out of a job, unable to pay their mortgage and therefore homeless and as such a drain on the state system. This country is run by BAD accountants who will look after their own. Guarantee that bloke sitting next to you on the bus smiling like a cheshire cat has NOT just won £50,000 on a lotto scratch card, he's just snowed under with work from clients and customers who need his accounting skills @ times like this.

  by pete on 2009-01-06 12:35:46

• Hi Aral, I use and can highly recommend the fixed-fee (£60+VAT per month) service from Nixon Williams. It's not the fully automated system you envisage but it's fairly painless and good value. Cheers, Paul.

  by Paul Booth on 2009-01-06 13:36:05

• You are really describing bookkeeping here as opposed to what a small business would normally pay an accountant for. I don't pay my accountant to do my bookkeeping. I pay my accountant because he understands the various bits of tax legislation that I have got better things to do than read up on. To remove that cost you need to talk to the government not the banks, as it is the government who are adding more convoluted and complex legislation for small businesses to comply with year on year. Back to bookkeeping. We use Xero.com having switched to it from QuickBooks. It cut the time I spend on bookkeeping massively as it handles exports of data from the bank and I use it for invoicing, tracking payments outstanding and so on. Not all of our financial information is with the bank - for example we take payment for courses via PayPal which I treat as a 'Bank Account' for bookkeeping purposes, sometimes we use cash for taxis and so on, or pay for business expenses out of personal accounts and need to file an expense claim, this needs tracking. I find that this takes very little time as long as I do it straight away and don't let the bills pile up! I'm not sure I'd want my bookkeeping bundled with my bank account, I choose a bank on them being a good bank, and software based on it being good software. The potential for the best bank for my needs not having the best software is fairly high, so I would rather these things were decoupled. What would be most useful would be having better data export from banks into applications like Xero, Sage and Quickbooks - the ability for that data to be fed directly into those applications for example.

  by Rachel Andrew on 2009-01-06 13:46:07

• I'll give FAC a try since my accounting life is hell, too...

  by Stefan Richter on 2009-01-06 19:49:19

• [...] January, I also suggested that my business bank should calculate and file my taxes automatically. The complexity of taxes for small businesses in the UK is something that has inconvenienced me [...]

  by Aral Balkan · 2009 retrospective on 2010-12-31 12:56:07