Archives for July 2019

Bookkeeping is very useful. Really? You have accurate records. So what, what can you do with them? Here are a few boilerplate suggestions why the effort is worthwhile.

INVESTMENT DECISIONS
Plans need to be documented to be reviewed by partners and staff, bankers and advisers. And while words and attractive images speak volumes, at the end of the day, any investment is defined by the financial results.
Producing realistic forecasts for anything except greenfield startups requires some historical data to begin with, to establish trends and estimate costs.
So QED – without good enough records, the task becomes guesswork.

BUDGETTING
After investment decisions have been taken, the more humdrum requirement is to construct annual / monthly / weekly / daily budgets to compare with actual financial events and make control corrections in the business to keep it on track.

FINANCIAL RESULTS
When people talk about bookkeeping they usually refer to financial books and records in the back office.
As used to be referred to in the North of England , scorekeepers provide the useful knowledge of how his business is doing to the owner.
Well designed systems to record transactions in a timely and accurate manner facilitate this.

OPERATIONAL SCOREKEEPING
Business records are lets face it primarily financial. But there is more – the operational metrics that give substance to the day to day business also generate a vast amount of data which, if deemed important enough, needs to be recorded and reported just as the dollars and cents. The principle is the same.

FINANCIAL / OPERATIONAL CONTROL
With the vision in place, and a practical budget compiled, the next step in realising the dream is to compare actual revenues, costs, returns and operations. The final essential is to take action if the variances which result are detrimental to goals. The most obvious is cost cutting, but this can backfire if done without deliberation on the consequences.

COMPLIANCE COSTS
Costs of compliance with government regulation are notorious and with good reason. If you are to avoid costly hours *wasted* finding / recreating the necessary records and reports, start with well kept books.

FUNDAMENTALS DONT CHANGE OVER TIME
To a degree accurate records are just that, and the principal is timeless, whether the counter is a piece of string with knots, an abacus, or a spreadsheet. Computers have however enlarged the volume or data kept and the speed of retrieval to levels undreampt of before.

THE IMPACT OF COMPUTERS
Simple machines
The micochip enabled production of handheld electronic calculators, a very significant improvement on pencil, paper and mental arithmetic. Accuracy and speed improved.

Semi automation – programs
With the advent of programmable calculators, a new world of “macro” driven calculations was possible achieving even more speed and efficiency in repetitive calculation. At approximately the same time the Pc was introduced and the first “apps” or bookkeeping programs/systems appeared which ended the era of the paper bound double entry ledger and quill pen. There was no turning back, but the bookkeeper merely had a new set of tools, not a new world.

Full automation – AI + self learning programs
Industrial scale databases and the programs that run them enabled businesses to control ever more aspects of their books, integrating the operations of each area of business from marketing to production to finance. Collaboration was possible and yet the accountants role just got bigger as a result, rather than disappearing.

However looking to the future with technology moving ever faster, we could easily foresee artificial intelligence finally removing most of the traditional tasks of the bookkeeper for ever. In the futurist dream the central machine could monitor operations and issue requests for the necessary data, record it and report all without much human intervention.

While such a situation would only apply to the largest businsses, there is no doubt it is technically feasible within cost constraints and value – add considerations. But its not here yet!

THE PAST
– BOOKKEEPERS HAVE ALWAYS BEEN THERE

Civilisations have always been obsessed with accurate records – for both legal and accounting purposes. Its nothing new, reflecting the perennial need to prove transactions in all areas, commercial, government and family.
Memorable examples abound – Egypt, Rome, their graneries, and wine cellars, slave holders and traders and the meticulous records kept of their “cargo” on atlantic crossings in ships logs.

THE PRESENT
– NEW DIMENSIONS, NEW TOOLS BUT THE SAME OBSESSION

In the modern era we have new dimensions – the size and scope of society and enterprise has exploded – as witnessed by the size of companies on the world’s stock markets.

This has been enabled by the impact of computers – these new tools of the trade have changed what is possible and the speed of the transaction.

However the same obsession with accurate books and their importance for life and business decisions remains.

FUTURE
Looking forward, the pace of IT change is relentless.

Remarkable things have been achieved so far, and even more will be achieved next 30 years,
Full automation and thinking robots capable of adapting and changing are already here
and may be unleashed within 30 yrs, almost certainly and within 100 yrs.
So the timescale may be 3 to 4 generations for a machine to be able to do all the tasks of a bookkeeper.

BUT even then there will be an effort required of bookkeepers – not to do the recording but still to check the validity or IT output and the direction the self programming machines have taken, and critically, there will always be the scale of an enterprise to consider. Machine automation with robots may or may not be a good thing, but are unlikely to be cost beneficial for small to medium sized enterprises, which still form the vast majority of registered businesses.