Accounting Software
June-July 2017
Free Online Accounting Software
A new client recently made us aware that there is free online accounting software that they have been using. It is called Wave and, like Xero or MYOB Essentials, is designed with small businesses in mind. It is US-based, which means some of the terminology is different to what we are used to. ‘Users’ are called ‘collaborators’, for example, the Profit & Loss report is called ‘Income Statement’ and GST is ‘Sales Tax’.
Otherwise it seems to do the things that you expect accounting software to do. You can connect your bank accounts to it so that transactions are imported, create invoices and bills, and have all the usual reports. One drawback is that, as with MYOB Essentials, Wave does not have any tracking function so you will not be able to do your tracking of grant money through here.
Their web site does not reveal how they can keep their product free. Their privacy policy prohibits sharing your information with anyone else other than as aggregate statistics, however they may be able to offer targeted marketing to some companies and they may email you with offers they think are of relevance to you.
Wave offers other services, most notably the ability to accept credit cards and also give small business loans, which are fee- and/or interest-bearing, and providing free accounting software may be their main marketing tool for those services.
As with all online software, make sure you regularly copy the General Ledger to your organisation’s PC. Companies can fold without warning and servers may be switched off from one day to the next.
We are yet to have a good look at it, but if you are starting out or want something better than your own spreadsheet or manual cashbook it’s definitely worth trying out. If you do, let us know your experiences.
December 2016
Unbalancing Xero
Yep, it can be done. Even if you have bank feeds activated, and Xero shows you the green tick indicating you are fully reconciled, your actual bank balance may still be different to the one Xero shows you.
Xero itself recommends to occasionally check an actual bank statement against Xero – for good reason. The bank balance that Xero shows in the Balance Sheet or on the dashboard is not the figure imported from the bank statement. It is the balance of Xero’s bank ledger accounts.
Sometimes people choose to delete a transaction during the reconciliation process or at some other time. Xero then erases this transaction from your bank ledger, even though it appears on your bank statement. Since the transaction no longer shows up in the bank ledger, it no longer requires reconciliation, so Xero doesn’t see an issue.
This is actually fairly common, and the difference has occasionally amounted to a few thousand dollars. By now we have a bit of experience fixing this particular issue, but it is not an easy one to work out when you are first confronted with it, so contact us if you find your Xero balance does not agree with your bank statements.
On the face of it it seems strange that Xero allows transactions to be deleted that were imported directly from the bank. The reason for this is that Xero cannot be certain that its import function is 100% accurate, and it does very occasionally omit or duplicate imported lines. This error is more common with some banks than others, and also with particular types of accounts. For this reason the user must have the option of correcting those errors.
GST and Accounting Software
One of the irritating thing about GST is that you need to turn on your brain when inputting or coding transactions in your accounting software, including CCA’s Accounting 4.0.
GST fields are overwriteable in all accounting software for a simple reason: Transactions that ‘normally’ have GST sometimes may not and vice versa. Your accounting software does not know which transactions are GST-liable – only you do.
Let’s say you have a ‘supervision’ account which you use for payments to counsellors for your staff and volunteers. The account is set to deduct GST at the normal rate from these payments by default. However, many counsellors in private practice are not registered for GST. For payments to such counsellors you need to change the GST field of the transaction: in Xero from ‘15% GST on expenses’ to ‘no tax’; in MYOB from ‘S15’ to ‘N-T’, in CCA Accounting 4.0 from ‘True’ to ‘False’. You don’t need to change the GST setting for the account, only for that particular transaction.
How do you know if a supplier is GST-registered or not? If they are they must supply you with an invoice headed ‘Tax Invoice’, containing their GST registration number and business name. Without such a tax invoice you are not allowed to claim GST on this transaction!
Not changing the GST field in software is by far the biggest source of GST mistakes for our clients, sometimes amounting to thousands of dollars where GST is paid on exempt grants or where it is claimed on not-registered contractors.
Where GST is underpaid in any given GST period by $500 or more Inland Revenue will charge use-of-money interest on the amount, which accumulates the longer the mistake remains undiscovered or unreported.
‘Locking’ your Financial Year
May 2023
The major accounting software packages all offer options to ‘lock’ periods in your accounts, meaning that people will not be able to make entries that fall into that period. For example, your financial year ended on 31 December 2023, and after your accountant finalised all the bookkeeping and other entries for that year, they ‘locked’ the accounts up until that date.
‘Locks’ can always easily be undone again, and that may be necessary if significant errors are discovered later, for example during an audit process. But most entries into past periods are done by accident:
- At the beginning of a new calendar year, people often accidentally still use the last year (e.g.. 15 January 2022 instead of 2023).
- Sometimes dates are completely mistyped, and software does not generally query a date even if it is 10 years in the past.
- Invoices or bills are sometimes entered deliberately with a past date, because it had been overlooked and that was the date on the invoice.
- Invoices or bills from previous periods are frequently deleted, either because they have been reconciled incorrectly, because the organisation does not expect to collect them anymore, or because the invoice was written out in error.
Because your end-of-year reports must have the previous year’s figures in them for comparison, and these figures must be the same as what you reported in that year, such late additions create a major hassle for accountants, and are often very time-consuming to fix as it is not always easy to discover where the late entry happened. For sophisticated fraudsters there is also an opportunity here to slip transactions under people’s radars.
We recommend to ‘lock’ completed periods, i.e. after your accounts are final, to prevent these errors and keep your reporting, even your monthly reports, consistent. Some organisations even ‘lock’ each month for this reason.
In MYOB Account Right locking dates can be set under Set-up – Preferences, then ‘Security’ tab.
In MYOB Essentials locking dates are set when you click on the name of your organisation (top right of the menu), then ‘Business details’ and scroll to Financials year settings.
In Xero go to ‘Accounting’ – ‘Advanced’ – ‘Financial Settings’.
Xero or Nothing?
January 2024
Over the last few years, Xero has quietly achieved complete market dominance for accounting software in the not-for-profit sector. This is despite the fact that Xero does not advertise to that sector, nor has introduced any not-for-profit-specific meaningful functionality. And while they give discounts to registered charities, this is also not advertised or even mentioned anywhere. And getting Xero on the phone has become almost impossible for any mere mortal.
Even though not designed with not-for-profits in mind, Xero is the most useful accounting software for us on the market. It has been much more user-friendly and easier to operate than the competition that preceded it, which means time and money saved, despite the high fees. So – has the choice come down to Xero or nothing?
Perhaps not. Xero’s biggest competitor is MYOB, whose customers have been abandoning it in droves, and MYOB has been exceptionally slow to react. However, it’s new version of ‘Essentials’, now called MYOB Business, might actually be easier to use and give better functionality than the behemoth Xero has become. ‘Business’ is not to be confused with the clunky desktop-based AccountRight versions.
Like Xero, ‘Business’ is 100% online based, and has always been a credible alternative for small businesses. In the last year or so, however, they have added the missing functionality the absence of which would have put a lot of not-for-profits off. There is now tracking functionality in ‘Business’, and it provides cash-based reports, which all registered charities and most societies need for their reporting to the register. GST functionality has also been improved, and, like Xero, ‘Business’ now adjusts GST returns for corrections made to past periods. It makes it a bit more obvious than Xero what it’s done, too, and asks for approval rather than just assuming it.
Some of the navigation in ‘Business’ has always beat that of Xero, and that has remained. Reports update lightning-fast and automatically when changing the input dates, for example. It also remembers your last settings, which is a great help if you accidentally closed a window. And when clicking on a number in a profit & loss report or balance sheet, it expands the transactions in a pop-up window, rather than overwriting the existing one like Xero does.
Reports that compare to a previous period, for example income and expenditure this year compared to last, automatically display the variation – a rather helpful tool for both committee meetings and us auditors.
Overall, less functionality may be a good thing for many users. Xero’s asset function, for example, as well as its payroll integration is poorly understood by users, leads to big mistakes, and causes poor reporting for the client and time-intensive corrections at our end. What’s not included can’t go wrong.
MYOB ‘Business’ sells for $50 a month to Xero’s $70 (plans are not fully comparable, but this is what you would have to pay to get the useful features). Both have more basic plans, but you might as well do your own spreadsheet instead for all these plans offer.