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Cloud Accounting Hides What is Really Happening Behind the Scenes

As I have written before, cloud-based accounting is a system. You must have a systems mindset to manage it.

Working with cloud-based accounting software is like turning on a firehose of data.

Bank feeds. Credit card feeds. Shopify orders. Document feeds. Plooto feeds (do not worry I will explain!)

The power of cloud-based accounting is this – data from multiple sources can feed into your accounting software.

Why is that good?

It saves your team time. Accounting becomes dynamic, happening in real-time. No clerks entering debits and credits transaction by transaction at discrete times during the month.

And herein lies a problem my friends. Two problems to be precise.

With cloud-based accounting, documents flow into your software without human intervention. Hundreds, thousands if you are a bigger company.

If those systems are not managed or understood a big mess can get created! It is the old cliché, garbage in, garbage out. Except now the garbage is flying in at lightning speed one document after another.
This can be challenging to unravel. And time consuming.

There are three things you must do to manage cloud-based accounting…

Number One – Set-Up Your Systems Correctly

You must design your systems elegantly. You must understand how information flows into your software and how to manage it, in real-time.

For example, when you set up bank feeds your software will (in the background, usually daily) log in to your bank and pull your banking transactions into your accounting software.

It will look for matches to transactions you have entered. When it finds a match, it will suggest you click “ok” to reconcile.

It is important to ensure that the systems of matching are aligned with the actual transactions entered.
This is one system.

You may have invoices being synced from an online shopping system, like Shopify.

Here, if you do not have the syncing setup correctly your inventory, sales tax reporting, accounts receivable, sales orders…pretty much everything…. could end up being a mess.

Number Two – Manage Your Systems

It is imperative that you have a highly focused technician, who understands software to manage the systems.

You will have transactions flowing into your software from various sources (feeds). However, you cannot assume that the transactions are correct. Some transactions can be pre-set to always be posted in the same way. That is fine.

An example would be fixed rent. The rent you pay to the landlord is always the same and will always get posted to the same account. You can set up a transaction like this to flow in without any human intervention.

Does the same apply to telephone bills? You can setup your system to fetch the bill from your phone provider (log in the phone provider and post the transaction). It can be setup for auto pay.

But wait, stop. What if the bill is wrong? What is the phone provider charged you $500 for something you did not use?

You will want your sharp technician to check exceptions to the rules and flag them for review.

Number Three – Technicians Must be Trained in Accounting

It may seem like, with cloud accounting, that you do not need to know how accounting works!

This is not true. Cloud accounting is still accounting. Every transaction in accounting has at least two sides.

For every event in accounting, at least two (often quite a few) things happen. Every single transaction has two sides. There is no such thing as a one-sided transaction in accounting.

Take a sale. You sell a product. What happens?

Someone now owes you something. Accounts receivable has gone up. Sales has gone up.

Taxes were involved, so taxes went up.

Your inventory went down, and at the same time, Cost of Goods Sold went up.

All these debits and credits must balance.

Debits and credits can be very confusing to non-accountants.

Therefore, your accounting technicians must understand basic accounting and how each transaction changes various accounts on your Balance Sheet and Income Statement.

A systems driven person, not understanding basic bookkeeping, will not see the background entries being done by the software.

The problem emerges when you need to unravel a mess.

In Conclusion

Cloud accounting is fast. It is a system. To manage correctly you need to have it managed by people who understand software, systems, and basic bookkeeping.

With one of those three ingredients missing, a mess can emerge.

Thanks for reading…

The Real Breakthrough of Cloud-Based Accounting

The last 7 years has seen an explosion in cloud-based software…

Not everyone has fully grasped what this has made available.

What small businesses (and by small I mean up to $100 million in sales) have to choose from now is spectacular.

It is the realization of a dream.

A dream you say? Come on, you are an accountant!

A 1999 Prophesy

Yes, a dream. I will never forget a conversation I had– way back in the old days of 1999. This was when I first had the vision of serving our clients in the cloud.

A man said to me – “Mark, the true power of the emerging internet is not social media. It will be the speed that you can process financial transactions”.

That stuck with me. Well, speed, I have come to learn is not exactly the true breakthrough of the net.

The breakthrough is automation.

Let me explain.

The Evolution

Back in the day (ha-ha) of the 90s, software for small business had evolved to a pretty high level. QuickBooks desktop started as a tool for simple businesses like trade contractors. As it evolved more and more features were added. Businesses with sales volumes of $10-20 million would use QuickBooks.

Even uber-big software programs designed as ERP systems for mega businesses did not have some of the cool features built-in to little, old Quickbooks.

In other words, there was a gap. Boring, featureless software that could handle huge transaction volumes on the one hand. And very inexpensive, feature-rich software that could do lots. The kicker was that they would shake off the rails under higher transaction loads.

Here is what was handicapping software developers…

…the architecture.

A Design Flaw

Let us go back to 1999. You find a good accounting package like QuickBooks. You need a powerful inventory management system. Throw in a super-cool CRM package. Dang, these were not available inside QuickBooks.

So, you shop around for those. Problem number 1 – you would not be able to find a great inventory package that would run independent of QuickBooks.

And here is the kicker…

…no software talked to each other in those days of old just 20 years ago.

Why? Each software company kept their code private and proprietary.

What did you do then? You shopped for an enterprise-level software that did it all. Inventory management. Customer relationship management. Sales order entry.

There is the problem with that. No software can ever be, nor will ever be good at all things. It will have one, maybe two great strengths. Everything else will suck.

Worse, it will be a highly specialized system with less customers and the response time for support will be high.

Customization costs will be astronomical.

The Cloud Breakthrough

Then…along…comes…cloud-based software…

And the dream of software talking to each other beautifully, seamlessly, accurately was born.

This is the current world we live in – a hyper-specialized world where you can buy software that does one tiny function. But here is the cool thing – what happens when you get hyper-specialized?

You get really, really expert at that one thing.

And the proprietary problem mentioned above? Gone. Disappeared. Almost all small accounting packages have open APIs. What is an API? An Application Program Interface.

In simple terms, they let other software programs enter in! Now, software programmers could write a cool, specialized software program and hook into Xero or QuickBooks Online!

The result? It turned basic accounting, although very functional and cool programs like Xero into 800-pound gorillas!

I will illustrate an example of where we are at for a typical small business. This is not exaggerated. It is real.

A Real Life Example

We have clients with 9 separate software programs that together function as a well-oiled machine:

  1. At the core and heart of it all, a basic online accounting for reporting, accounts payable, accounts receivable
  2. Online payroll software that connects to (1)
  3. Inventory management system that tracks unlimited inventory items, in multiple warehouses, in multiple currencies, able to track lot numbers, do drop shipments, cost in real-time, and on and on. This connects seamlessly to (1) above;
  4. Online order entry system for customers to order products connecting to (3) above;
  5. Approval software that routes incoming vendor bills to department heads for approval. It too talks politely to number (1);
  6. Software that chases accounts receivable resulting in fast turnover of accounts receivable. This one connects to (1) above;
  7. Online bill payment software connecting to (1) above;
  8. Document extraction software doing basic data entry, connecting to (1) above;
  9. Finally, stunning month-end reporting package connecting to (1) above. Oh, and it does rolling 3-way, 36-month forecasting. (Message me if you want to know what a 3-way forecast is).

Oh, wait, I can hear your objections! I do not want 9 separate pieces of software! I do not care how nicely they talk to each other! That looks complicated and unwieldy!

Sorry to be blunt. You are wrong. I will tell you why.

What is the Alternative?

The alternative is this. Finding a software vendor – could be cloud-based – that does all of that in one simple package! Be super cool, right?

No. no. no. It is not. It is not because firstly, that software will not do each of those functions well. Number two, it will be way, way more expensive. And number 3 it will become super-expensive as you ask for customizations for things the software above will do. And do much better.

The architecture is all wrong. The thinking is all wrong. It is not where we have evolved to. It is backwards thinking. In the old days – the 1990s – you had to do this. Remember, the software in the pre-cloud days, did not communicate at all, let alone nicely.

If you want a fourth reason, here it is. What happens when that custom, Mr. Big Software Package fails? You have everything in one basket.

However, if one piece of that 9-item software suite fails, you only need to focus on one piece of your business.

Another objection I hear is cost. I hear people say, “I only pay $450 a year for QuickBooks desktop. I do not want to pay for 9 pieces of software!”

The good news is some of the software above is free when you use Xero. That would be the document extraction. Others are super low cost. As in, $25/month. The one doing all the heavy lifting will likely be the inventory management system. That is more expensive, yes. However, compared to a full-blown, all-in-one ERP system it is ultra-low-cost.

What We Do

But here is what you must know. The level of automation, and cost savings are radical. And the 9-suite software system mentioned above becomes very, very inexpensive. There is a catch…

(Warning. Warning. Beep. Beep. Commercial coming. Ok, you have been warned). You need someone who will setup the automation for you in a way that takes advantage of all the features available in the cloud software out there. Someone who will not only impeccably set it up. They will train you and co-manage with you. If needed they will run the whole thing for you. That would be us, at ControllershipPLUS.

Breath. Commercial is over.

Thanks for reading…

The Massive Efficiency of Cloud Accounting

There can be so much hype when new technology kicks in.

Also, monthly software fees to go online add up to more than desktop software.

Some people compare the price of online accounting to Quickbooks Desktop.

Likely QuickBooks Desktop is a lot less expensive.

This is false economy.

Here is why…

Online Accounting is a System

Online accounting is vastly different from traditional accounting.

In traditional accounting, clerks spend all their time on data entry.

To show you, here are all the steps to process a supplier bill.

Step 1 – The Supplier Mails/Emails Bill

The bookkeeper takes the vendor bill and enters the following:

  1. Date
  2. Looks up supplier name
  3. Records the GST/PST portion
  4. Records the amount
  5. Records the account to post to
Step 2 – The Bill is Paid

The bill is paid by cutting a cheque or doing an Electronic Fund Transfer (EFT).

The bookkeeper must record the payment in the accounting system:

  1. Do a payment entry to record a decrease to the bank
  2. Record the reduction in amount owing to that vendor
Step 3 – Bank is Reconciled

Once a month the bookkeeper must now reconcile the bank.

He/she does that by printing off the bank statement or viewing it online.

They must match each transaction from the bank to a transaction in the accounting software.

Note that all the 3 steps above take time. They are prone to errors (keying in so many numbers dates and other details).

It is a terrible misuse of a good bookkeeper’s intelligence. They become data entry clerks.

Now, compare the above steps to processing a bill using online accounting software.

I am assuming 3 software programs to do this:

  1. HubDoc for data extraction
  2. Xero for the accounting software (could be Quickbooks Online)
  3. Online bill payment service (Plooto, a Canadian company)
Step 1 – Vendor Emails Bills to HubDoc

HubDoc does the following:

Extracts for you:

  1. Date
  2. Invoice number
  3. Vendor
  4. Amount owing
  5. GST
  6. PST
  7. Due date

HubDoc codes the vendor bill to the same account as the last time you did it.

High-end accounting technician reviews what HubDoc did above. He/she glances over to ensure amounts for taxes and total bill, date, and account code are correct.

(Note the error rate for extraction with HubDoc is ridiculously small. Some bills if they are faint or formatted weirdly need some human intervention. I have seen almost zero error rate on the numbers).

Technician, after a quick once over, clicks “publish”.

Here is the recap of what the human does:

  1. Quick eyeball check of what the software “data clerk” did
  2. Click “Publish”
Step 2 – Bill Moves to Accounting Software

Now the bill moves automatically to Xero with a PDF copy attached to the transaction.

The transaction was recorded automatically.

Step 3 – Bill Moves to Plooto for Payment

The PDF copy of the bill is automatically fetched by Plooto.

The owner or manager now has 4 mouse clicks to do:

  1. Choose bill for payment
  2. Choose your bank account to pay from if you have more than one
  3. Clicks continue
  4. Clicks “process payment”
Step 4 – Recording Above Payment

Plooto then records the payment inside your accounting software (Xero) automatically.

It reduces the bank account and records the payment against that vendor bill, so your accounts payable goes down.

Step 5 – Bank Reconciliation

Xero has bank feeds. What bank feeds do is log onto your bank automatically and feed (hence “bank feeds”) the transactions into Xero, your accounting software.

Here is what your bookkeeper does:

  • He/she goes to bank reconciliation screen and sees where the system has auto-matched your transactions with the bank transaction. When matched they turn green.
  • She/he clicks “ok”.
Summary of Workflows

Look at the table below for a summary. The system does most of the work for you. Compare to the little the technician does.

Done for You by Software Bookkeeper Tasks
Document extraction for each bill:

  • Date
  • Amount
  • GST
  • PST
  • Vendor
  • Account Code
Glance over for accuracy

Clicks “publish”

Records each transaction in accounting software:

  • Increases accounts payable
  • Increases the expense
  • Decreases GST owing (recoverable)
  • Adds PST to expense amount (non-recoverable)
  • Attaches PDF copy of bill

  • HubDoc files the bill by vendor and pushes to Dropbox or Google Drive, etc.
  • It adds copy of bill to the specific transaction in accounting software

Paying Bill:

  • Transfers bill to Plooto (secure online bill payment service)
  • Records payment in accounting software by:
    • Decreasing accounts payable
    • Decreasing the bank, you paid it from





4 mouse clicks

Reconciling bank: 

  • System matches the bank item to the transaction in your accounting software


Reviews transactions every day or so.

Clicks “ok” on green system matches

As you can see HubDoc can easily replace full-time data clerks. Yes, exceptions must be managed. However, just look at all the steps done by the system above and the very few mouse clicks by the technician. The time freed up can go into systems management, and higher-end reporting.

What is the downside?

Mindset. Traditional bookkeepers are addicted to processing documents. They often bypass systems to feed their addiction to paper processing and data entry.

21st Century accounting technicians are tech savvy systems-focused users. They manage the systems and look for exceptions.

HubDoc is now free with a Xero subscription. Xero runs about $40 CAD/month. Plooto is just $25/month CAD and that includes 10 payments. Subsequent payments are just $.75.

When you add up the costs you can see it is low!

Imagine the times savings though! Would you rather have your bookkeeper do data entry, or high-level accounting that adds real value?

Thanks for reading..