Reducing the Cost of Compliance: The Right Information

Reducing the Cost of Compliance: The Right Information

This is one of a series of articles published by Business Fitness on the steps to reducing the cost of a compliance job. For more articles on this topic, head to the compliance category.

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Getting the right information the first time, every time, will dramatically improve your job turn-around times and cut the costs of completing compliance jobs. To do this, every accounting practice must address each of the following:

– Accessing the client’s data;

– Gathering source documents; and

– Conducting pre-commencement reviews.

Accessing the client’s data

 

Working with the client’s data file can at times be difficult and unpredictable. Not only are the many different types of accounting software programmes available to business clients (as well as many different versions of those programmes), but the skill level of the person responsible for entering and reconciling the client’s data varies from client to client.

Even those clients who rely on the services of a bookkeeper (whether external or internal to the client’s organisation) can experience problems when collating the data for a compliance job. From missing transactions to unreconciled accounts and incorrect allocation of GST codes to source documents that are no longer available, these problems add costly hours to the total time taken to complete the compliance job.

The single ledger

Newly available technologies and online tools are becoming increasingly popular in efforts to combat problems such as these, in particular and tools that facilitate a ‘single ledger’. By ‘single ledger’ we mean a client’s accounting ledger that stays in the one place and is not passed between client and accountant. It is a single file that can be accessed by both the accountant and the client.

While many accountants may be able to think of only one brand or company when they think of a single ledger tool, there are in fact a number of ways to access this solution. For example, logging in remotely to a client’s system using an online meeting tool such as ‘Team Viewer’, ‘GoToMeeting’ or ‘Log Me In’ can be just as effective as relying on a cloud-based single ledger data file.

Reducing time – and costs!

 

Relying on a single ledger typically results in substantial time (and therefore cost) savings when it comes to completing compliance jobs. Consider the time it takes to reverse journals from the prior year, enter a new trial balance produced from the client’s system, and then post numerous journals in your accounting ledger package. This time would be substantially reduced should you simply reconcile and create journals directly on the client’s live file.

In addition, by working using a single ledger, the time involved in restoring and upgrading data files is eliminated, and so is the need to exchange large data files backwards and forwards between client and accountant. Plus, there is no need for the accountant to maintain multiple subscriptions for different accounting packages.

The need for educating clients

 

In terms of educating the client’s staff, the aim should be to have all transactions processed correctly the first time. It is unlikely that this will be achieved immediately in the first year, but it should definitely be something that improves assuming the lines of communication are open between the accountant and the client’s staff. Educating the client’s staff (including an external bookkeeper) should help in reducing job turn-around times and costs, not to mention providing a more complete picture of the client’s financial position on a monthly basis (rather than just a year-end basis).

The accountant has a great opportunity here to play the part of an adviser by educating the client’s bookkeeper or administrative staff on preparing accounts in accordance with the accountants needs and preferences. For example, this education might include:

– How to prepare an accounts manual (particularly for unusual transactions such as the sale and purchase of assets);

– How to handle refunds to suppliers and customers;

– How to review an account that does not reconcile; and

– How to handle GST and payroll adjustments.

The accountant should encourage the client’s bookkeeper to do as much of the word as is reasonable, for example standing journals, depreciation, reconciliation of accounts and preparation of workpapers. In this case, however, the accountant must be prepared to be available to answer questions and provide guidance.

Another advantage of working from a single ledger is that is facilitates the clients performing more of the reconciliation and data entry tasks themselves. This is because, due to the nature of the single ledger, the accountant is able to provide immediate assistance to the client if they experience problems on the first attempt.

Source documents

 

Being clear and concise about precisely what information and documents are needed from a client will go a long way towards reducing job pick up/put down time on a compliance job, improving overall job turn-around times and reducing costs.

The accountant should provide all clients with a checklist or questionnaire which clearly lists all of the information required (in plain language, not accounting language). The accountant should keep this checklist or questionnaire in mind when processing the current year’s work and make sure to add further information requests as required in order to make the process run even more smoothly the following year.

The accountant should also consider here which technology might make it easier for the client to deliver the information. Educating clients about (and encouraging them to use) scanning, email, client portals and online file sharing tools will make a significant difference to the time it takes clients to provide the accountant with the required information and documents.

It is worth mentioning here that encouraging clients to transition to a paperless (or simply less paper) office will also be of major assistance in this regard, for it is always easier and faster to find and send documents which are already in electronic format than it is to find and send paper documents.

Pre-commencement review

 

Best practice dictates that no work should commence until all the information (data file, source documents, engagement letter, budgets etc.) has been prepared and collated, and that a team member with the technical knowledge to know what is missing or incomplete has reviewed the information.

It is only once all missing or incomplete information has been received and the engagement letter signed that work should commence. Working in this way will ensure that there are fewer (or no!) ‘pause points’ requiring job put down/pick up, and therefore a faster job turn-around time and reduced costs of completing the compliance job.

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Written by HowNowHQ View all posts by this author →

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