Cloud Based Accounting: The Cloud, The Books, The Bookkeeper, and His Death

The use of cloud-based accounting software began to surface about five years ago, amongst my clients. Since then, I’ve seen more young entrepreneurs adopting software quickly and with minimum training.  Accounting software, desktop or cloud-based, is supposed to be user friendly for non-accountants, and this has been the case since accounting software came onto the scene in the 1990s. Now, with cloud-based accounting platforms, the clumsy need to transfer an actual physical file to various users has been eliminated, providing instant access to anyone with authorization.

I have been reading articles on how cloud-based platforms will finally put the nail in the coffin for bookkeepers.  Well, let’s discuss this prediction.

Yes, more and more business owners, particularly the young ones, are the “bookkeepers” of their own businesses today. How hard can it be? The bank can download all the deposits and payments. The credit card company can also download all the purchases and payments. The owner/bookkeeper only needs to accept the transactions and, presto, the transactions are “in the books”. The same goes for all other matters that relate to CRA filings, such as GST owing, payroll remittance owing, the issuing of T4s to employees, and filing with CRA. The “books” contain all that information just from the business owner pressing a few keys and running a few intuitive processes.

Except things are never that simple. As we approach the fall, I’m already receiving phone calls from a handful of clients who have been contacted by the CRA because the GST return or the T4 filed with CRA is not consistent with the information CRA has on file. These clients all had a similar answer to the CRA’s questions: they had simply taken the information that was in the “books” and filed with CRA.

The idea that a business owner, with limited knowledge of T4 and GST filings, knows how to complete these documents correctly just by using cloud-based software is like a driver saying she can fix the car because she drives it. The thing with bad bookkeeping is that the financial statements will still print. The GST returns will still get filed. The T4s for the employees will still print with figures on them. A car fixed by a non-qualified mechanic will not start. On the other hand, the CRA will still accept your filings today, until you get audited.

The flip side of this discussion is the “bookkeeper”. The problem with the profession is it is unregulated. Anyone can call himself a bookkeeper with zero training in bookkeeping. The really good bookkeepers are so busy they cannot accept any more clients. I have tried begging them to accept more work, to no avail. And I have seen my share of bookkeepers who have little training.

Yes, I am noticing that more clients have cut out the bookkeeper. At year end, despite imperfect bookkeeping, they are paying the professional accounting firm to reconcile the various accounts that need to be reconciled: bank, accounts receivable and accounts payable, GST, payroll, just to name a few. These are not the tasks that accounting firms generally want to do. We want to deal with tax planning and compliance, not trying to figure out if our client received his biggest receivables yet.

When I am trying to reconcile my client’s books, I am frustrated. The good bookkeeping firms are too busy to accept my client, and the untrained bookkeepers just want more clients from me. This kind of bookkeeper seldom asks for assistance. I guess they don’t know what they don’t know.

Cloud-based accounting platforms have not killed the bookkeeper professional. But these platforms are the death of untrained bookkeepers. And that’s a good thing.