Case Study

We recently analysed in detail how one small company does their accounts.

1) Make sales and make out invoices – about 100 per month.

2) Customer pays and they mark the invoice as being paid.

3) Every second month they capture their bank account into a separate system. This helps produce a VAT report.

4) The company gives all his accounts to his accountant who recaptures all the transactions and submits annual accounts to SARS. They admit the company is behind with their accounts.

What’s wrong with the above?
1) It’s very good to make sales and make invoices.

2) When payment is received it is good to mark the invoice as being paid. However, how does the company know that the customer has paid? Two ways – either they get a cheque/credit card or the customer makes an internet deposit. In other words, the company is forced to check their bank account very day. If they don’t then they can forget to allocate payment from a customer. If they mark an invoice as being paid without reference to the bank account they stand a risk of not being paid.

3) It’s very bad to capture the bank account every second month! What happens if the customer’s cheque bounces? How would the company know about it? What happens if unauthorised transactions are sent through the bank account? What happens if the bank makes an error? If they delay for two months before capturing their bank account, they are likely to have forgotten some of the transactions they have made in the preceding two months. It’s so much easier to remember what yesterday’s Internet payment referred to, than 8 weeks ago. It will take longer to allocate those expenses from two months ago. It is also more time consuming to check on which transaction carries VAT if this is done every two months, rather than the following day. The owner did not mention petty cash. However all companies spend petty cash. If petty cash is not included in the calculations the company will lose money, and the owner will not be reimbursed. Most small companies we have analysed get their petty cash wrong. At the best they claim their petty cash, but forget to claim the INPUT Vat.

4) What a waste of time. Why do all your accounting work only to get your accountant to recapture it? What a waste of time and money! To go further and admit that the accountant is behind with their accounts, and still let the accountant recapture the accounts, using a different package leaves me speechless. What is the point of using an accountant and paying large amounts of money in order to be behind in his work?

From our viewpoint, the most frustrating aspect is the company has done 95% of the work already and spent 150% of the time that he should be spending on his accounts. He just does not know it! He is now paying his accountant 5 times as much as he should to redo all the work he has already done.

This is the owner’s current way of doing accounts

The EconoAccounting way

In summary, using the current method the owner to duplicates his work every day – he checks his bank account each day, but only captures his cashbook once every two month. His is prone to error, and ignoring various transactions. He then gets his accountant, at a fee, to duplicate the work he has already done.

The EconoAccounting method says that he only needs to look at his bank statement and not capture it. That he can import the bank statement accurately. That this will automatically cause most of his accounts to be automatically allocated. At this point, all his accounts are done. He can print out a VAT report, he can produce management accounts, and he can supply audit ready accounts to his accountant who will not have to re-capture the accounts.
He will save time in how he is currently doing his accounts. He will save on accountant’s fees.

Most of all, and the true benefit of using EconoAccounting: He will have accounts when he did not previously have accounts. He will have control and be able to manage his business.

Many small businesses do not use or need all the features in EconoAccounting.

EconoAccounting Lite is a way to allow us to discount the product to users, who otherwise do not need and do not want to spend too much on an accounting package.

I still emphasize that the cost of a package is irrelevant if it is not being used!

We hope that EconoAccounting Lite will be used. It’s low price - R570 incl should encourage businesses to take that first step towards getting their books up to date.

It’s worthwhile explaining how we arrived at the price of R570, in comparision with EconoAccounting at R2900. The full EconoAccounting is supported via a free training course costing R570 for the Lite version. Also Econoaccounting supports multiple companies on the same PC whereas Lite is only one company. We also offer unlimited phone-in support to EconoAccounting users, whereas the Lite users get only 5 free phone-in support calls. Of course both sets of users are able to get support via email and our web site. Most of our costs relate to support, so if we can reduce the cost of support, we can reduce the cost of the product!

To help all our users, we will be expanding our web site - more FAQs, and we are preparing a Flash movie presentation explaining exactly how to use the product.

We get many enquiries from people asking about our accounting system, and a million reasons from people not to do their accounts.

Many people have enquired up to two years ago - but still have not made the decision. Obviously I’d like them to decide on us, but the bigger picture is to wonder what they have been doing for the past two years. The answer is they have NOT BEEN DOING their accounts. They are now two years more out of date without any chance whatsoever of getting up to date.

Another person enquired 8 months ago - we sent him a trial CD and offered a live demo. He phoned again recently - still had not looked at the trial CD, and still would not take us up on the offer of a demo. What has he been doing for the past 6 months? He finally decided to stick with his “existing DOS based package”. Now he never had his accounts up to date in the first place with his DOS based package. Does he really expect me to believe him that he will have proper accounts for the first time ever? This is just a good reason not to do anything.

We also often get enquiries from people saying they already have an accounting package - and asking for the price of EconoAccounting. Why on earth would anyone want to change a perfectly working package. Note - they don’t ask if we have a specific feature that they need - they just want a price. I always tell everyone that if they have an accounting system and it works for them - then keep it - why change to something else, unless they are not using the package. They still ask us - just to find another excuse for not doing their books.

Another person enquired about EconoAccounting 18 months ago. Recently she enquired again - telling us that her accountant had spoken her out of making the purchase decision. What has she been doing for the past 18 months? Absolutely nothing - her accounts are still in a mess - but 18 months worse off. Her accountant is far happier - has more work to do and can charge her more (BTW not all accountants behave in this way).

I have no doubt that in 12 months time I’ll receive another call from her enquiring about our product, just as the man who wants to use a DOS based package is going to call complaining that DOS is no longer supported on his new PC, and the DOS program itself is no longer supported. In both cases they will find their accounts are another 12 months out of date - but they will be able to console themselves by saying that they have investigated the market and will soon make a decision.

IT’S A NO BRAINER - EITHER DO YOUR ACCOUNTS OR CLOSE DOWN YOUR BUSINESS.
As I’ve said, I’d like you to decide on EconoAccounting, but either way do something - and GET YOUR ACCOUNTS AND BUSINESS UP TO DATE.

Nedbank are currently advertising free banking for two years to SMMEs, provided they take a loan of R100 000.

What I did find interesting is one of their requirements is that the business
must produce management accounts. They say:

A critical component of the ongoing relationship is the submission of monthly MANAGEMENT ACCOUNTS to Nedbank Small Business Services.

This should not be seen as policing, rather as part of relationship building. These accounts should be produced anyway for effective management. A free flow of information would facilitate easy decision-making especially where additional finance is required for expansion purposes, or to meet important orders or merely to see the business through difficult times.

and they go on to say:

It should be noted that if Management Accounts are not received on a monthly basis, Nedbank Small Business Services reserves the right to send in consultants to prepare these accounts. The costs incurred will be for the account of the
applicant.

I could not agree more with them - especially their second paragraph.

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