How assumed automation can FU your cash based business

I’m sorting out a mess. Here’s how accounting fails to meet business needs and what you need to do to avoid the same mess.

As a retiree I never thought I’d end up performing a quasi audit but that’s exactly what I’ve been doing the last few weeks on a pro bono basis for a cooperative business that is largely cash transaction based. It’s not been fun. Here’s why.

I was asked to help build a reporting solution based on a well known and successful SME cloud based system.

Like any trained accountant, the first thing I did was to review the trial balance. To my horror I found four glaring issues:

1. Cash (as recorded) wasn’t balanced nor reconciled

2. No one was checking whether VAT (Sales Tax for my American friends) as noted in statutory returns matched the liability in the TB. Here’s what I discovered:

3. According to the accounts there should be a good chunk of change in the business safe. Nobody know!!

4. According to the accounting record, the amount due to pay VAT is about 40% higher than that shown in the auto generated return.

How did this happen? Easy.

1. The people tasked with recording these transactions were told to make entries based upon….wait for it…spreadsheet created journals that failed to code VAT on the right line items. These same people are good at doing what they’re told without understanding the underlying principles. How awesome is that?

2. The system was not set up or optimised to manage cash and card receipts on a daily basis. Duh? Yes!

3. Possible integrations between POS and accounting were given short shrift for accounting entry purposes. In short they selected a brand rather than an integration that is fit for purpose.

Net net, I’m now doing a shit ton of grunt work to identify the journal batches where errors are obvious and correcting accordingly. Jeez - I thought I’d left that behind over 30 years ago. But heh, it’s good to reactivate dormant brain cells. I guess.

I’ve long been an advocate of technology that improves people’s lives but it still amazes me how those who set up systems fail to consider the business needs or the capabilities of those who have to use them.

This is a classic case of an accountant who did the right thing but was brain dead when it came to implementation by non-accounting types. He (It must have been a he. No woman I know would have been so stupid) gave them a method that should only be reserved for those who’ve been through a 3-4 year course on journal entry creation AKA. a proper accounting qualification/certification.

The good news is that once I’ve shovelled this shit pile out of the way, the system can be automated with good controls on physical cash and taxes. That will be the cherry on this particular cake.

Right now they’re budgeting 30 hours a month for this work. I reckon with some relatively simple changes, I can collapse that to 4-5 hours max and still automate reporting on which the finance group can take action.

If you are faced with a similar situation - don’t call me. This is definitely my last cash accounting rodeo.