Like to know whether sharing accounts data with banks is a good idea?
The Australian Financial Review online today carries a story about ‘Two Way Data Sharing’ between Cloud Based Accounting systems like Xero and banks. NAB is participating when a customer gives permission for Xero to share the data.
This innovation, whilst creating efficiencies in dealing with banks for SMEs, also carries potential risks.
If the data being shared isn’t accurate it could create all kinds of hassles for SMEs, who are contacted by their lender due to numbers not stacking up. In our work with SMEs and helping them to gather accurate information from accounting systems, we find lots of mistakes being made. For example if just one large transaction is entered incorrectly into a system it could create an alert to the bank that things aren’t travelling very well for the business. E.g. purchase of an asset gets allocated to an account in the Profit and Loss, rather than the Balance Sheet, creating what looks like a sudden drop in profitability.
Conversely this could be a great incentive for SMEs to focus more attention on getting their accounts right. We find many use accounting systems for just producing invoices and don’t use the full system capacity to accurately account for monthly profit. If systems are used correctly they can provide fantastic insight into the true picture of profitability. Additionally ‘Add-On’ systems to Xero and the like, such as job management (when setup correctly) can provide great opportunity for reviewing profitability on jobs, accuracy of quoting/tendering compared to the actual results on a job, as well as labour productivity.