Takashi Yamaguchi, English Speaking Japanese Tax Accountant
Tel/Fax : 03-6312-3320
営業時間 : 9:00 - 18:00 (月~金)

Beyond the Cloud

In my previous blog, I talked about how you can good use of the the Cloud Accounting.
Just “It is convenient! It made my life much easier!” would be enough happy for you.
But there is still room for pursuing further benefit. You should try it.
This time I will talk about how you can bring out further benefit from the Cloud Accounting.

Actuals and books

Before going into the main subject, let me touch on the relationship between “actuals” and “books”.
Under the principle of current bookkeeping, double entry bookkeeping, the balance of various booking account will be accumulated in the books.
Assuming that there was a cash of 150,000 yen at the cashier of Mr. A’s store at a certain point in time (X1).
Mr. A went to the bank the next day (X2) and opened a deposit account and deposit 100,000 yen of cash from the cash register.
Furthermore, the next day (X3), it is assumed that the merchandise of the store has been sold for 20,000 yen in cash.
Well, how much is the cash register balance at the time of X3 and the balance of the bank account respectively?
The cash is 150- 100+ 20 =70 thousand yen, the bank account is 100 thousand yen.
These are the balance of “actuals”, i.e., physical present balance of Mr. A’s cash and the bank account.
You can confirm the actual cash balance by tallying up bills and coins in the register.
You can confirm the actual cash balance in the bank account by filling in your bankbook or checking the balance with ATM or internet banking service.

Then, how much is the balance on “books”?
That is just result of Mr. A’s bookkeeping.
If Mr. A had kept book only up to the point of X1, the “cash” balance on the book remains at 150,000 yen.
If it is only up to the time of X2, it is 50,000 yen.
The balance of “actual” cash and the balance on “books” match for the first time after firmly keeping books up to the time of X 3.
With the same theory, unless Mr. A has done bookkeeping timely manner, the “actual” cash balance in the bank account and the “book” balance of the bank account never match.

In other words, the actual outstanding balance is representing true result of the transaction took place.
On the other hand, it can be said that the book balance is artificial result recreated on the books as the record of the transactions.
If the record is accurate, seeing the record means seeing the truth.
If the record is incorrect or in delay, the person who saw it cannot know the truth as of the day.

The year-end book closing process is like a procedure of reconciliation between “the record” and “the truth”.
If your records were outdated, you need to examine the transaction history then update “the records” so that you can present “the truth”.
If the actual cash balance (truth) of the cash register does not match the book balance (record), you should investigate the unknown truth such as unrecorded sales, unrecorded cash deposits, or unrecorded expense payment.

The more time lapsed, the more difficult to find out the truth.
You will not able to update the record unless I know the truth.
It means the year-end book closing becomes quite difficult.

Real-time processing enables you see the actual balance

As I mentioned before, the Cloud Accounting enables you to import the transaction record of bank accounts and credit card directly into your books.
Even if yourself do not keep books promptly, it is possible to record a large amount of transaction data automatically in the books.
Some of the Cloud Accounting can capture cash-in and cash-out records from the linked cash register, expense reimbursement request from employees.
Like this, linking with various external data, you can save cost and resource for bookkeeping and make it easier to reconcile books (records) and actuals (the truth).
This definitely makes the year-end book closing easier.

By linking data more frequently, you can update books in real time, so you can see the books more representing the truth.
This enables timely review on current balance of each booking account.
So, you can compare the actual results as of now with your business projection / budget, and foresee whether current cash balance is enough to cover funding needs in the near future.
Like this, you can obtain necessary information for running your business.

Some people may ask you “How was it compared to the previous year?”.
If you know the most recent books balances more frequently, you can provide them with more informative analysis such as “Which account has changed significantly compared to the previous month” or “What was the best-selling merchandise of the same day in the last week”.
Based on such information, you can make business judgements such as “Let’s do bargain this month to increase more cash sales” or “Let’s increase merchandise XX this week.”

Earlier ago, you would have had to whip up your accountant to obtain such real-time information.
Now you do not have to do it if you fully command the data linkage function of the Cloud Accounting. You may be able to close your books daily basis as well.
In addition, by providing real-time trial balance to external experts such as tax accountants more frequent and timely manner, you would be able to level out their workload that is likely to be concentrated at fiscal yearend, forecast tax payment and/or make favorable tax election before fiscal year ends.
The Cloud Accounting will provide you with real-time information that could contribute to your decision making. It is another benefit of the Cloud Accounting.

The Cloud Accounting will create time for recreation 

The Cloud Accounting would be able to save your cost and resources for bookkeeping. i.e. “recording” of “past” business events. But it cannot handle “projection” or “planning” for “future” events. They remain in brainchild of human beings and it is only human beings entitled to “decision making”.
The Cloud Accounting can offer various “guess works” applying AI but they cannot make final call whether it is correct or not. It is our job.
Therefore, Journal entry cannot be completed only by AI unless it is a very simple transaction pattern.
So, you should think in this way.
The Cloud Accounting cannot substitute human beings but create more time for human beings so than we can spend more time for value-added work such as accurate forecast, planning and decision making.
In another word, the Cloud Accounting can best perform only with collaboration by human beings.

Finally, I would like to emphasize that you should use “spare time” productively.
You should not drastically reduce headcount or compensation for your in-house accountants just because the Cloud Accounting saved their time.
You should rather spend such spare time and cost for new initiatives or suspended projects, revitalization of your employees and organization that might have been exhausted due to overwork.
I recently heard that the labor productivity of Japanese small and medium enterprises is less than half that of large companies.
If rationalization of the back office work of SMEs is promoted, their productivity should improve significantly.
I believe that the Cloud Accounting will be a powerful tool for rationalizing back office operations.

I would like to work with you to make good use of it.

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