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Optimizing Digital Toolkits for Canadian Firms with Michael Shafman CEO NexCloud Consulting

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Our second installment with Michael Shafman from NexCloud Consulting covers the importance of clean data and data governance. Data is more than index and search; you also have to address the data sources to determine what initial issues may be. 

Clean data is a fundamental starting part of your accounting tech stack journey, but choosing optimal workflows and what integrations will provide the best outcome is the next jump-off point.

What is the importance of clean data for accounting firms and clients in Canada?

Clean data is essential. To truly have clean, usable data, you have to address the data as it comes in. If you review your data once every six months or do it only at year-end, it will not be clean, and clients will be missing information that you require. 

Think about it: You will potentially lose receipts throughout the year, lose track of transactions or bill payments, and in the end, you could be in real trouble. Do you have access to what those transactions were in the first place? And if you look at your bank statement (as opposed to your credit card), in general, the answer will most likely be no. 

But you look at your account statements, and you see 58 account transfers and 20 e-transfers, and it just says transfer or e-transfer with likely reference code, what are you going to do? You’re going to have to go to your bank and make a request for them to recover it. That can become an expensive endeavor of both time and money, and then maybe they can recover it with the details you need. 

But at that point, it could take months, and your tax deadlines may have passed, and you still have no idea what’s going on in your accounts. I think this is especially important for small business owners. When you have all these transactions, especially cash in cash out, it can be challenging to track.  

For the accountants out there, when you’re looking at unknown cash-out transactions, you know there can be very different implications if you’re trying to determine whether it’s an expense or a shareholder withdrawal on both personal and corporate tax.

If your books are messy, it makes these processes even more difficult to navigate.

What are the steps that you take to create a results-driven ecosystem?

First, you have to determine what your organization can handle. You can go ahead and give someone the perfect cloud accounting infrastructure, but if it’s not the right fit, it can overwhelm them and lead to poor implementation. 

Like many things, you can easily make things overly complicated; but there are simple ones too. You have to start with, what does every single business need? Well, they need their books; they need their GL. That is the foundation. 

But then you have to have an easy way of bringing in and sorting through all your transactions. The most considerable portion of this volume is typically expenses. And that’s where Dext comes in. The way that you can access a search and download backups that you can potentially need is essential. 

So, where do people need to start? Develop your core tech stack. For me, the core tech includes a piece for Accounting, expense management, and  banking information. 

From there, you can start to think about what services you want to offer your clients and what additional tech you potentially need to incorporate to fill the gaps. There’s a difference between bringing in systems to help with the bookkeeping and looking at systems to help you provide value-add services. You have to consider where your expertise lies between finance and operations in those decisions. 

What is your best tip for someone starting to piece together their tech stack? How can they be successful?

Step one is to start small and build a process. You first need to think about what you want to accomplish. What do you want to take on? Just because somebody is willing to pay you for something and pay you well does not mean it’s actually profitable and worth your investment. 

Suppose it bleeds your time, bleeds your resources, or costs you other business relationships. If whatever you are trying to bring on causes issues and concerns and strife with current customers who are consistent clients who have been around and are loyal. That’s a problem. 

In general, accounting firms do not hire in advance; they generally do not have excess capacity. Most underestimate the requirements and the understanding of how even to test these systems to know how they’re going to work when they start getting into cloud accounting. 

There’s no such thing as a cookie-cutter setup when you look at the details (relatively) What I’ve seen through onboarding hundreds of clients, when you look at features, there can be ten different ways of doing the same thing. 

Okay, that’s great. But the organization needs to determine who’s doing it and what their specific workflow should be. Is it an admin, an employee, or a business owner? Are you using Xero or QBO? and what needs to integrate with those tools. What are your workflows for how those systems connect? How do you follow through? Are you paying out of expensive reports or company credit cards? Are you paying them by check, EFT, or through direct deposit, or as part of payroll? 

It’s not as simple as saying there’s a knowledge base for any system out there, and from reading it, you can determine exactly how your business will apply using features to your workflows. 

Just because a system is designed to be used one way does not mean that that’s the way you should use it or is the optimal way. There are different ways of using them. It depends on your needs and client scenarios and the services you’re trying to provide. 

You have to build your stack around your business, your clients, your service offerings, and your expertise.