HOW ACCOUNTING HAS CHANGED LIFE BEFORE QUICKBOOKS EXISTED
A long time ago in an office far away...
Things were very different when I started in accountancy way back when. Firstly there were no computers, everything was done manually. Pencil and paper was the order of the day and thats a great way to learn the basics.
Paper and pencil (so you could rub out the errors and correct)
Everything was done in cashbooks, or analysis paper there would be a Sales Day book, a Purchase day book, a Cash book for bank entries and a Petty Cash book. In addition there would be ledger cards for the Sales and Purchase ledger accounts. Then everything would be put together on large wide analysis paper to make an extended trial balance.
Oh the hours that would be spent when things didn't balance.. all added up with large adding machines. Very quickly we learnt when things were out of balance and they were re added or checked against the till roll listing to find the incorrect entries.. "You call I'll tick off " the conversations around the offices would go.
Oh the hours that would be spent when things didn't balance.. all added up with large adding machines. Very quickly we learnt when things were out of balance and they were re added or checked against the till roll listing to find the incorrect entries.. "You call I'll tick off " the conversations around the offices would go.
Kalamazoo and one write systems
After a while the one write systems came into play, these consisted off carbonised paper held in place, so that you would write once and it would complete three pieces of information at the same time.
For example you would write a cheque out to a purchase ledger supplier which would copy through the carbonised paper to the purchase day book below and the individual purchase ledger account at the same time. This could be a huge time saver- but required training to ensure it was done correctly and regular reordering of all the component parts. It also helped eliminate some errors- as the same number was copied through to 3 places. It wasn't fool proof of course and they were many corrections.. " Dave don't forget to change the carbon copies if you change the top copy as otherwise you cant read it"
Kalamazoo sales reps went busily from office to office selling the new systems and the job pages of the London evening news and standard were full of adverts.. "experienced Kalamazoo bookkeeper required"
For example you would write a cheque out to a purchase ledger supplier which would copy through the carbonised paper to the purchase day book below and the individual purchase ledger account at the same time. This could be a huge time saver- but required training to ensure it was done correctly and regular reordering of all the component parts. It also helped eliminate some errors- as the same number was copied through to 3 places. It wasn't fool proof of course and they were many corrections.. " Dave don't forget to change the carbon copies if you change the top copy as otherwise you cant read it"
Kalamazoo sales reps went busily from office to office selling the new systems and the job pages of the London evening news and standard were full of adverts.. "experienced Kalamazoo bookkeeper required"
The extended trial balance
All the information from the manual records would be compiled together on a very large A3 sheet of analysis paper sometimes 2 , 3 or even 4 A3 sheets were sellotaped together sideways to form a very large extended trial balance.. this may also be 2 to 3 pages deep .
All the nominal ledger accounts would be written in column 1 going downwards and across the top would be written the various headings for example, Opening balances, Sales Day book, Bank account , Purchase day book, Journals etc. each with a debit and credit column.
Depending whether these were monthly, quarterly or yearly accounts would depend on whether you need additional summary pages for the Sales day book etc.
It was a slow long drawn out process and each area of bookkeeping was often delegated to staff responsible for their different areas. i.e. Sales ledger clerk, Purchase ledger clerk,
All the nominal ledger accounts would be written in column 1 going downwards and across the top would be written the various headings for example, Opening balances, Sales Day book, Bank account , Purchase day book, Journals etc. each with a debit and credit column.
Depending whether these were monthly, quarterly or yearly accounts would depend on whether you need additional summary pages for the Sales day book etc.
It was a slow long drawn out process and each area of bookkeeping was often delegated to staff responsible for their different areas. i.e. Sales ledger clerk, Purchase ledger clerk,
At month end
The credit controller would send out "dunning letters" 1 2 and 3 depending upon how old the debt was and what had happened before. If you had set up all parts of your Kalamazoo system correctly ( most people only used parts of it)
At the end of the month as well as compiling the information into a TB (trial balance) the Accountant would record any journals- sometimes into a special journal book but more often than not onto a separate A4 analysis sheet. Then into Profit and Loss and Balance Sheet reports. They would then be given to the secretary ( always a female in the past without exception). "Linda can you please type these up for me to go with the letter and notes I dictated" .. You had to be very nice to the secretary to get her to prioritise your work otherwise it would go to the bottom of her in-tray to be left until another day.
In addition you would draw up an aged debtor report and question the credit controller on why some debts were not being paid.
In addition you would draw up an aged debtor report and question the credit controller on why some debts were not being paid.
Dunning letters
The credit controller would send out dunning letters 1, 2 and 3 depending how old the debt was and what had happened before. These would either be template letters with the secretary typing in the name, address and amount or sometimes hand written. Letters would always be on letterheaded paper and signed by the individual who wrote them. They would then be taken to the post box before the last post and posted 1st or 2nd class.
NCR 42 Accounting machine
If the organisation was a certain size and they could afford it they may have progressed their accounting, or part of it onto an NCR 42 accounting machine.
When I started work in the accounts department of a west end hotel we were lucky enough to have one of these in the reception area. I can only describe it as a mechanical computer.. all moving parts like a giant adding machine with hundreds of buttons. You would have to be a trained NCR42 operator to work one of these. All the room charges were rung up on this and it produced accounts to give to the guest as well as x cards and z cards for the accounts department which summarised the sales into the type of sale, e.g. room, food, drink, beverage, meeting etc and also how it was paid cash, account (sales ledger) Access ( Mastercard) , Barclaycard ( Visa) Amex and Diners club.
Another function of the accounts department was to separate all the parts of the credit card and post them off to the relevant companies for payment.
When I started work in the accounts department of a west end hotel we were lucky enough to have one of these in the reception area. I can only describe it as a mechanical computer.. all moving parts like a giant adding machine with hundreds of buttons. You would have to be a trained NCR42 operator to work one of these. All the room charges were rung up on this and it produced accounts to give to the guest as well as x cards and z cards for the accounts department which summarised the sales into the type of sale, e.g. room, food, drink, beverage, meeting etc and also how it was paid cash, account (sales ledger) Access ( Mastercard) , Barclaycard ( Visa) Amex and Diners club.
Another function of the accounts department was to separate all the parts of the credit card and post them off to the relevant companies for payment.
Fax
Sometime in the early 1980s fax machines began to appear. I remember the very first which were a cylindrical shape and spun around very fast until eventually an image appeared like magic. Very soon fax machines were everywhere and urgent accounts and letters were sent by fax rather than trusting to the post or sent "by bike".
Golf ball typewriters
Accounts were being typed up by secretaries across the land and new IBM golf ball typewriter appeared this revolutionary system meant the keys would never jamb up again.
Bureau accounting
Computers were beginning to appear but they were main frames that look a whole room to house them and a cluster of computer technicians to run them. The majority of businesses could never afford them so began computer bureau accounting.
We would spend hours filling in forms with account numbers dates and amounts they would then be sent by bike to the bureau to be keyed or punched into the computer by a "computer operator". This was a far from glamourous job and required less skill than a secretary.
Later that week the results would be returned by bike and we would pore over them wondering why the results were not as intended. If the operator had mis keyed you would get free rerun and the results reprinted however if as often were the entries were miscoded or there were further late journals then the 2nd or 3rd run had to be paid for.
Schedules were still produced by hand on analysis pads and there was a detachment between the input and output . It was very difficult for juniors to see the process and therefore understand what was going on, accounting had to be learnt from the theory rather than actually seeing the debits and credits on paper as previously.
We would spend hours filling in forms with account numbers dates and amounts they would then be sent by bike to the bureau to be keyed or punched into the computer by a "computer operator". This was a far from glamourous job and required less skill than a secretary.
Later that week the results would be returned by bike and we would pore over them wondering why the results were not as intended. If the operator had mis keyed you would get free rerun and the results reprinted however if as often were the entries were miscoded or there were further late journals then the 2nd or 3rd run had to be paid for.
Schedules were still produced by hand on analysis pads and there was a detachment between the input and output . It was very difficult for juniors to see the process and therefore understand what was going on, accounting had to be learnt from the theory rather than actually seeing the debits and credits on paper as previously.
Mini computer systems
The bureau's would often use the new mini systems as would companies of a substantial size. These were much much smaller than a main frame computer and required less people to operate them. However would require a computer programmer to write a program to put everything together and an operator to input as with the bureau 's.
At this time you would come across programmers working more or less full time developing their own accounting program for their client, so now errors were not just coding or input errors but could also be "bugs" in the program. Of course the programmers weren't Accountants didn't understand properly how things were meant to work.
At this time you would come across programmers working more or less full time developing their own accounting program for their client, so now errors were not just coding or input errors but could also be "bugs" in the program. Of course the programmers weren't Accountants didn't understand properly how things were meant to work.
IBM PC single and double disc drive
Then there was nothing short of an overnight revolution about 1981 IBM launched the PC running on DOS (the operating system) with one or if you were lucky twin disc drives. The information was stored on a 5 and quarter inch disc drive and the program was loaded onto the computer from another disc.
Of course you needed some very basic knowledge to use these, no mouse. How to run a batch file or write one, remember to save the information to disc or it would all be lost when you turned the computer off. Good practice now dictated that backups of the data also be taken as otherwise the disc could be corrupted and the data lost.
A lot of Accountants still preferred to do things manually . Hard disc PCs quickly appeared and your twin disc PC was promptly upgraded to a 10, 20 or even a 30 mb hard disc drive Wow!
Of course you needed some very basic knowledge to use these, no mouse. How to run a batch file or write one, remember to save the information to disc or it would all be lost when you turned the computer off. Good practice now dictated that backups of the data also be taken as otherwise the disc could be corrupted and the data lost.
A lot of Accountants still preferred to do things manually . Hard disc PCs quickly appeared and your twin disc PC was promptly upgraded to a 10, 20 or even a 30 mb hard disc drive Wow!
Spreadsheets
At about the same time as the IBM PC came along, so did spreadsheets, these have remained pretty much as they were then . A spreadsheet is basically the paper and pencil approach without the adding up. So as long as you have the formulas correct it will do the adding up for you.. however that is such a large statement I will say it again. So as long as you have the formulas correct it will do the adding up for you. Spreadsheets across the land contain so many errors and have been responsible for some huge mistakes in accounts.
I still come across plenty of companies doing their accounting on spreadsheets - why? Accounting systems have been invented and work well, you don't need to .. it is more work to do something less well!. The answer is normally its what I know, its what I have always done. I don't know how to use computer accounting systems such as Quickbooks, Well what you need is some training in Quickbooks, it will quite simply bring your business into the 21 century.
I still come across plenty of companies doing their accounting on spreadsheets - why? Accounting systems have been invented and work well, you don't need to .. it is more work to do something less well!. The answer is normally its what I know, its what I have always done. I don't know how to use computer accounting systems such as Quickbooks, Well what you need is some training in Quickbooks, it will quite simply bring your business into the 21 century.
Pegasus accounting and DOS
Pegasus was an early accounting program written and run in the UK. It was brilliant for its time, it ran on DOS and had separate modules for Sales Ledger, Purchase Ledger, Job Costing, Nominal Ledger, Financials . Wages, Etc
It was well written and simple to understand, I used it for many years - and I know of at least one associate that continued to use it up until about 4 years ago still running on DOS still operating as it always had.
However time has moved on - you wouldn't drive a car that was 40 years old would you ? well the same reasons exist to use a more modern accounting system - Quickbooks it has improved and has features that were not available all those years ago - see Quickbooks online further on.
Of course Pegasus became history like so many others as it was not maintained and updated, to update VAT, you would have to go into the settings and change the VAT codes, the same with wages and paye - each year go in and change all the settings for the NI levels etc. It became so complicated you would have to call a computer technician in to do it.
It was well written and simple to understand, I used it for many years - and I know of at least one associate that continued to use it up until about 4 years ago still running on DOS still operating as it always had.
However time has moved on - you wouldn't drive a car that was 40 years old would you ? well the same reasons exist to use a more modern accounting system - Quickbooks it has improved and has features that were not available all those years ago - see Quickbooks online further on.
Of course Pegasus became history like so many others as it was not maintained and updated, to update VAT, you would have to go into the settings and change the VAT codes, the same with wages and paye - each year go in and change all the settings for the NI levels etc. It became so complicated you would have to call a computer technician in to do it.
Sage and others long gone
When Microsoft introduced windows there was an explosion in accounting systems, most long gone, most no improvement on the early editions of Pegasus. I would put Sage into this category. There were so many bugs in Sage that it didn't work a lot of the time, it was complicated to use. The report writer feature required a degree in computing so much so that Sage set up a report writing department to have them customise and write specific reports for you ( at a cost). It was and is expensive.. But and this is a big but it had the power of marketing behind it. Everyone had heard of Sage so everyone used Sage.
The Sun is the best selling newspaper in the UK ! Is it the best newspaper in the UK - NO, of course not so just because everyone has heard of Sage it doesn't make it the best. In my opinion and many others Sage hasn't really improved for many many years the old program is still there it just has some, but not all of the features of the more modern programs.
I used to use Sage, I used to train in Sage, I used to be an expert in Sage, BUT for me now Quickbooks is so much better does so much more is easier to use, cheaper so I no longer use Sage. The stock system is better but that's it, if you don't need stock avoid it, and even if you do then there are other solutions - better, cheaper .
The Sun is the best selling newspaper in the UK ! Is it the best newspaper in the UK - NO, of course not so just because everyone has heard of Sage it doesn't make it the best. In my opinion and many others Sage hasn't really improved for many many years the old program is still there it just has some, but not all of the features of the more modern programs.
I used to use Sage, I used to train in Sage, I used to be an expert in Sage, BUT for me now Quickbooks is so much better does so much more is easier to use, cheaper so I no longer use Sage. The stock system is better but that's it, if you don't need stock avoid it, and even if you do then there are other solutions - better, cheaper .
The internet and email arrives
It wasn't until about the mid 1990s that the Internet really arrived and even then it was dial up, slow and inefficient. Accounting systems didn't run on the Internet but email did you could send emails rather than letters and things started to change.
Of course your accounts still had to be run on your PC ( or Mac) but you could print the results and either email or fax them through, you could send questions and reminders by email. You still had to fill in a paper form and post off your VAT return with a cheque but things were starting to change. It would be a long time however before computer accounts systems went online.
Of course your accounts still had to be run on your PC ( or Mac) but you could print the results and either email or fax them through, you could send questions and reminders by email. You still had to fill in a paper form and post off your VAT return with a cheque but things were starting to change. It would be a long time however before computer accounts systems went online.
Quicken and Microsoft Encarta
Along with the launch of Windows a lot of new PCs were bundled with free software, Microsoft Encarta was one, this was pre - Wikipedia, pre google. Microsoft Encarta was an amazing cd that when loaded on the computer in the new CD drive was an encyclopaedia with pictures and even some videos ! It revolutionised children's homework.
Also bundled was a personal finance program called Quicken, it wasn't an accounts program but it would keep track of your bank accounts and your investments . A quick click and it would show how much you were "worth" complete with pretty graphs. It was a bit of a novelty and not much more. However it would lead to Quickbooks.
Also bundled was a personal finance program called Quicken, it wasn't an accounts program but it would keep track of your bank accounts and your investments . A quick click and it would show how much you were "worth" complete with pretty graphs. It was a bit of a novelty and not much more. However it would lead to Quickbooks.
QuickBooks is born
Just over 20 years ago the desktop versions of Quickbooks started to appear, Quickbooks PRO it was sold on disc with a manual and for the cost of the program you could run as many separate companies as you liked on it.
It was based on the American program so used some strange terms such as Accounts Receivable rather than Debtors and Accounts Payable rather than Creditors but otherwise it was a pretty good program. Each year there were improvements. I started to use it for some of my clients, and with each year came a new version with additional features.
Very soon it was competing very favourably with Sage the market leader, it was easier to use, very intuitive and the reports were amazing. But a lot of Accountants didn't like it , it didn't have an audit trail and transactions could be changed - without any means of tracking the change.
These omissions along with others were addressed so that a full audit trail, a full double entry accounting system with full control over closing periods and locking transactions could be obtained. Further versions were introduced Quickbooks Premier, Quickbooks Accountant and Quickbooks Enterprise. Separate modules were introduced for payroll .
I started to use Quickbooks for all my Accountant clients, and quickly became an expert in it. One day one of my clients asked me for some training for a new member of staff in Quickbooks, I obliged and quickbookstraininguk.co.uk was born . I travelled the length and breadth of the South East of England, a big circle around London training clients in Quickbooks on their systems, solving their problems teaching them all the additional features of Quickbooks that they were unaware of. See Quickbooks testimonials for what these people say.
Each year saw more and more improvements to the desktop versions of Quickbooks, there was an accountants review facility which allowed an a copy of your data to be sent to your Accountant whilst still working on the original, your Accountant to make changes and the two files merged seamlessly into each other to form the full file again. I came across no end of Accountants that despite this were not using this excellent facility, a lot seemed to want to do things as they had always done them despite the rapid progress that such facilities offered both them and their clients. I trained Accountants as well as users and a lot became converts.
It was based on the American program so used some strange terms such as Accounts Receivable rather than Debtors and Accounts Payable rather than Creditors but otherwise it was a pretty good program. Each year there were improvements. I started to use it for some of my clients, and with each year came a new version with additional features.
Very soon it was competing very favourably with Sage the market leader, it was easier to use, very intuitive and the reports were amazing. But a lot of Accountants didn't like it , it didn't have an audit trail and transactions could be changed - without any means of tracking the change.
These omissions along with others were addressed so that a full audit trail, a full double entry accounting system with full control over closing periods and locking transactions could be obtained. Further versions were introduced Quickbooks Premier, Quickbooks Accountant and Quickbooks Enterprise. Separate modules were introduced for payroll .
I started to use Quickbooks for all my Accountant clients, and quickly became an expert in it. One day one of my clients asked me for some training for a new member of staff in Quickbooks, I obliged and quickbookstraininguk.co.uk was born . I travelled the length and breadth of the South East of England, a big circle around London training clients in Quickbooks on their systems, solving their problems teaching them all the additional features of Quickbooks that they were unaware of. See Quickbooks testimonials for what these people say.
Each year saw more and more improvements to the desktop versions of Quickbooks, there was an accountants review facility which allowed an a copy of your data to be sent to your Accountant whilst still working on the original, your Accountant to make changes and the two files merged seamlessly into each other to form the full file again. I came across no end of Accountants that despite this were not using this excellent facility, a lot seemed to want to do things as they had always done them despite the rapid progress that such facilities offered both them and their clients. I trained Accountants as well as users and a lot became converts.
Blackberry and mobile phones
The launch of the mobile phone initially had very little impact on Accountants work load, however the blackberry which had push emails and therefore sent emails to your phone immediately was very useful. Like all the technological changes I was up to date and fully abreast of the changes and worked my way through 3 or 4 models of blackberry before the smart phone eventually arrived and changed everything.
Quickbooks online
Quickbooks online is still relatively new in the scheme of things, Initially launched in the UK in 2011 the early versions had several shortcomings and it was not until about 2015-2016 that it really took off. I would say 99% of my training is now on Quickbooks online although I still have occasional users on the desktop versions.
So what advantages and differences are there to running Quickbooks Online to other now outdated methods of accounting.
Quickbooks Online v Paper books and records
Paper Records
QuickBooks online v Spreadsheets
Spreadsheets
Quickbooks online v Sage
Sage
Quickbooks online v Quickbooks desktop
Quickbooks desktop
So what does a modern accounting system, specifically Quickbooks online do and that perhaps Quickbooks training can help you with
Quickbooks Online
* hundreds of apps available that will link in with Quickbooks online, like stock, payment programs and Go Cardless for direct debits etc
So what advantages and differences are there to running Quickbooks Online to other now outdated methods of accounting.
Quickbooks Online v Paper books and records
Paper Records
- Paper records more time consuming
- Paper records more prone to error
- Paper records not suitable for VAT any more
- Paper records cannot be worked on by several people at once on same records
- Paper records give a lot less information with more time taken
QuickBooks online v Spreadsheets
Spreadsheets
- Spreadsheets time consuming to set up and maintain
- Spreadsheets very prone to errors in formulas
- Spreadsheets not suitable for VAT Returns
- Spreadsheets not suitable for job costing efficiently
- Spreadsheets not suitable for department accounting efficiently
- Reporting not easily available in spreadsheets
Quickbooks online v Sage
Sage
- Sage not so user friendly
- Sage not able to find entries easily
- Sage not able to correct entries easily
- Sage IT architecture old and not flexible
- Sage reporting very limited
Quickbooks online v Quickbooks desktop
Quickbooks desktop
- Quickbooks desktop no longer has a payroll facility
- Quickbooks desktop has no location facility
- Quickbooks desktop doesn't have bank import feature in UK to many banks
- Quickbooks desktop does not easily share information with your Accountant
- Quickbooks desktop likely to be phased out in next few years
So what does a modern accounting system, specifically Quickbooks online do and that perhaps Quickbooks training can help you with
Quickbooks Online
- Ability to raise and send estimates and quotes to customers by email and turn into Invoices at a click
- Invoice customers by email and automatically send repeat invoices
- Link bank account to auto entry some bank transactions and greatly improve time taken to enter others
- Automatic bank reconciliation
- Full Bank, Sales and Purchase ledgers and Nominals
- Full Departmental entry and reporting
- Full Job costing entry and reporting
- Full Project costing entry and reporting
- Automatic reading of email attachments into bills and receipts
- Full Budget entry and reporting by customer, job, department and company
- Full multi currency operation
- Full audit trail and locking of closed periods
- Full CIS facilities
- Cash flow planner
- Full VAT Reporting and filing including flat rate and cash accounting
- Limited stock facility*
- Easy access by Accountant into clients programs for training, changes and reports
- Full payroll programs inbuilt
- Full time recording inbuilt
- Full reporting easily
- Sending of statements and reminders at one click
- Automatic reminders if you want them
- Multi user
- Secure back up on cloud
- The Accountant version has additional facilities ( Tools) available for Accountants only like the ability to reclassify groups of entries easily.
* hundreds of apps available that will link in with Quickbooks online, like stock, payment programs and Go Cardless for direct debits etc
Smart phones - and Quickbooks app
We all know about modern smartphones and Apps and of course Quickbooks has an app where you can view certain information and input limited information to make using and viewing common functions on the move easy - fully integrated with the live online program on your laptop or PC. Take photos of receipts which automatically appear in your Quickbooks online account.
The Author Martyn A Smith A.F.A, M.I.P. A is a qualified Accountant and certified advanced QuickBooks training knows QuickBooks and accounting inside out and back to front. This article is copyright Martyn A Smith 2021