
Accounting in 2016 – Still a manual and tedious process - BjoernKW
https://bjoernkw.com/2016/04/03/accounting-in-2016/
======
Havoc
There is a reason why it all seems so oddly ancient. Rule number 1 - if its
not broken then don't fix it. Not the usual hn mindset I know, but you only
need to be involved in one bad transition between finance systems to know that
it can be a huge shtstorm. Big enough to kill a company. That is why everyone
is running ancient mainframe era tech and everything feels like its 10 year
behind silicon valley mindset.

Its all good & well on a small business scale to DIY and integrate things
hacker style but beyond that the actual accounting problems become big enough
that you don't want the latest flashy gimmick adding potential unknowns. Its
kinda like you don't run nightly builds on your production server.

As for the formats & integration - yeah not great. What you're looking for is
essentially EDI, but there isn't a market for it on that scale. Its also still
fairly fragmented so only works on an enterprise scale (i.e. BMW tell all its
suppliers they are to use X standard).

Unfortunately in my experience (auditor) the more people try to hack together
a solution the worse the end result. I've had to tell a CFO that all of their
numbers from top to bottom are bad because they custom rolled a key component
and the people that did so missed a subtle accounting nuance. Cost them a
fortune to fix it. So yeah by all means go automate data transfer but please
don't attempt to implement any actual accounting logic. Its like a airline
pilot attempting surgery (or a surgeon flying an airliner). Neither even
realises they're making a mistake until its too late.

~~~
IshKebab
It seems to me the bigger reason is that the best people to fix it are the
ones with the biggest incentive not to.

~~~
Havoc
> ones with the biggest incentive not to

Not really. The bank stuff (where they are REALLY still running ancient
mainframes) is not changing because its a bureaucracy and they're super risk
averse. And every year the conclusion is the same - limp along for another
year. Plus there are cases where the tech is so old that its essentially a
black box at this stage.

On the authors scale - they're are few people that have the necessary odd
combination of skills (accounting & programming). And those that do don't
spend their time writing SME software...they work on enterprise scale stuff.

As for no incentive to fix it - trust me nobody likes paper invoices. Not even
bookkeepers. Everyone's life would be easier if there was a widely adopted
standardized system in place.

------
ChuckMcM
There is a lot of "meta" money in the money system, accountants, CPAs,
forensics, bankers, clerks, etc. So automating that away is nominally an
existential threat to their businesses.

Some folks (like Quicken in the US) use automated download as a way to insure
upgrades (they periodically make it impossible for previous versions to work
any more so that you have to upgrade or lose the capability). I got sick of
that and wrote a csv ingester in perl.

But business has been transacted, literally, for thousands of years and there
is so much variety there. I don't expect full automation until we have even
better cognitive tools which can dynamically adapt to what ever is needed.

So that leaves you with a patch work of things and not a lot of incentive to
unify them. It reminds me of the CAD framework initiative where engineers
tried to unify the sharing of CAD data, except the CAD vendors figured out
that lead to less "stickyness"[1] and started working against it. Banks are no
different, there is nothing to distinguish bank "A" from bank "B" with respect
to holding on to your money.

Payments and invoices are a bit different, working with the vendor, if you are
a B2B business you can often negotiate something if you are B2C you are in a
stronger position to simply insist that your customers use your automation
tools.

[1] This term has been used to describe tools and techniques that make it hard
to switch from one provider to another, thus maximizing your "customer
lifetime value" often at the detriment of the customer.

~~~
iheartmemcache
What's that quote again, "never attribute to malice that which is adequately
explained by stupidity"? CAD vendors might intentionally have designed
"stickyness"[1] but banks and B2B transactions are pretty much standardized
via EDI ANSI docs[2]. It's a legacy set of standardized protocols/documents
that you have to deal with because DbC works badly, and corporate DbC works
even worse when someone like SAP is influential in the decision process.

SAP has done a lot of bad things[3] but they pretty much standardized how
business is done in most industries, whether you're a plastics injection
molder in China, dealing oil out of Dubai, or the trader in Zurich making his
fortune figuring out how to get that crude from Dubai and refined into some
plastic polymer pellets to that Chinese plastics vendor (who'll sell those 50
cent widgets to you in a few months).

[1] We have the same thing in our industry, we just call it "vendor lock in".
I sort of touched on how the "meta money" worse in fed contracts here
([https://news.ycombinator.com/item?id=10807858](https://news.ycombinator.com/item?id=10807858)).
A CPA is basically a programmer maintaining legacy code (300 years of obscure
tax code (they even call it the same thing)) feeding your input data (your
quarter and/or years aggregate financial data) to produce output data (your
1040 or whatever). _Edit:_ Havoc basically captured the whole "legacy"
reasoning (a mentality of "they'll remember my potential failed project a lot
more than they'll remember my potential re-implementation that will only
slowly (but very substantially) accrue profits" is always in the back of your
mind. There's a lot of politics when you reach the decision-making level and
risk aversion is a necessary skill to adopt to keep yourself out of hot water.

[2]
[https://en.wikipedia.org/wiki/X12_Document_List#Financial_Se...](https://en.wikipedia.org/wiki/X12_Document_List#Financial_Series_.28FIN.29)
or variants there of. Even other ERP's FI & Controlling (or AP/AR) will have
some sort of 'Connector" that will enable you to talk to SAP in _some_
fashion. You'll just be paying Epicor, Netsuite, or Oracle a few hundred k for
the modules.

[3] Can't knock on it too much since I've profited directly from the
convolution of SAP ECC 6, but I certainly I generated more value for the
clients than I billed.

------
lstamour
If anyone finds themselves in a similar position, writing MT940 files --
there's at least one open source Java library for doing so. See
[http://api.prowidesoftware.com/core/com/prowidesoftware/swif...](http://api.prowidesoftware.com/core/com/prowidesoftware/swift/model/mt/mt9xx/MT940.html)
and its source at [http://prowide.googlecode.com/svn/trunk/pw-swift-
fields/src/...](http://prowide.googlecode.com/svn/trunk/pw-swift-
fields/src/com/prowidesoftware/swift/model/mt/mt9xx/MT940.java) (LGPL) as well
as further examples at [https://github.com/prowide/prowide-core-
examples](https://github.com/prowide/prowide-core-examples)

First time hearing about MT940 and SWIFT message format. As a Canadian, I'm
used to seeing QBX/OBX/CSV as import/export formats (thanks to QuickBooks and
Microsoft Money), and every accounting package I've worked with allows for CSV
import though it's not quite as nice about it.

~~~
BjoernKW
Thanks very much for the link. I'll have a look at it.

------
jacques_chester
Strictly speaking, this is _book keeping_ , which is the on-ramp to accounting
proper.

The bulk of accounting, as I understand it, is not the relatively simple
updating two accounts in a single transaction on a ledger.

It's deciding _which_ accounts. _Which_ ledger. And making a case for _why_.

Because the flipside of accounting is management accounting: those famous
reports (income report, cashflow report, balance sheet) which markets and
governments take such a close and legally meaningful interest in.

~~~
dontscale
This is all correct except that financial accounting deals with external
reporting and managerial accounting deals with internal reporting. But the
distinction between bookkeeping and accounting is spot on IMO.

~~~
jacques_chester
Thanks. In my understanding, managerial 101 more or less starts where
financial 101 leaves off. Does that sound right?

~~~
Naga
Pretty much, yeah. Managerial 101 builds on introductory financial reporting.
The biggest difference between them are the intended users. While financial
accounting is all about accurately stating your financial position for tax
authorities, capital markets, banks, and other potential users, managerial
accounting is internal. It's for managers and decision makers to give them the
most accurate information possible. Because of this, there is no consistent
standard used in managerial accounting like there is in financial accounting
(GAAP or IFRS), but its largely similar I believe between different companies.

------
pinky07
Odoo Accounting has nearly everything the OP wants:

\- full API:
[https://www.odoo.com/documentation/9.0/api_integration.html](https://www.odoo.com/documentation/9.0/api_integration.html)
\- direct integration with 24.000 banks for statements \- for non supported
banks, has it supports bank formats, including cmat.053 in germany \- automate
payments with SEPA (in Europe, or checks in U.S.) \- automate invoicing and
follow-ups of payment by email or regular mail (docsaway integration) \- it
supports Germany (SKR04)

It's 100% free, unlimited users on the cloud:
[https://www.odoo.com/page/accounting](https://www.odoo.com/page/accounting)

Odoo Community is open source: it includes most accounting features but not
the payments and bank interfaces.

disclaimer: I am the founder of Odoo

~~~
jxcl
If your users aren't paying you, who is?

~~~
pinky07
Odoo has hundreds of business apps. Our cloud offer is free for one app. So,
if you only use accounting it's free, but if you need more application:
eCommerce, point of sale, inventory, etc. then you have to pay.

That's for the cloud offer, but you can also download Odoo.

We are mostly open source
([https://github.com/odoo/odoo](https://github.com/odoo/odoo)) but have an
open core business model for on premise installations with a bit more features
in Odoo Enterprise.

The offer is explained here:
[https://odoo.com/pricing](https://odoo.com/pricing) (although I am not sure
this page is clear; we are still thinking about how to improve it)

~~~
schrijver
The pricing page is quite clear. But the pricing calculator linked,
[https://www.odoo.com/pricing-online](https://www.odoo.com/pricing-online)
does not seem to include the cloud offer you mention?

From there it looks like one needs to pay a base cost of €20,- / month / user
before selecting apps. Then, the calculator doesn’t make me have the first app
for free. What’s more, I can’t select accounting (€20,- / month) without also
selecting invoicing (€10,- / month). So if I’d want an install with only
accounting, instead of it being for free, it looks like it costs at least
€50/month?

~~~
pinky07
Yes, we have to improve that. One app is always free (including all its
dependencies), we will improve the pricing calculator.

~~~
pinky07
> Cool. So will there have to be a paying user or will the first user be free
> as well?

No, it's really free. Since the first user.

> Also, since the apps have different prices, will it be > the cheapest or the
> most expensive app that comes for free?

You always start with one app, this one is free and also it dependencies. So,
whatever you start with, it's free. (e.g. you get accounting+invoicing for
free)

But if you want one app more (e.g. inventory), then you have to pay for all
apps / users. It's not "one app free", it's a "free for one app" plan.

But if you want expense management as well, you will have to pay for
everything. (use vendor bills which are in accounting app, instead of
expenses, so that you stay in the free plan)

Thanks, for the feedback, we really need to improve the pricing page...

------
ohthehugemanate
Part of the author's problem is that he's in Germany: a country in love with
paper trails. You can't change your phone plan without writing a letter of
request (not joking). Taxes require a level of documentation that in North
America is only needed for an audit. No joke, MT personal and business tax
return is a thick binder full of paper every year. The only solution is to pay
a tax lawyer to prepare it for you.

Yes, there's a whole field of law that's just for filling out tax forms. And
it's an enormous industry here.

Incidentally, the complexity is maintained by the tax lawyer lobby. There have
been a few proposals to simplify the tax code, but it's hard to do when a
third of the civil service and the single largest legal profession in the
country oppose the idea.

~~~
lancewiggs
Xero lets you upload files so they are attached to invoices etc., and when yo
send invoices you can elect to send the paperwork too.

------
edwinvlieg
Björn, nice read! Your description of the current state of accounting in
Europe is very accurate. As a founder of an online accounting tool, I know a
lot about the struggles you are having. The difference is: it’s my job to
improve the lives of entrepreneurs and solve the problems you mention. This
doesn’t make it less of a challenge though, I feel a lot of the same pain you
are feeling!

The first steps for a automated accounting are already in place:

1\. In Holland we are working towards a standard for exchanging invoice
information based on the Universal Business Language XML standard. Both the
market and the government are supporting SimplerInvoicing, the first invoices
are already being exchanged at this time.

2\. The European Union has introduced new regulations concerning your banking
data. Within a few years, all European banks need to comply with PSD2, which
means all your data should be accessible through an API. Unfortunately the
banks in Holland are not very fast. Sometimes starting your own bank seems
like the fastest solution to enable technical innovation, but the regulations
in de European Union for starting a bank are even worse.

There are many more steps to make, but I strongly believe small startups like
my own (MoneyBird) can make a change. Can’t wait to see what the future of
accounting brings us!

------
kfk
Have you tried a human being as a solution? Software in the finance industry
is growing exponentially, yet people are super confused - like confusing
accounting with book keeping. What if you could outsource all your book
keeping, accounting and reporting services to a serious firm for some dollars
a month?

~~~
BjoernKW
That's the usual approach and yes: I've tried it. Finding a good accountant
who's up to that kind of task, responsive and not afraid of using modern
software, is surprisingly difficult.

There are new entrants to the market such as Felix1 in Germany or Crunch in
the UK though that promise this exact service.

Your suggestion certainly is a good one but I'm still wondering why accounting
and book keeping requires so much human-machine interaction. I'm not talking
about handling edge cases, exceptions or conflict resolution, things you need
a human being for. You shouldn't need an accounting firm for entering incoming
invoices or synchronizing your bank account statements.

~~~
kfk
Agreed, but I am going to guess that the biggest problem is not the human-
machine interaction, but all the hedge cases that eventually happen and
require a human to make a decision. Also, consider that an outsourced analyst
will probably be cheaper than building and maintaining a full fledged software
solution. What you need is a good accountant who is managing few analysts so
that he can intervene only when needed, saving you lots of $$ that you would
spend just to have him do book keeping.

Also, a human should advise and help you to move to another bank, one that has
better interfaces with modern software solutions (like the one you use or
Quickbooks or the many other around).

I tell you from my experience working in finance that you will never manage
bank reconciliations automatically 100%.

~~~
alex_hirner
>I tell you from my experience working in finance that you will never ...

Famous last words. As long as you define 100% to be residual errors at human
level.

------
scandox
"Why do many companies even seem to insist on paper invoices that add the
additional nuisances of having to scan and file those documents?"

It's called Cashflow management. Maybe you're in a high margin high profit
business. But the other 95% of all business owners are in a brutal competition
for Cashflow. That means make paying out as hard as possible.

~~~
jldugger
I work for a university, and they're pretty big on paper receipts for
expenses, as well as money incoming. It's more about auditability, I think. To
be able to say to the IRS, shareholders, the government and even internal
management that the money spent in transaction ad9c538e was spent buying
servers, and that five years ago those same servers were fully depreciated and
sent off for ewaste / recycing, and here's the documentation to prove it.

Otherwise, you're potentially taking too much depreciation, opening the door
to employee theft, and making managerial decisions based on poor data. Paper /
letterhead is some kind of proof that can be followed up with. Even if an
employee fakes a purchase, does Dell have a record of purchase order #2023420?
They don't?

An electronic version of this stuff would be fairly useful, but is sort of a
collective action problem: if vendors offers API nobody uses, was it worth the
effort? How do you handle N vendors offering N different APIs? And how do they
upgrade when they interact with hundreds of clients?

------
wyck
You can't automate exceptions and mistakes, which is what most companies spend
a lot of time with. Also the industry has decades of proprietary crap build
into it.

This is certainly one area the tech sector can tackle (maybe with smart
contracts) but it's years away and requires a lot of effort in the financial
space.

------
thinkcomp
He's right.

This has been my main interest for over a decade. I started down the rabbit
hole after doing my books by hand throughout the late 1990s and early 2000s
and hiring CPAs who strangely never asked any questions. I built a web-based
accounting program to automate what I was doing in Excel, and eventually, my
corporate taxes. Everything seemed to hinge on the availability of line item
data; but getting line item data hinged on the payment processors allowing it
to be transmitted and stored. That functionality still doesn't exist today in
ACH or payment card formats.

So, being an entrepreneur, I set out to build a new network that would support
the functionality, as well as better security features. And I did. But then
the California Money Transmission Act intervened thanks to financial lobbyist
Ezra Levine and his client, The Money Services Round Table; no other startups
or VCs wanted to take on the issue in a coalition; and the California
government wouldn't budge. So I sued the State
([http://www.plainsite.org/dockets/8l0ickx4/california-
norther...](http://www.plainsite.org/dockets/8l0ickx4/california-northern-
district-court/think-computer-corp-v-venchiarutti-et-al/)), and the judge was
apparently so hopelessly confused that he sat on the State's motion to dismiss
longer than any other non-stayed motion in Northern District of California
history: about four years.

I lobbied in Sacramento in the meantime and got the law changed twice, to the
point where it's essentially moot, but there's still 46 others, and via 18
U.S.C. § 1960 it's a federal crime to violate any state money transmission
law.

While all of this has been going on, the big players have skillfully ignored
the line item data problem and instead attempted to deploy EMV nationwide in
the United States at the cost of billions of dollars. But there's no PIN
functionality yet, just chips, which are hardly supported uniformly as many
vendors balk at "certification" fees for technology that's already outdated
relative to smartphones. And startups and their funders, including Y
Combinator, have been in a race to see who can ignore (break) the most laws
fastest, which has given regulators an excuse to claim that no one has come to
them with real concerns.

Last Thursday the Office of the Comptroller of the Currency (OCC) put out a
much-heralded white paper that, between the buzzwords, suggests it might be
interested in addressing the outdated regulatory gridlock. See
[http://www.occ.gov/news-issuances/news-releases/2016/nr-
occ-...](http://www.occ.gov/news-issuances/news-releases/2016/nr-
occ-2016-39.html). Comments are due in May. For now, I've written more
detailed thoughts here:

[http://www.aarongreenspan.com/writing/20131118.hsgacstatemen...](http://www.aarongreenspan.com/writing/20131118.hsgacstatement.pdf)

And all I wanted were my line items.

~~~
erichocean
So, I get that they're not giving you line items. What I don't get is _why_?
Is there some competitive advantage or whatever that's causing the big players
to lobby the government to prevent it?

It seems to me that, at some level, everyone already "has" their line
items—just not in a convenient form, i.e. paper (or email) receipts.

Is there cost involved in getting them to people? Standardization? Legacy
systems/formats/whatever in the way?

Thanks for your writeup by the way, I'm also in CA and learned a lot.

~~~
thinkcomp
Legacy systems that are totally inflexible is the main problem. Much of this
stuff was developed in the mid-1960s. Upgrades and standardization are not
considered a "profit center" for an already very profitable industry, and the
costs would be enormous. The EMV rollout has cost tens of billions and it
doesn't even touch the formats.

~~~
erichocean
Okay, so basically it'll require legislation at this point.

------
shas3
The OP uses the term "accounting" but really talks about just bookkeeping.

------
speleding
I haven't seen ledger.cli mentioned yet in this thread: it's a command line
accounting tool that's fully text based, which allows a programmer to easily
add little scripts to parse weird MT940 / CSV files and allows you to use all
the comforts of git in your workflow. Pretty steep learning curve if you don't
know accounting well, but incredibly powerful once you have all your
accounting chores automated away.

[http://ledger-cli.org](http://ledger-cli.org)

------
z3t4
Anyone here that would be interested in a book-keeping as an API service?

