Free Accounting Software
Just to make things clear at the start, this is a review of a specific service provided by an Australian web site on the dot com dot au domain and not of free accounting software in general.
It isn't often that I review something and then don't give it a rating. In this particular case I am not going to rate the software because I was unable to use it to see whether it works properly or not. The reason that I couldn't try it out was that I couldn't find any way to actually set up the opening balances for my accounts properly. After several hours of looking at all the various options and examining the small amount of help the system provides I was able to resolve some of the issues that I had with setting up but the solution to others completely eluded me.
First let's consider a couple of the pluses that this particular accounting option has:
- It provides for direct lodgement of BAS and tax returns directly with the Australian Taxation Office. For this option it recommends using a device level certificate (which is certainly a better option than using an administrator or standard one). That there is a bug in the site that generates the certificates so that the device certificate ends up in the certificate store on your own computer rather than in a separate file that can be easily uploaded is a problem with the Government site that issues the certificates and not with the accounting software. By copying your certificate store before and after downloading the device certificate it is possible to work out what code is the device certificate and to remove the other certificates from the file you upload.
- Even though the software is free, it also comes with free support via a 1300 number or via email and so you can get assistance with the software when necessary. I didn't check this out because I found so many problems right at the start that I abandoned the idea of using this software.
With those positives out of the way I will now go into more detail about exactly what I found when I tried to set up my own company accounts in this software.
- First, there is no option for uploading your opening balances. The only way that I could see to be able to do this was to create a Journal containing those balances dated the day before the date you intend to start using the software.
- Creating the Journal turned out to be a problem as half the accounts I needed were not in the chart of accounts the system provides to start with and there is no provision while creating a Journal to add accounts. I created the same Journal over again from scratch about four times before it would let me save the Journal because on each prior occasion I had overlooked creating needed accounts.
- Quite a few essential accounts that need special handling were missing from the chart of accounts and so creating these accounts so as to enter the Journal got the Journal entered but did not have that data in the right place for subsequent processing. This included such things as the current superannuation liability, the various bank account balances and petty cash, amounts owed to the tax office for GST, PAYG withholding, PAYG instalments and company tax, debtors and creditors balances, and retained earnings.
- The software allows invoices to be created and so by creating the outstanding invoices that way the balances for debtors and creditors could be duplicated. Adjusting the balances in the opening journal to correct the balances for this is certainly possible but you need to know exactly what effect the invoices had and a good knowledge of accounting to be able to work the adjustments out. A simpler solution would be to leave the opening debror and creditor balances in separate accounts and post the payments for those particular invoices againt those accounts instead of against the invoices (which you would not then enter in the first place). You would Need to manually track what invoices those balances represent though if you did that.
- The cash processing option in the software provdes for one bank account or credit card or petty cash. By simply entering a payment or receipt there for the balance of the selected account that balance could be transferred to the cash option. The software apprears to have no provision for entering cash transactions for multiple accounts though. It looks like the other bank accounts and credit cards would have to be processed using Journals.
- The only way to get the GST collected and paid balances correct that I could find was to go back and re-enter the opening Journal yet again but entering the gross rather than net balances. This would allow the correct GST for those transactions to be taken up but would simply push the same problem back to the start of that period. Whichever way you work the GST you are still going to end up with an amount that you can't transfer to the correct account. The best you can do is to leave the GST balance in a separate account and post the payment for it there instead of to the account that the software expects you to post it to once you have resolved the opening balances.
- With regard to the pay as you go amounts for withholding and instalments, superannuation, and company tax outstanding amounts, and the retained earnings, I gave up on trying to find a way to get these figures entered in the right place.
With having given up with my attempt to even get my opening balances loaded I cannot comment on how the software would actually work in regular use. That it appears to only be able to handle one account for processing cash looks to me to be very limiting since most small businesses usually pay a lot of their expenses either with cash or a personal credit card and so with the cash account used for the company bank account you'd have to journal all the cash and credit card expenses and from what I have seen, most non-accountants do not understand Journals.
Assuming that someone with a new small business were to start using this software where all the accounts start out with zero balances, they are most likely going to jumble all the amounts for the company bank account, their personal credit card, and anything they pay cash for out of their own pocket or a company petty cash tin all together in the one cash account that the software provides. As these sources need to be treated very differently when it comes to finishing the annual accounts for a company with respect to any Div 7A liability this makes the software unsuitable for where the small business is run through a company.
The only situation where I can see that this software might work (without requiring a large amount of intervention by an accountant) is with a sole trader small business.
All of the difficulties in actually getting proper accounts out of the software explain in part why the accounting firm that is providing the software is providing it free of charge. To be able to use the software to get meaningful accounts is going to require significant involvement by an accountant and once the person using the software realises that and starts looking for an accountant to help them out then the company that has provided the free software they are using will at least be one that is likely to be considered.
I may be completely wrong about just how usable this software is since the above comments are based on my experience with trying to load my own accounts into the software (along with my 30+ years programming and 10+ years accounting experience).