Accounting Agency: Participants’ interactions

Accurate, reliable, and complete financial reporting is a keystone of the community’s ability to establish the health of participants’ businesses, and in doing so, understand how best to help the businesses succeed. The Accounting Agency works closely with participants and other agencies to ensure that participants have financial reporting services, and access to its automated system, as well as qualified accounting professionals who are contracted by participants to review financial reports and advise on business strategy.

Accounting practice in the community

The American Institute of Certified Public Accountants (AICPA) defines accounting as the practice of recording, summarizing, and classifying financial information in terms of money, and analyzing the results of such an exercise. Accounting starts with recording transactions before thereafter analyzing these results, adjusting them, and reporting.

While the process has historically been done manually, through journal entries that are then used to prepare trial balances, the process of accounting is today highly automated. Accounting professionals use software such as QuickBooks and Sage to record transactions, analyze them, and prepare financial statements.

Even so, the process is still highly dependent on human input, raising the possibility of mistakes, misrepresentation, and even fraud. Measures to prevent this, such as the use of blockchain, have limited success, because of reliance on accounts and business operators to input at least some part of data used to prepare reports.

In the community, all accounting processes are automated. Businesses seldom need help from experts in the preparation of financial reports or analytical tools such as graphs, charts, ratios, and others.

On the rare occasion that they do, a business may need bookkeeping help from a professional. In every village, there is a bookkeeper who is contracted by businesses in that village when they run into issues with the Accounting Agency’s automated system, which provides automated accounting services.

While in normal circumstances, businesses prepare their books of accounts quarterly, semi-annually, and annually, community businesses do so on a real-time, ongoing basis. This ensures that at any given time, a business, as well as the parties that rely on financial information to make decisions, can pinpoint exactly how well a business is doing.

Formulation of accounting standards

Various accounting bodies have accounting standards and guidelines that dictate how various transactions and events are reported. In addition, the Financial Accounting Standards Board issues Generally Accepted Accounting Principles (GAAP) that financial reporting follows. In addition, the standards dictate how automation can be used to enhance the completeness and reliability of financial reports.

The community’s economic environment demands a relook at accounting standards so that the reports community businesses produce can be used to guide decision-making. For instance, businesses do not own any assets, including work in progress, inventory, equipment, or accounts receivable. Besides goodwill, a business in the community will only have the cash it generates from transactions as assets.

Because of these obvious differences, the Accounting Agency facilitates certified accountants to collaborate at a professional level and formulate principles and guidelines that they can use, which still need to be consistent with GAAPs, and ultimately, with the laws governing how financial reporting should be performed.

Registration, monitoring, and operations of accountants

While all accounting processes in the community are automated, certified accountants are periodically needed by businesses to help interpret financial reports and presentations. Accountants interrogate a business’s setup to ensure it is done properly, such that it can take maximum advantage of the community’s economic infrastructure. In addition, they advise businesses on how they can improve their profitability.

In the US today, there are 650,000 certified accountants, serving close to 170 million clients. To differing degrees, they rely on automation to serve a large client base, such that there is one certified account per 250 – 300 people. They also spend extensive amounts of time with their clients, with many serving only one client for an extended amount of time.

A fully automated accounting landscape means that much fewer accountants are needed. They also work only a fraction of the time they would normally spend today. The NewVistas community envisages that there would be approximately only a quarter of the accountants needed in a modern economy – with each accountant serving 1000 businesses, rather than the 250 – 300 they serve today. In total, there will be around 40 accountants serving 40,000 businesses.

Again, due to automation, where accounts are updated in real-time, and where most tasks are performed by software systems and AI, accountants would need around one hour per quarter per client. The time will be spent reviewing books of accounts, financial processes, and any bookkeepers’ input.

The Accounting Agency has a duty to ensure that all accounting professionals are up to the task. They do this by vetting, training, and providing opportunities and incentives for more learning.

Before an accountant can establish a business in the community, they must have been qualified and registered. Registration is mostly done by professional bodies, such as the AICPA, and ACCA, among others. The registration is offered once a person has completed training in accounting, and has spent a set amount of time in practice.

As discussed, accounting practice in the community is markedly different. A person who aspires to be an accountant needs to not only be registered by the professional body they ought to belong to, but also need to have shown a thorough understanding of the community’s principles and guidelines on accounting.

The agency invites accountants to undertake some courses to discuss the differences not only in accounting practice but in other elements of the econosystem. They then undergo various tests to ascertain their grasp of the subject, after which, if they pass, they are registered to practice in the community.

As they practice, the Accounting Agency, through its automated system, operational presidents who serve agencies in the Data Bureau, and contractors that the agency may hire from time to time scans the environment for changes in accounting practice as well as the community’s needs. It synthesizes new information into training modules, which accounting professionals are encouraged to take. Over time, those accountants who are up to date as far as the agency’s recommendations are concerned are rated more highly than others who are not updated. This therefore incentivizes professionals to actively seek ways of earning more and updating their knowledge.

Accounting automation

Accounting is increasingly highly automated, enabling accountants to be more efficient, and improving the quality of their analysis of summarized reports.

The community envisages a situation where automation will be able to handle much of the accounting work, with accountants and bookkeepers only helping in professional analysis, or in instances where a participant is unable to navigate the system.

In this regard, the Accounting Agency’s system is simplified, yet powerful enough to deliver all bookkeeping and financial analysis that a business would need. Successful accountants will be able to engage with the system more efficiently so that they can deliver high-quality services to more clients. They will also be able to train their clients well so that they use less of their professional time troubleshooting and training, and more offering quality consultancy on subjects such as interpreting financial statements, ratios and what they mean, or formulating proper accounting strategies to improve reporting and profitability.

Training participants

For everything to fall into place, participants need some understanding of how accounting works. A participant needs to have a fairly good understanding of different types of financial reporting, and how to analyze financial information and statistics.

The Accounting Agency trains participants to use the automated system. Through this system, courses are offered that participants have to take regularly, especially as new knowledge comes up. Data presidencies, who serve the Data & Publishing and QHSE Agencies also monitor business owners to ensure that they have a sufficient understanding of how the system works and accounting as a business function.

Accounting contractors, as part of their services to participants and the Accounting Agency, prepare reports that discuss areas where the system can be improved to enhance its ability to help participants. These recommendations are vetted and implemented as needed.

Illustrations

The following illustrations explain how the Accounting Agency works with businesses and accounting professionals.

Illustration 1

Eric operates a graphic design business in the community. His main task is to create imagery and text that helps his clients communicate with their market. He designs layouts and imagery for adverts, fliers, banners, posters, and magazines.

Eric has been in the community for a while now. During this time, he has managed to establish himself as one of the best designers around. He has two types of clients: those who give him one-off gigs, and others who engage him for more extensive assignments. For the one-off clients, Eric is usually paid on delivery. HE does not utilize factoring services, since the assignments are fairly short-term, mostly lasting for a day or two.

For longer-term clients, Eric may, for instance, be engaged by a newspaper to help them update the layout of their daily edition. He will engage several other contractors who collaborate with the newspaper publisher, including marketers, journalists, editors, and even readers to help come up with the best design. This will take a long time, and will likely involve payments being made by Eric, for example, to conduct some research, and by the publisher for facilitation. Eric bills his client based on milestones which are pre-agreed before the task commences.

The information on the milestones, the rates, account details, and every other detail is logged in Eric’s portal in the Accounting Agency’s system. Other contractors similarly have portals where they record their transactions. The system processes the information and advises on the taxes, participation fees, and other obligations that Eric needs to remit based on the profit or loss that he makes.

At any given time, Eric can view his profit and loss statement, balance sheet, and all entries that have been effected by the system. In some instances, there are issues with entries that Eric feels are incorrect or does not understand. He contracts his village’s bookkeeper for help. He however does not have to call this particular bookkeeper. If he feels that another person can do the job better, he can contact and engage them.

Every quarter, Eric contracts a certified accountant to look at his financial reports. He advises Eric on the areas that he needs to adjust so that he can boost his business’s profitability and streamline his financial processes. For instance, he can try to shorten the milestones and bill clients per task, rather than per hour. He can also explore ways through which his invoices, which are factored by the Business Operations Agency, can have a shorter turnaround time, minimizing the risk of unpaid accounts receivables.

Illustration 2

Simon is a certified public account, being registered as such by the AICPA. In the community, he has also been vetted and registered by the Accounting Agency. Simon was drawn to the community because of the professional development the community system offered – instead of engaging in manual, repetitive tasks, he would be able to embark on more important roles of a CPA, such as analyzing financial statements and accordingly advising businesses on several measures that the statements presented.

Once he joined, Simon signed up several clients, whom he would consult for once a quarter. The reason was that he only needed to review financial performance, and analytics, and use them to advise on the best course of action. While he had some experience with automated accounting, it was not as thorough as it was in the community, a situation that enabled him and other CPAs to take on more advisory roles as opposed to actually carrying out bookkeeping and preparing reports.

With the absence of traditional manual accounting processes, Simon can devote time to developing strategy – for him, as a business, and for his clients, so that they can be more competitive and efficient. He can also communicate better with his clients and other CPAs and keenly study the system to see if it meets clients’ needs.

There are around 40 other CPAs in the community where Simon is a participant. They have formed a professional association that enables them to collaborate. The association forms a platform through which the community’s accounting standards are formulated and updated. In addition, the Accounting Agency collaborates with the association in vetting and registering incoming accountants. It also plays a crucial role in mentoring newer accountants and bookkeepers.

Simon has been working with creatives, including artists, designers, and similar businesses. He has extensive experience here, and as a result, is widely preferred by this niche. He has been able to advance his knowledge in the field so that he can give his clients better services.

Simon currently has more than 800 clients and is keen to expand his base. For an hour every quarter, he reviews his clients’ financial statements and reports. He employs several analytical tools to establish the health of the client’s business, including their ability to meet current and future obligations, cash management, financial strategies, and ability to scale and grow.

In most instances, he sits with his client in person or through video call, where they discuss the reports. He also complies with a short report that simplifies his interpretation of the client’s accounts, which can then be used in the next session to check on implementation and efficacy.

In addition to his work with participants, Simon closely liaises with the relevant data operational presidency to enhance access to his services and those that the Accounting Agency offers. When the operational presidency is approached by a participant seeking accountancy services, he can direct that participant to a list of accountants, where their ratings, expertise, and indicative rates are detailed. In addition, the operational presidency receives regular insight from Simon and other accountants on the efficacy of the automated system in responding to participants’ needs, as well as insights on how it can be made better.