Accounting automation is very good at doing exactly what it has been told to do.
Unfortunately, that is also the problem.
Xero, Hubdoc and other bookkeeping tools can remove hours of manual work when they are configured properly and somebody understands what should happen to the information once it reaches the accounting system.
They cannot decide whether the accounting workflow itself makes sense.
I was reminded of this recently while taking over the accounting for an established UK travel business.
The owner had not come to me because nothing had been filed. VAT returns had been submitted (albeit quite last minute). Accounts had been prepared. Xero was in place. Document-capture software had been connected.
On paper, the machinery existed.
The problem was that the owner had gradually lost confidence that anybody actually had control of it.
He wanted something quite simple: an accountant who understood TOMS, allowed him to continue doing much of his own bookkeeping, and worked with him directly rather than passing the business between different people.
When I looked more closely at Xero and Hubdoc, it became clear why that mattered.
The Hubdoc problem was not really a Hubdoc problem
Hubdoc is designed to make source-document collection easier. Bills and receipts can be uploaded, information extracted and documents pushed into the accounting system.
Used correctly, that can save time.
Used without a controlled workflow, it can create an impressive amount of chaos remarkably quickly.
In this case, historical receipts and supplier documents had ended up being published into Xero as bills. Some appeared as drafts. Others had progressed to approved bills awaiting payment. There were hundreds of them, collectively representing a very substantial value of transactions.
The obvious problem was that many of the underlying costs had already been paid. Those payments had entered Xero separately through bank or card feeds and had already been reconciled.
That creates a serious accounting risk.
If an expense has already been recorded through a bank transaction and the same source document then creates a new supplier bill, the business can end up with duplicated expenditure or creditors that do not represent genuine amounts still owed. The balance sheet can therefore appear to show large supplier liabilities when some of those suppliers were actually paid months earlier.
The software has not necessarily malfunctioned. It may simply have followed the workflow it was given.
And that distinction matters.
Accounting automation does not remove the need for accounting control
I regularly hear versions of the same idea: “My software does the bookkeeping.”
No, it does not. Your software processes information.
Someone still has to decide what that information represents, where it belongs and whether the resulting accounts reflect what actually happened.
For a straightforward business, that already requires judgement.
For a travel business, considerably more sits behind the numbers, which is why travel business bookkeeping cannot be separated from the accounting and VAT structure behind it.
Customer deposits, supplier payments, commissions, principal versus agent treatment, client money and VAT and TOMS treatment for travel businesses can all affect how transactions should be recorded and ultimately reported.
A receipt arriving in Hubdoc tells you that money was spent. It does not tell you:
- which departure the cost belongs to;
- whether the same transaction has already entered Xero elsewhere;
- whether the cost is relevant to TOMS reporting;
- whether the business is acting as principal or agent; or
- how the transaction should feed into VAT and year-end reporting.
Software cannot provide control over a process that has never been properly designed.
When accounting automation creates more work
One of the interesting things about this case was that the business owner did not actually want more automation. He wanted fewer moving parts.
He was perfectly capable of doing routine bookkeeping himself. Accounting automation should simplify that process, not create another layer of transactions that nobody can easily explain. His question was not, “Which additional app can I install?”
It was closer to:
Can we get this properly structured so that I know what is happening and can get on with running the business?
That is often the better question.
There is nothing inherently wrong with Hubdoc.
There is also nothing inherently necessary about it for every business.
If a company has a very high volume of documents and needs automated capture, it may be useful. For another business, a simpler Xero-led process may be easier to understand and control.
The objective is not to collect software. The objective is to maintain reliable accounting records.
A large accounting firm does not automatically mean better continuity
The software problem was only one reason this business decided to move accountants.
The previous accountants were a large firm.
There is nothing inherently wrong with that model. Large firms can offer expertise, staff capacity and resources that smaller practices cannot. But size does not automatically produce continuity.
The owner had more than one accounting contact. Different matters appeared to move between different people. Communication was fragmented. At one point he discovered that a surprisingly large number of users had access to the document workflow and found himself wondering who these people were and whether they understood anything about his travel business.
That does not mean those users had done anything improper. Large practices naturally have teams, internal workflows and staff access.
But from the client’s point of view, the more important question is:
Who actually understands my business and is accountable for the accounting?
If the answer is unclear, adding more people does not necessarily solve the problem. Sometimes it creates more hand-offs, more internal communication and less ownership.
VAT should not become a deadline-day conversation
Another source of frustration was timing. The owner described being contacted immediately before VAT filing deadlines and asked whether the return could be submitted. His reaction was entirely reasonable: “Why are we discussing this now?”
For a travel business using TOMS, VAT should not be a last-minute administrative event. The underlying accounting needs to support the VAT treatment throughout the period. The accountant needs enough time to review the position, identify anything unusual and ask questions before the filing deadline becomes tomorrow’s emergency. This matters particularly where the business sells packages as principal.
With TOMS, the accounting is not simply a case of looking at money arriving in the bank and applying ordinary VAT logic. HMRC’s guidance on the Tour Operators’ Margin Scheme sets out the basis on which the scheme applies to businesses buying in and reselling travel facilities as principal or undisclosed agent. Departure timing, qualifying travel costs and the underlying structure of the supply matter. That information needs to exist in the records before the VAT return is due. It should not be reconstructed while somebody is hovering over the Submit button.
Travel accounting cannot live entirely in year-end journals
The owner did much of the day-to-day bookkeeping himself and wanted to continue doing so. That was not the problem. The problem was visibility. He could provide information about tours and departures, but could not always see how the travel-specific accounting treatment connected back to what appeared later in the accounts. Adjustments could appear through manual journals without a clear operational trail. That is exactly the kind of setup I dislike for a travel business.
A tour operator should not have to wait until the year-end accounts to discover what its accounting supposedly says about tours that ran months earlier. Where departure timing matters, the bookkeeping structure should preserve that information. Where margins matter, the records should make those margins reviewable. Where TOMS applies, the underlying accounting should support the VAT treatment rather than relying on somebody reconstructing everything retrospectively in a spreadsheet or posting an unexplained adjustment once a year.
Year-end accounts should report what happened during the year. They should not be the first point at which somebody attempts to work out what happened.
Specialist knowledge matters more than the logo on the accountant’s website
Another important point was that the owner was not looking for somebody simply to complete accounts.
He needed an accountant who understood the travel sector and TOMS. That requirement had become increasingly obvious because previous accounting relationships had not given him the confidence that the travel-specific VAT treatment was actually understood.
This is one of the reasons travel businesses can struggle with otherwise perfectly competent general accountants. Travel accounting contains issues that do not arise routinely in most small businesses.
A general accountant may deal with hundreds of ordinary VAT-registered companies without ever needing to analyse principal versus agent status, TOMS, departure-based reporting or the interaction between customer receipts and bought-in travel services.
The issue is not whether the accountant is intelligent. The issue is whether this is work they actually do.
Unclear fees usually reflect an unclear service
The client also described receiving invoices for varying amounts without always understanding what the additional charges were for. The individual amounts were not necessarily enormous. That was not the point. An accounting relationship becomes difficult when the client does not know:
- what is included;
- what will be charged separately;
- who is doing the work; or
- what each person is responsible for.
This is particularly problematic in travel accounting because the work is interconnected.
Bookkeeping affects VAT.
VAT treatment affects TOMS.
The way income is recorded depends on whether the business acts as principal or agent.
Departure data may affect margin reporting.
The year-end accounts then depend on all of the above having been dealt with properly.
Splitting those responsibilities between different people and charging for them piecemeal can make it remarkably easy for everyone to complete their individual task while nobody owns the whole picture.
The cheapest accountant is not necessarily the lowest-cost accountant
One comment from the owner stood out. He was not particularly interested in finding the cheapest accountant.
He wanted reliability and peace of mind. That is an important distinction.
Poor accounting does not become cheap simply because the monthly invoice is low. The real cost can appear later in:
- duplicated bookkeeping;
- time spent correcting software workflows;
- VAT errors;
- unexplained liabilities;
- missed tax-planning opportunities;
- repeated conversations with different members of staff;
- management time lost trying to understand the accounts; and
- professional fees paid later to repair work that should have been structured properly in the first place.
A business owner should not need to become an unpaid project manager for their accounting firm.
What a better travel-accounting workflow looks like
The solution was not to throw away Xero, stop using technology or conclude that Hubdoc is dangerous.
The solution was to restore control.
For this type of business, that means one accounting structure, clear responsibility and a workflow that reflects how the travel business actually operates.
The owner can continue doing the bookkeeping. In fact, I am quite happy for a capable client or bookkeeper to handle routine processing. What matters is that the bookkeeping takes place within an agreed accounting framework.
The travel business owner records transactions consistently.
Departures are tracked properly.
Travel-specific costs remain identifiable.
VAT and TOMS treatment are reviewed throughout the year.
The accountant checks the bookkeeping regularly rather than appearing shortly before a deadline.
Questions are dealt with while the transactions are still recognisable. And when advice is needed, the travel business owner knows exactly whom to ask.
That is very different from taking a pile of transactions at year end and trying to make the numbers fit afterwards.
Warning signs your accounting process has lost control
A travel business does not need to wait for a spectacular accounting failure before questioning its setup. Warning signs include:
- bills appearing as unpaid when you know they have already been paid;
- large numbers of draft or awaiting-payment transactions nobody can explain;
- several people having access to your accounting systems but no obvious person owning the overall process;
- VAT discussions taking place immediately before submission deadlines;
- manual journals appearing at year end with little explanation;
- your accountant asking for travel data but you cannot see how that data connects to the accounts;
- your bookkeeping being separated from the VAT treatment that depends on it;
- unexpected invoices for work you believed was already included;
- repeatedly explaining your business to different members of an accounting team; and
- nobody being able to explain simply how the accounting records reflect the way your travel business actually operates.
One of these on its own does not necessarily mean there is a serious problem.
Several together deserve attention.
The important question is not whether the software works
Xero works.
Hubdoc works.
Bank feeds work.
Automation works.
The question is whether the accounting system built around them works. Accounting automation only helps when the workflow behind it is properly designed and controlled.
That requires more than connecting applications and switching on automatic publishing.
It requires somebody to understand the business model, decide how transactions should flow through the records, control who can do what and periodically check that the result still makes sense.
This matters particularly for travel agents and tour operators because apparently ordinary bookkeeping decisions can eventually affect VAT, TOMS margins and the year-end accounts.
A clean-looking dashboard is not evidence that the accounting is correct. Neither is the fact that the VAT return was submitted on time.
And a large accounting firm is not automatically a substitute for having somebody who actually understands the business.
The real test is whether the numbers can be followed from the underlying booking and supplier transaction through to the accounting records, VAT treatment and financial statements without somebody having to reverse-engineer the process at the end.
That is what accounting automation should support.
It should never be expected to replace it.
