The general ledger as the thread

Where did it start?

As a bookkeeping practice. Automation came along very soon after that, and since 1985 the general ledger has run like a thread through my businesses. First with Exact, later with Unit4 Multivers. In all, around 15,000 small and medium-sized businesses bought their software through us.

What part did the accountant play in that?

A large one. We always worked closely with accountants and automation partners. Accountants wanted to be busy with their profession, not with automation. We took that off their hands, and through them we were able to welcome a great many new clients. The accountant did the work the client did not want to do. It was taken for granted that they worked inside the client's administration. If the client wanted to get going themselves, they got a licence of their own.

Did business owners do their own bookkeeping back then?

Many of them did, yes. But faultless it certainly was not. And it is an open question how much was really saved on the accountant's fees. A lot has improved over the years, but there is still plenty of old-fashioned work going on. At smaller companies you often see the owner, with or without a few people, doing the work, and the partner looking after the administration.

How do business owners themselves look at bookkeeping?

What you hear back: it comes with the job, but it is no fun. Everyone takes it for granted that orders and invoices are made with software. The financial consequences of those come with the job too, but rather not. There are plenty of aids these days. Documents are sent, scanned, recognised and partly booked automatically. Even so it remains the case: the business owner would rather be rid of the bookkeeping than blessed with it.

And at larger companies?

There the challenge is a different one. Take our own company: three operating companies with a holding above them. That holding has no administration of its own, at least not yet. If you want an overview, you first have to pull everything into Excel or have elaborate BI reports built. Merging overviews, tying the islands together, having everything in one place: that is not easy. That is how the idea of our own cockpit came about.

How did you start?

I had never programmed before. AI made this possible. I was infected by a good friend with a lot of experience and by my son Mehdi, who became a data scientist and gained his experience in a very different way from his father. He said: "Dad, you just have to start." That is what I did, first of all to get the information together in one place. They gave me the frameworks, and the result is here!

Building connections is your trade. Why no connection here?

That is exactly why. We know how to connect systems to one another. But I wanted something that needs no connection, only the reading of three things: the figures, the annual accounts and the budget in Excel. So I went into the auditfile. That is an export the Dutch tax office requires as the source for a tax audit. Every company working with a bookkeeping package can produce one. They exist for administrations, but also for taxis and point-of-sale systems. I started with the auditfiles of the past few years of our three operating companies, and with those I filled the cockpit.

What is the truth in the cockpit?

The annual accounts. The accountant draws them up, and that is the truth for that financial year. The figures from the auditfile have to reconcile with them. If they do not reconcile completely, the difference holds the corrections the accountant made when closing the year. The budget follows the layout the business owner is used to, often with groups merged. Whatever is in the budget, the cockpit shows in the same way. And at any moment an Excel sheet comes back out, filled with the figures up to that point. With that the owner adjusts the budget, or builds on the budget for the new year. That is what we made.

How do I know the figures are right?

There is a hard rule about that in what we call the brain, the place that holds everything I know. Figures are always recorded arithmetically, from fixed rules. The same input always gives the same outcome, and at every amount you can click through to the entry and the document.

What makes this different from yet another AI tool?

The order. The profession first, then the technology. I have done forty years of administrative organisation, and what is in there I learned over those years and had checked by people who know the trade just as well. A model always gives a confident answer. Whether it is right, you only see if you know the trade, and that is why every outcome has a check from the trade itself beside it. If that check fails, nothing is shown and it goes to a person. Built with AI, steered by professional knowledge, and the arithmetic is simply done.

How does that work in practice?

I started with an analysis of the first half-year. After that I import a new auditfile every month. The cockpit keeps track of what has changed since last time, whether there were still movements in earlier months and what stands out. Those signals matter. You want to prevent things, rather than having to call in a forensic firm later to work out how on earth it could go wrong. That way the truth is in the report once a month.

And the overview across the three companies?

For the consolidation a separate unit was made, with no administration beneath it. It shows one merged report of the figures of the three administrations. That was phase 1.

Phase 2: taking the financial package out of the middle

What was the next step?

The question: what if I use the auditfile as the basis for a company administration of my own? Then we collect the data in the cockpit and connect to the accountant afterwards. The accountant now uses the financial package as a waypoint on the way to the annual accounts. They do their checks in it, make their corrections in it and use the export to draw up the annual accounts. But what if we could take that financial package out of the middle? That was my challenge.

Then surely you are just building another bookkeeping package?

No. Of course all sorts of things have to be recorded financially, and that needs tools. But it must not feel like a bookkeeping package to the user. It is about creating a truth, and that truth should really be there at all times.

So where do you begin?

With the path from quotation to order to invoice or subscription, and the financial consequences of those. That has to give more insight, and of course less work. A quotation looks different from an order, an order different from an invoice, and an invoice different again from an outstanding item. But in fact it is the same information every time: name, address, town, amounts, VAT and company details. What changes is partly the content of the document, and the status. So I thought: let us give every moment a hook.

How does that hook work?

Take a quotation. I do not want to save it in Word first, make a PDF of it, put it in an email, ask the customer to approve it and have them send it back signed. Those are all superfluous steps. I start with a text and share it with the client: this is what I have put down for you, is this what you have in mind? "Roughly, but I would want this and this to be different." Then I adjust it straight away: do you mean it like this? "Yes, that is it." Then you sign in the document itself, and I go and sort it out for you. The moment you sign, I no longer have a quotation but an order. The hook moves to the order. Then the work is done or something is ordered, with a delivery note or a work order that you share. Once that is finished, the hook moves a step further and it becomes an invoice.

And a subscription?

That works too. A simple example is the management fee a holding charges an operating company every month. Why would you not let that run automatically? Turn it into a subscription.

What does that get you?

You only have to count the hooks. How many quotations, orders, invoices, subscriptions and outstanding items do you have? And what value do they represent in total? That is immediately the blueprint for your report: how am I doing? Everything except the outstanding items is a run-up to something that ends up in the general ledger. It is a funnel: you start with quotations, it keeps narrowing, and you end with orders and invoices.

And the receipts and invoices coming in?

Those are scanned and recognised. Fortunately the auditfile already holds the history: the suppliers, the general ledger and everything that has been done in the administration in the past. Every company gets its own email address, and you can send practically anything to it. The system works out for itself what it is. A receipt, but also a contract, a set of annual accounts, a settlement or a bank statement. Once a month you throw in the PDF from the bank, and then the payments are matched. More often is fine too, if you want that.

And paying, investments, salaries?

You have to be able to pay the outstanding items as well. If something costs more than 450 euros, you want to capitalise it and depreciate it. All of that is in there, and it simply happens because you carry out the action. It is processed automatically. If you have staff, you email the payroll journal entry and it is booked. Everything is archived and can be found again.

And where does that leave the accountant?

They can simply work along in this administration. If at some point you no longer want to touch the administration yourself, the accountant is your extension again, just like in the old days. They also take out what they need to compile the annual accounts and file the returns.

Does it work already?

Yes. I have set it up this way for my own holding, and it runs there every day, up to and including the VAT return.

And at the end of the year?

Then the circle is complete. The truth no longer sits with the accountant in the first instance, but in the cockpit. The accountant works in it and makes their corrections. Together you make sure the administration is rounded off at the end of the year in such a way that the accountant imports the auditfile and draws up the annual accounts from it.

Phase 3: the private side as well

What is the next step?

Bringing in the private side. Why? So that one place comes about where everything is recorded: the family wealth, the assets, the debts, the obligations, the wills, the contracts and everything to do with investing.

How does the private side get into the cockpit?

Through the private accounts. We turn those into an administration of their own, and for every item that matters we build up a file.

How does that hang together with the companies?

If the holding owns part of the operating companies, the expected result of those companies counts towards the result of the holding. That is how you draw the line from the operating companies through the holding to the private side, and on to family wealth if there is any. You can make the children part of that too, so they know what is going on and where to find everything.

What does that add?

A new dimension. What earthly possessions do I actually have? And how do I eventually get them to my heirs as cheaply as possible?

Who is that interesting for?

Think of wealth managers who sit down with clients. They produce handsome overviews, but a lot of manual work goes into them. If they work with the cockpit, they have everything together: the operating companies, the holding and the private assets. And their picture sits very close to today's truth.

Is it only for wealth managers?

No. It is for any business owner who wants insight. Take an investment company. It agrees with its participation that it receives an auditfile every month. Then it does the analysis itself, month by month. In its consolidation cockpit it records what percentage it holds in each company, and it sees how its participations are doing all year round. The same goes for a holding with operating companies, for a family with wealth of its own, and for the accountant who runs a business too.

Who works in it, then?

In phase 3 you work together with a wealth manager, an adviser, an accountant or a consultant. Setting up the cockpit from an auditfile is tight and really rather simple. Working together across different fields is another story. A wealth adviser has a lot of loose ends that all have to come together in the dashboard. Or someone has an Excel sheet and wants to turn it into an application.

How do you make that possible?

The client's adviser gets a workplace of their own at the administrations they look after. Setting up is a conversation there: they say what they want, the cockpit measures in the figures, proposes, and the adviser confirms. That is how they set up the cockpit, add to it or make proposals. They can only reach the administrations they look after, and they only make changes through fixed actions.

And if an adviser needs something that does not exist yet?

An application out of their Excel sheet, for instance. Then that becomes a proposal to us and we build it as code. Once that code is there, it is ordinary arithmetic again, just like everything else in the cockpit. And that is how the work is spread over many hands.

To be continued.