QuickBooks, Xero, Security and CPA Malpractice

Filed in Accounting, Business, Intuit QuickBooks, Xero by on June 11, 2012

I recently commented on a very supportive Doug Sleeter post, Moving towards “Xero” Data Entry and Better Client/Accountant Collaboration. Doug, the leading techer of QuickBooks professionals, is now a major Xero supporter. I added my comment because many QuickBooks users, even QuickBooks CPAs, badly miss the boat when considering QuickBooks security vs Xero security.

Many ignore that all bank, credit card and other financial institution data is already on the web. They also ignore that QuickBooks requires slightly insecure web access to install and update. Most important, they compare Xero security to having no risk, not to the terrible QuickBooks security risks they now have. That is why I wrote 15 Reasons Why QuickBooks is the Worst Place for Your Data, Xero is the Best. It also is why I am now #2 for the number of Xero clients in the U.S. (List View).

Yodlee is a U.S.-based bank feed company. Half our leading banks use it to give 35 million users bank balances (without showing the Yodlee name). Yodlee does this by screen-scraping READ-ONLY entries, with a bank name and the last four digits of the account number (no routing number). It uses hidden encrypted tokens, valid only from Yodlee computers. Yodlee passes this data to Xero, which has similar security and multiple redundant computer systems, at different highly secure locations. It is ridiculous to even compare Xero security, accuracy and reliability to the insecure, unrelieable and error prone QuickBooks desktop. It is equally ridiculous to even compare Xero to the very weak QuickBooks Online, due to the far better Xero functions and the repeated extended QuickBooks Online crashes.

Xero has the fastest, easiest, most accurate and current accounting. It automatically downloads all entries daily, automating up to 100% of account assignments. CPAs can use it to check and backup QuickBooks data, until clients want Xero. For many, this can cost only $12 a month, compared to the $15 QuickBooks charges merely to backup files of more than 5g.

The free Xero industry-standard interface attracted twice as many add-ons last year. Intuit often charges up to $5,000 before add-ons apear on on its marketplace.intuit site. Some developers then must pay 20% of add-on revenue, for a proprietary QuickBooks interface, so there were few recent QuickBooks add-ons.

CPAs can easily use on-demand remote Xero CPAs (XeroCPAs.com), to update Xero and end year-end accounting rushes, for less than $10/hour. They can quickly and easily check this work, with frequent keystroke and mouse click counts and screen shots. They can even use $5/hour help to quickly check the $10 people.

Due to the Xero accuracy, ease of use, economy, safety, security, speed and reliability, I feel that those not using Xero or other automatic accounting programs, to at least check the accuracy of accounting data, badly hurt themselves and their clients. They also vastly increast the amount, cost and delays of CPA – client document and file transfers. I most respectfully submit that clients may soon consider this type of Xero non-use as CPA malpractice.

Some may feel it is wrong to say that not using Xero or equivalent automatic accounting programs is CPA malpractice. However, Google CPA malpractice main issues. Start with this from the authoritative Journal of Accountantcy:

You might accidentally enter a number incorrectly, misinterpret a law, or misconstrue the client’s facts… Do you advise the client to file an amended tax return… have you essentially conceded that you have committed malpractice? … in the case of one accounting malpractice insurance carrier… tax-related claims were the most frequently encountered…

Tort principles instruct that professionals have a duty to exercise a level of care, skill and diligence commonly associated with that of other members of their profession under similar circumstances. Contract principles require practitioners to competently perform the task undertaken. 

In light of this, how can a CPA justify using a program he knows is more error prone? Each CPA or client QuickBooks entry can be wrong. You also can omit entries in QuickBooks. You can even commit malpractice by accepting client summaries, when you know that clients know little or no bookkeeping.

Xero entries are complete and accurate. CPAs also are far more likely to assign entries to correct accounts (and verify client assignments) by using a rather small number of Rules, instead of having each entry result from a separate decision. Many CPAs compound the many QuickBooks errors by improperly using QuickBooks Preferences, such as a Preference assigning accounts based on payees. They add more errors by doing much work in busy tax seasons, instead of letting Xero spread it over the year.

QuickBooks file transfers may make CPAs use the wrong QuickBooks file, including incomplete files. The extra documents needed may add CPA errors and extra work if we get incomplete documents. We also risk having clients lose or misplace documents. This happened twice to me in one day. Replacement would have cost more than $1,500 and taken more than two months, while an Internal Revenue Field Agent demanded an unfiled return. That made me commit to Xero.

I also believe it is CPA malpractice to use (and let clients use) unreliable and programs (see my 15 reasons above). We know our clients:

  • May not adequately backup and update computers or programs
  • Are not professional computer and QuickBooks users
  • Have insecure and unreliable facilities and systems
  • Different clients have major system crashes each year
  • Face fire, theft and natural or man-made disasters
  • Almost never have data insurance

We even know that much of this also applies to our office and staff. All this contributes to the errors we have in our data, besides risking firm and client survival. Unless we act to minimize the risk, for clients and ourselves, I feel we are guilty of CPA malpractice. To the extent that this does not create errors, we may have no CPA malpractice claim. However, I could not sleep at night if Ineedlessly put clients (and myself) at risk these ways.

I especially could not sleep if I knew that Xero and other automatic programs could substantially cut costs, while improving the quality of work and minimizing my year-end rush. That is why it is not a question of if most CPAs will soon use automatic financial institution download programs. It is only a question of how long your CPA will wait.

Please show him this and ask him. You might especially ask him why he is risking your business, his own business and your relationship, when Xero CPAs can do better work for much less. It also does not matter where you are located with Xero. 


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