The balance nobody was watching
Preparing accounts for a small company, the manager looks at the director's loan account. Over the year, personal purchases on the company card, transfers to the director's own account and a few household bills have built up a balance. It would have been an easy conversation in the spring. At year end, with the deadline approaching, it is a more complicated one.
The practice has access to the client's ledger all year. Nobody looked, because nobody had a reason to.
Access is not the same as attention
Many practices can see clients' Xero or QuickBooks at any time. But with hundreds of clients, nobody opens each ledger to check director balances. The review happens when a job is due, which for most companies means once a year.
Bookkeeping clients' ledgers may be coded monthly, but the director loan account is still just one line among many. And for clients who do their own bookkeeping, personal spending may not be coded to the loan account at all until the practice spots it.
Thresholds also vary. What your practice would want to know about for one client may be routine for another, so a blanket check across all clients produces noise. The monitoring needs per-client settings to be useful.
What late discovery costs
| Issue | Effect |
|---|---|
| Balance found at year end | Less time for the client to consider their options with you |
| Personal spend miscoded | Clean-up work before the accounts can be prepared |
| No in-year conversation | Clients surprised by something that built up over months |
| Managers checking by hand | Time spent opening ledgers one by one |
| Inconsistent attention | Some clients watched closely, others not at all |
It also puts the practice in a reactive position. Instead of an early, friendly check-in, the conversation happens under deadline pressure, with fewer options and a client who feels they should have been told sooner.
How we build director loan monitoring
- With client permission, your practice's connection to each client's Xero or QuickBooks is used to read the accounts your practice maps as director loan accounts.
- Balances are read on a schedule, such as weekly, and movements are totalled by director.
- Thresholds your practice sets per client or across the practice trigger an alert, for example a balance moving beyond a level or a large single movement.
- Transactions that look like personal spending in other accounts, based on patterns your team defines, can be listed for review as possible miscoding.
- Alerts go to the client manager by email or Microsoft Teams, with the balance history and the movements behind it.
- The manager records what they did, such as contacted the client or no action, so there is a history per client.
The monitoring shows balances and movements. What they mean for the client, and what to discuss, is your practice's judgement.
Conversations in time
Managers hear about balances building while there is still time to talk. Miscoded personal spending is caught nearer the time. Year end holds fewer surprises. And attention to director balances becomes consistent across clients instead of depending on who manages them.
Clients often welcome it. A quick call during the year about a balance they had not noticed feels like the practice looking out for them, which is very different from hearing about it at year end.
Does this happen at your practice?
- Director loan balances are first reviewed at year end
- Personal spending on company cards is miscoded
- You have ledger access but no time to check it
- Clients are surprised by balances in the accounts
- Some managers watch balances and others do not