Dennis Thompson is a QuickBooks guru in the Seattle area and a Certified AuditMyBooks Partner. Dennis reminded me of a project I started earlier this year. I thought I’d “dust it off” for today’s blog entry to see if it “has legs”.
AuditMyBooks automatically scans QuickBooks to identity errors and possible fraud. We’ve invested 1,000’s of hours with our customers, partners and Accounting Advisory Board to develop the proprietary algorithms that scan the data. Set that point aside for this discussion; assume that you can run the same algorithms manually without making clerical errors.
My project compares the time required to complete a manual review of ALL transactions vs. an automatic review using an application like AuditMyBooks. I built a model in Excel and ran a few scenarios.
Scenario A: Business Generates 50 Transactions/Month
If a business generates 600 transactions per year (50 per month) and you can manually check each transaction for 10 of the most common indicators of errors and fraud in less than 1 minute, it would take 10 hours to manually complete the same analysis that AuditMyBooks completes automatically. Assuming your time is worth $85 per hour means this one-time manual review costs $850. With an AuditMyBooks subscription you can complete the analysis as often as you like during the subscription period.
Scenario B: Business Generates 15 Transactions/Month
This is a break even analysis that assumes an annual subscription cost equal to around $240. If a business generates 180 transactions per year (15 per month) and you can manually check each transaction for 10 of the most common indicators of errors and fraud in less than 1 minute, it would take 3 hours to manually complete the same analysis that AuditMyBooks completes automatically. Assuming your time is worth $85 per hour means this one-time manual review costs $255. Like the scenario above, it’s important to note that an AuditMyBooks subscription provides unlimited scans, so the unit cost could actually be much lower (e.g. running 2 scans per month would result in a unit cost of $10 per scan vs. $255 per manual analysis).
Scenario C: Based on Average Number of Transactions in Beta
I reviewed data from our beta program to determine the average number of transactions reviewed per QuickBooks file. The average is 3,267. With transaction counts this high, the case for automatic scanning is obviously pretty strong. If you can manually check each transaction for 10 of the most common indicators of errors and fraud in less than 1 minute, it would take 54 hours to manually complete the same analysis that AuditMyBooks completes automatically. Assuming your time is worth $85 per hour means this one-time manual review costs $4,628.
Like any model, the result can change dramatically based on the variables. If you are interested in experimenting with the model, send an email to morey<at>auditmybooks<dot>com. I’d be happy to send your the Excel file. If you are interested in scanning your data with AuditMyBooks… check out our free trial.
-CP Morey
