We are going to make the working assumption that handwritten records are more repetitive than printed records such as bank statements. Such records are said to be low entropy and the records that we get handed in during December and January in order to prepare an income tax return are often like this.

Typically we get a little rental account with twelve receipts of £500 recorded in an exercise book. Low entropy means that there is scope for invention in dealing with this. We will type in the number 500 once, and then type in * eleven times in order to copy down the 500 entry. Alternatively, we can click on the * button on an onscreen toolpad eleven times to do the same thing. To copy down a date we use Ctrl-C, and to copy down a date with an increment of one month we use Ctrl-Shift-C. Alternatively we can click on buttons on an onscreen toolpad to do the same thing. We will have the f1 key reprogrammed from last year to say “Rental income” or similar and we can just hit it twelve times to generate the narrative.

Generally handwritten records are shorter and more predictable. We cannot use optical character recognition on them, but we can use other methods to enter them into our system which have the same mentality or ideology. We want to use the best of new technology to do it quickly. There isn’t that much of a gain with our example of a rental account, but in other cases substantial gains can be made.

 
In order to process bank statement narratives using optical character recognition, we will be using a multi-stage system which we call OCR/narrative prediction. The stages are:

(1) Scan the bank statements using OCR. After narratives are scanned, we process them to remove clutter from the leading and trailing parts. For example, if the narrative says “1rect deb1t payment to David Porthouse and Co on 18 Sep” then the initial stage will be to recognise that this should be amended to read “Direct debit payment …”. However, the leading bit of verbosity can be removed altogether and the trailing date is also redundant, so our software will amend this to just “David Porthouse and Co”.

(2) Compare this to last year’s narratives, where we might find “David Porthouse”. The narrative will then be amended to say just “David Porthouse”. A variety of narratives such as “David Porthouse & Co” or “David Porthouse Ltd” will all be cut down to read just “David Porthouse”.

(3) If a narrative is not in last year’s lexicon, then it needs to be perfect to survive, such as letters only. Otherwise it is deleted.

(4) Deleted narratives are then predicted based upon numeric values. For example, if we had a large number of payments of 41.33 to David Porthouse, then we can predict that the next payment of 41.33 will also be to David Porthouse even if we cannot scan the narrative because it falls on a paper crease or has been scribbled over.

(5) Reprogram the function keys F1 to F10 with the commonest narratives encountered so far. Then the clerk needs to inspect each narrative and overtype it with the correct narrative if required. Overtyping can often use a function key rather than having to type it all in. If we need to type it, autocomplete often helps.

When we reprogram the function keys, we try to ensure that F7 is some type of telephone expense, and key F9 is some type of motor expense. This makes the system more useable.

This system has plenty of graceful degradation and backup systems. OCR and NP are both capable of getting it right first time, but in cases where they don’t, we have other systems which take a little longer, but never disproportionately longer. We can use this system on handwritten records which resemble bank statements. OCR will be useless, but the rest of the system is still there. We can use it where we need to type in invoices one at a time, because while OCR and NP are both useless as they stand, NP has a secondary action of reprogramming the function keys in bulk which can be helpful. It can be arranged that if the client drives a Diesel, then key F9 will generate “Diesel fuel”, while if the client drives a petrol-engined vehicle then F9 will generate “Petrol”.

All the keys on our keyboard are covered in stickers which are normally white lettering on black. Keys 3, R and F are reversed-art black on yellow and in the dates column they generate the dates 3, 13 and 23 respectively with month and year being copied down automatically. Keys 6, U and J are reversed-art black on white and generate 6, 16 and 26 in the dates column. We can whiz through a pile of receipts for petrol with this system. Key F9 is reversed-art black on yellow so it looks the colour of petrol.

 
If several sets of client records are handed in at once, then it makes sense to do all the optical character recognition scanning of bank statements at once, for everybody, before we do anything else. We call this scanbashing and it gives us an early warning if any bank statements are missing. Monday is a good day for scanbashing because the online tax and banking systems are effectively still shut and there is not so much to do.

The dust has now settled on our “making tax digital” efforts and we are currently up to date with everything. It has swallowed up a lot of time and energy and left us with a backlog of other work. We have now scanbashed all the bank statements we have and life is returning to normal. If anybody telephones asking for their accounts to be produced quickly, then we are ready for them.

We have triaged our work-in-progress according to our estimate of when the job is likely to be asked for. Obviously the next round of VAT returns are at the top of the “to do” list, so we are now getting on with them. As we submit each return, we will make a point of downloading it again on another computer to prove that we have submitted it correctly. We have a new Intranet which lays out the procedure to follow and which helps us find our way round the over-complicated MTD system.

 
On an average day, we like to have a colourful product. It is of practical use to have blue as the standard colour for companies, red for sole traders, orange for partnerships, green for VAT and yellow for PAYE. Our outgoing mail uses a red company sticker for sole traders and partnerships, green for VAT and blue for everything else. Our accounts and VAT reports often use colours appropriate to the particular client.

Postage stamps can be ordered online from https://shop.royalmail.com/ and they are currently offering free delivery on orders over £50, which is just about right. We order batches of commemorative stamps according to our fancy, and then use them in the appropriate season. It is stamps with eagles and aeroplanes in summer, owls in the autumn, and the Night Mail in November. Our stampings are intended to have plenty of atmosphere.

We also pick out greenish stamps from what we buy, and use them for posting VAT reports, so everything to do with VAT has an overall greenish colour cast. When we e-mail out electronic payment details for VAT, that is a green notice as well.

The point here is that we preach having a Unique Selling Proposition, and failing that, a Distinctive Product. Our use of optical character recognition is the USP, and colourful accounts and VAT reports are the DP. Our competitors should find it impossible to copy the USP, and practically quite difficult to copy the DP. We are business advisors as well as accountants, and are in a better position to talk to clients with the way we go about our own business.

 
Suppose we have a client who hands us 24 bank statements at the year end. We have a working optical character recognition system which can process these rapidly. Sometimes the narrative on the statements will be useless, so we will need to type it in. We have a narrative prediction and overtyping system which can speed things up.

This system is very useful for an elite of experienced accountants to use, but what about junior trainees? Suppose that the client registers for VAT, and starts bringing in 6 bank statements per quarter? Suppose that some statements are torn and won’t go through the scanner? Suppose that there is a queue to use the OCR scanner, or suppose we just cannot be bothered?

To simulate the likely usage of OCR in a typical accountant’s office, we are going to prohibit the use of OCR for runs of less than 7 bank statements. We will then be forced to type it all in, but we can still use narrative prediction and correction. In addition, with smallish batches of 7-11 bank statements where we do use OCR, we are likely to scan dates and numbers only, and use narrative prediction for the narrative.

This will encourage us to develop a balanced OCR system which is not just a fair weather friend. Our alternative systems will be inspired by seeing an OCR system in action, and will be designed to be almost competitive with it. We will have an OCR-equivalent level of ambition. Tactically, we will be slightly less competitive, but strategically, we will aim to be better and are likely to succeed.

 
… you should be mending your nets. This is a position that the self-employed are often in. You need to be active on something all the time. Normally either you are doing the job, or you should be out prospecting for new business.

In our case we have VAT returns and company accounts which keep us busy all the time. In some months there are fewer VAT returns to do, and we compensate for this by doing a bit more direct mailing of potential clients. Get the idea?

We don’t do any direct mailing in January because we are so busy, but we play catchup in February.

 
Our VAT clients need to provide us with information every quarter. Just taking bank statements as an example, sometimes they hand them in, and sometimes they e-mail them to us as a PDF attachment. Occasionally they photograph the statements on their mobile phone and text them to us.

Pretty soon we get a collection of dribs and drabs of information. What we have started to do is to staple and tape two files back-to-back for selected clients. The front file contains our working papers. The back file, which we call the dribcatcher, contains client records. We hole-punch the client’s bank statements as needed and fix them together with treasury tags to build up one big bank statement which will be the lead schedule in the dribcatcher. Other information provided by clients goes in behind the bank statements, and when we see the client we can empty out the dribcatcher and hand it back to them.

The need for something like a dribcatcher is a feature of the electronic accounting age when documents can be e-mailed or texted. We aim to position ourselves as “MTD Specialists” and we do need to do something to avoid being overwhelmed by an assortment of data in a variety of formats.

 
We have started to claim to be Making Tax Digital Specialists. Back in 1999 David Porthouse devised a spreadsheet system for analysing bank statements by the page which was always right to the nearest penny, and since then he has advanced digital accounting to the point of having a working optical character recognition system for processing bank statements. It is possibly literally true that we were making tax digital when the taxman was wearing a nappy.

The area to watch is interaction with the online tax system. The corporation tax system is pretty good, and David has worked on nothing but companies for several years. However, the other taxes leave something to be desired, and we need checklists and written procedures to fill in the gaps, which we now have. It is always essential after submitting a tax return to make sure that the online view is what we expect it to be. This cannot be taken for granted, and if necessary we will telephone or write a letter (with a Certificate of Posting if needed) to sort things out.

 
Direct Mail means writing to prospective customers to tell them what your business has to offer. This may look expensive, but the costs of a direct mailing campaign are easy to control and the results are easy to monitor.

We suggest that many businesses might find it advantageous to do a bit of direct mailing during their slack season. The aim to to acquire some extra business and keep activity going when trade is falling due to the time of year.

Our slack season as accountants is February and March, and also the middle of every month between February and December. We will practise what we preach with a bit of direct mailing when we have little else to do. It will also put us in a better position to advise clients.

One thing we established this January is the sheer speed of our accounts production system, which often leaves us with nothing to do, so direct mail is something to fill in the time.

 
All our tax returns were submitted by the deadline, so thanks everybody for your cooperation. We are feeling a bit groggy today!

One thing that worked really well this year is our technology. There were no jobs that we struggled with. OCR plus the blink comparator can now gobble up bank statements, while handwritten records can be typed in quickly by the column. After that, it’s all-electronic processing.

What we will do each February is to look on Amazon for the OCR pen scanner with the best reviews. If it’s new to us, then we will buy one and try it after reading the reviews. We would use it for processing printed matter such as credit card statements where there is no running total to serve as a check. Since we don’t see all that many credit card statements, the pressure on us to find a good OCR pen is not that great, but we will still look for one as an annual exercise.