Lots of clients like to do their own bookkeeping to keep the costs down and as accountants we are fully in support of that as it really helps you understand what’s going on in the day to day running of your business. If you record all the bills and income, you will have a much better idea of what’s happening and what is being spent and should be able to react quickly if you spot something that looks wrong. However, bookkeeping done badly can create a whole host of issues and ultimately cost you money as your accounts will take longer to complete.
So, what should you be doing if you want to avoid those costly mistakes? We recommend that you should do these tasks every month, or as a minimum every quarter. If you are VAT registered it’s essential that you do this, otherwise at you year end your accountant may spot mistakes that need adjustments you haven’t planned for.
- Reconcile the bank, by this I mean get a copy of your physical or online bank statement and check that every entry is showing in your books. If you use software such as Xero or Sage, then it’s a great idea to connect your bank and let the software help you with this reconciliation. But it’s not fool proof and so you should check the actual bank statement matches the balance in your software. Do this for all business bank accounts.
- Next check what bills or invoices you need to pay and, on your software, run a detailed aged creditors report. This will show what you have entered that remains unpaid. If you spot something that you have paid, then you can check if you’ve entered it twice. A common mistake is entering directly from the bank and then also adding the invoice or bill later and it sits there never getting paid off.
- Then I check all my overdue sales invoices by running an aged debt report and seeing who hasn’t paid me. Again, make sure you have updated all your bank receipts before doing this and then if the sales invoices are still outstanding start chasing by sending statements out and calling and emailing to chase your payments in. If you let your customers get too behind, they may find it harder to pay and also you may pick up that they haven’t received an invoice. By chasing your clients they soon learn that you mean business and tend not to delay paying you as much.
- Next if you have any bank loans or HP accounts make sure that when you posted the payments from the bank that you have split out the interest charged as the total payment needs to be split into capital and interest, that way you will have an accurate balance on your loan and HP accounts.
- If you have a payroll scheme then you should add a payroll journal to correctly record the gross and net pay and any National Insurance, PAYE and pension liabilities. Payroll is an area that we see most clients get wrong and this can make a massive difference if you run a profit & loss account off your software. If you are not sure what needs to be entered, ask your accountant to help you set up the journal each payroll year and then you can copy it every month and adjust any changes using your payroll reports.
- Depreciation is something that can affect your accounts and tax if you have assets like computers, vans or machinery etc so again ask you accountant after your year end for the correct amount to set up as a recurring journal and this will give you a more accurate accounts information from your software.
These are the main tasks we would suggest you do regularly and by doing so you can then use the reports off your software to help track your business throughout the year and make meaningful decisions knowing that your data is pretty accurate.
At RDG Accounting we offer training and support for your business bookkeeping on various software including Sage, Xero and Kashflow and Quikbooks
If you would like help to set up better bookkeeping for your business, then let me know?
Book a call