Accountants come across a variety of errors every day and from your point of view, reducing the frequency of those errors will save time on your accounting and ultimately the time saved will save you money. More than that, as Tim Maris from UHY Hacker Young explains here, the other incentive is that having the right management information circulating in your business will help you make the right decisions year-round. So, getting your bookkeeping in check really is a win:win.
Here are Tim’s top tips:
1. Keep your finger on the pulse.
It’s important to know the state of play regarding your invoices and receipts, so this is something you should check regularly. Outstanding invoices and receipts that aren’t on your accounting radar can give you a false impression of either business success or business failure. By running an aged customer and supplier report, you’ll be able to keep your finger firmly on the pulse of things that have been outstanding too long as well as the true financial state your business is in. Credit control and spotting errors early is the basis of sound financial management and by checking out any duplicated or misallocated items immediately, you’ll stay in tight control of what’s happening.
2. Consistency is key.
When you allocate expenses or income, it’s important to make sure that you allocate them to the right place in the first instance and keep on allocating them to that place as time goes by. It’s also important that you avoid falling into the General Expenses/Miscellaneous trap. Allocating your expenses wisely and making sure you have a code for each category means that you will have the detailed information you need to make wise decisions for your business. A big pot of General or Miscellaneous expenses is confusing, unclear and to be avoided.
Using Farm Accounts Software you can set up templates for regularly occurring transactions, this will not only save time but help ensure that you are consistent with your coding.
3. Don’t mix business and pleasure.
If you’re someone who has personal expenses that go through your business account, you could be making life unnecessarily difficult for yourself. Try to avoid this way of working if at all possible and if it is essential that an expense goes through your business account, make sure it’s highlighted and marked clearly as drawings. This will avoid confusion and preventable, time consuming discussions.
4. Attention to detail.
Petty cash is badly named in some ways because the name means that the whole notion can seem ‘petty’ and unimportant. But in the same way as counting the pennies mean that the pounds look after themselves, keeping receipts for small items all add up in the end. Even though controlling your petty cash may seem like a whole lot of unnecessary hassle, it is an important part of your bookkeeping process and must be done. Choose a system that suits you and your accountant and bear in mind that the better the system suits you, the more likely you are to find it hassle-free (or at least low hassle). You can make electronic copies of your receipts and store them in alphabetical or date order, whichever you and your accountant agree to. In many ways, it’s irrelevant, as long as your system is logical. It’s also important to remember that technology isn’t 100% fool proof, so make sure you do regular back-ups so that if all else fails you can recover your receipts.
Also, when it comes to expenses, it is important to remember that records need to be kept for 5 years AFTER the submission deadline they relate to. So, if your year end is 31 March 2016, the deadline for your tax return will be 31 January 2017. This means that you must keep your records until January 2022.
5. Capital or not?
This is where even the most vigilant business people get caught out. Deciding whether an item should be a capital item or posted to profit and loss can sometimes be a close call. Accountants often pick up items that have been misposted in this way and this can be avoided by double checking your decision with your accountant or by using the support line that comes with your software. While these types of transaction are relatively infrequent in most businesses, it’s well worth taking the extra time to make sure you’re posting them to the right place.
So there you have it – five top tips to keep your bookkeeping in check. Day to day accounting is a necessary evil for every business, yet needn’t be a pain if you take the right approach and work with the right people.
For more on Farmplan’s Farm Accounts Software click here or call 01594 545000
If you’d like to find out more about the services that Tim and his team at UHY Hacker Young provide, particularly for the rural and agricultural community, visit their website www.uhy-uk.com/agriculture.