You wouldn’t build a house on crumbling foundations. So why expect to build a successful business if your foundations – the bookkeeping – aren’t solid?
Without quality bookkeeping, you will struggle to understand your business on a day-to-day business, and your accountants, us, will struggle to prepare your accounts effectively, and advise you at the right time. Which is just going to create a sour taste in everyone’s mouth.
With that in mind, we’ve tailored this article to walk you through the power of good quality bookkeeping. We’ll help you understand what to do, what it means for your business, and what it unlocks from your accountant.
What is Bookkeeping?
Bookkeeping is the recording of financial transactions. It’s an old-fashioned word, as we’re moving away from “writing in a book” and more towards “entering in software”, or even automating the recording of transactions. Bookkeeping involves:
- producing your sales invoices.
- recording your purchase invoices.
- recording all your bank and cash transactions.
- matching bank receipts and payments to your invoices.
- posting other payments such as expenses, taxes, charges, wages.
Powerful Bookkeeping = On software, no paper
Cloud accounting has been around a while now, and was the focus in 2019 when the government mandated Making Tax Digital for VAT. There are a few different software providers out there such as Sage, Xero, QuickBooks & FreeAgent, but they all do most of the same thing once you peel back the colour scheme.
Using software is essential to getting real-time information about your business. By entering into software, you can produce reports that immediately tell you who owes you money, who you owe money too, and with your accountants help, what profit/loss you’ve made, and an estimate of what taxes are due and when.
Powerful Bookkeeping = getting you paid, and paying what you owe
If your bookkeeping is accurate and up-to-date, accounting software can show you who owes you money. You can then chase overdue payments, plan for what money will come into your business, or write off any bad debts.
Similarly, you can look at what you owe your suppliers, and when. You can use this “creditors report” to log into your bank and make your supplier payments, matching them off in the software as paid, as you go.
Powerful Bookkeeping = getting your accounts done quicker
If your bookkeeping is on-the-cloud, your accountant can jump into the software and start their work on your annual accounts very quickly after your year-end. This means no rushing to deadlines, and plenty of time to plan for those tax payments.
Plus, your accountant can do all their year-end work in your bookkeeping software, meaning you can see your accounts, and your tax bill, at any moment.
Powerful Bookkeeping = great advice
At A G Smith & Co, we pride ourselves in being proactive accountants, rather than the traditional reactive accountants of the past (though we still see plenty of those today!). We like to call or meet with all our businesses BEFORE the year-end to discuss tax-planning, profit extractions, and give you a view of your business where it is RIGHT NOW, not showing you a historical picture of your business 6 months ago.
This all sounds great, but we can only do this if your bookkeeping information is accurate and up-to-date. The closer to real-time information you can get, the better the advice we can give.
Powerful Bookkeeping = looking forward to the future
With your foundations laid firmly, a proactive accountant taking care of compliance, and ongoing advice about where your business is and how to make profit/save tax, you’re in a position to look forward to the future. You can start to set your business targets, and your accountant can start to produce management accounts, showing you where your business is throughout the year, not just at the year-end.
Add into the mix some budgets (where do you want your business numbers to be this year, and are you on track), some key performance indicators – KPI’s (What makes you money?
What do you care about? What worries you?), and some scenario planning (How much more in sales do I need to take on a new member of staff, or buy a building? What’s this business worth if I wanted to sell it next year) and you’ve got yourself a powerful business, built on powerful bookkeeping.
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