Or worse still – you neglect it altogether?
Well, before we answer that, let’s take a look at the state of play today.
Many old school accountants view bookkeeping as an administrative task that’s beneath them. One that’s trivial, or unimportant. But that couldn’t be further from the truth.
You see, accounting has changed so much in recent years. We now have access to a range of smart tools which help reduce the manual input required for a number of key accounting tasks. These include:
- Bookkeeping (Xero and Receipt Bank);
- Chasing debts (Chaser);
- Completing VAT returns (Xero);
- And reporting and forecasting (Futrli, Fluidly, and Float).
However, as with any software product, these tools are only ever as good as the data fed into them. Have you heard the saying “rubbish in, rubbish out”? Precisely.
Bookkeeping is the foundation upon which all other financial reporting is built. To that end, you must ensure your financial records are accurate and up-to-date. But what happens when your bookkeeping process breaks down?
The consequences of bad bookkeeping
Here are just a few of the most common consequences:
- Missed or over-claimed VAT. You can only claim VAT with a VAT invoice (or credit card receipts for retail purchases under £250).
- A delay to (or absence of) the management information you need to make crucial decisions.
- Finance tasks are made more difficult to delegate, tying up your valuable time.
- A mad, stressful scramble ensues when investors want up-to-date figures, as there’s a need to first do a big cleanup exercise on your numbers.
- More likely to have embarrassing mistakes revealed during due diligence rounds, damaging credibility among would-be investors.
- Your accountant has less time to focus on helping you make decisions, and spends most of the time (and your money) trying to make sense of your records.
- Ultimately your accounting cost will be higher as your accountant will not be able to delegate the nuts and bolts work internally. It can take a long time to correct mistakes and bring everything up to scratch.
Don’t worry, it’s not all doom & gloom!
If you’ve read this far and you’re now tugging on your collar because you’ve experienced one or more of those consequences, don’t worry – it can be fixed.
For us, there are three clear points of failure with any broken bookkeeping process. Repair those and you’ll quickly see the benefits of a seamless and accurate record keeping workflow.
1. Bank Feeds
The first thing you need to do is make sure you have bank feeds in place. If you don’t, your accountant won’t be able to do any bookkeeping until you’ve physically sent them your records.
This makes the entire process more time consuming, difficult to schedule, and prone to human error. It can also result in higher costs if your accountant needs to manually input your financial data into Xero.
By setting up bank feeds, your financial information flows into the system without any manual intervention, meaning everything is accurate and up-to-date, and your accountant can get to work on your books without delay.
Paperwork is by far the biggest point of failure in the bookkeeping process.
A move towards a paperless environment is highly recommended, and the simplest way of accomplishing this is to use the Receipt Bank app. By emailing your invoices and photographing your VAT receipts, Receipt Bank can strip out the pertinent information and pre-categorise everything, leaving your bookkeeper to review and correct where appropriate.
Of course, it’s easy to say “use this app and all will be well.” It’s another entirely to actually start doing it. That’s why we recommend setting up a single email address to which your suppliers email their invoices. This keeps everything neat and tidy, and you can also provide your accountant with access to the mailbox to further ensure accuracy.
Where receipts are concerned, get into the habit of snapping a quick photo with the smartphone app at the point of purchase. That way you have peace of mind that you’ve captured the relevant info, and you can discard the receipt rather than keep it in an overstuffed wallet or purse.
Remember:Without receipts you cannot claim back VAT. You’re throwing money away every time you forget to record a purchase.
3. The Chase
The last point of failure you need to address is every accountant’s least favourite dance: The Chase.
There are deadlines and timelines to which you and your business must adhere, and these become tighter with every passing week where your accountant is left chasing you for vital information.
To avoid this, you need structure. Where our clients are concerned, we hold a weekly check-in to make sure nothing lingers or piles up. Even if you’re busy, sticking a time in your diary once a week to speak with your bookkeeper will help shut down issues as and when they occur. It will also keep you closer to your numbers, giving you confidence to make the right decisions and the right times.
If it’s broken, fix it
Want to make bold and effective business decisions? You need accurate data.
Want to scale your business with the help of a virtual FD? You need a firm financial foundation.
Want to save time, save money, and avoid costly errors? Address those points of error and adopt a bookkeeping process that works.
Or better yet, outsource to Square Mile. To learn more about our bookkeeping process, contact us today and arrange a discovery call.