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  • What’s in your books???

    30th April 2012 in finance, Max Montague

     How important is keeping your business records accurate?

    Most of you will, probably, reply “very!”

     

    Your financial record keeping is the basis for producing any of the following:

     

    • Aged debtors report in support of  collection of debts
    • Aged creditors reports in support of payments to suppliers
    • Management accounts for shareholders or your bank if you’ve got an overdraft
    • VAT returns
    • PAYE/NIC liability reports.
    • End of year financial statements to pass to your external accountants

    Get any of the above inaccurate and your records don’t reflect the true financial position of your business.

    Get any of the above wrong and you may be in for a large bill, either from the VAT man who’s also the TAX man or your external accountant for putting things straight when the end of year financial statements are produced.

    Could be that your bank can’t rely on your periodic management accounts once they’ve seen the year end financial statements prepared by your external accountant and withdraw the overdraft facility.

    You may not be chasing valid debtors because sales invoices haven’t been entered. Or you may have paid a supplier twice because your bookkeeper inadvertently entered the same invoice twice. It may be that someone in your company asked for a copy invoice and this was passed to your bookkeeper and processed onto the financial system.

    If any of these are inaccurate they’ll have an adverse effect on your cash flow.

     

    If you use bookkeeping software is it the same as your external accountant uses? If not then your external accountant will extract data from your software and input data (in summary form) into their own software. The external accountant may make adjustments to your bookkeeper’s efforts and then will advise your bookkeeper to input the amendments into your own software. This, believe it or not, takes time and time equals money! Sometimes the external accountant won’t finalise the year end financial statements for many months and amendments to balances for the current financial year will be delayed, resulting in monthly management accounts being inaccurate!

    “I’ve got a really good bookkeeper” you say. That’s good, but are they receiving all the financial records and on time? If not, then what you get out is what you put in! And are you able to completely understand what the bookkeeper has produced? Do you ask for snap shot print outs of aged debtors, aged creditors, VAT and PAYE creditors, bank balances, etc. and do these look accurate? Who chases up credit notes? Does your bookkeeper reconcile what’s showing on your books as owing to suppliers to statements issued by them?

    The moral of what’s in your books is don’t just delegate these duties to your earnest bookkeeper in the hope that all’s well but ask questions, plan and monitor. It’ll pay off in the short term!

     

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