Breaking The Back of Bookkeeping

b imageFollowing on from “Why You Need an Accountant When Starting a Business”, I want to focus on the financial paperwork that you can (and need) to manage yourself, and that you don’t need an accountant for.

Imagine this dark scenario…

You’ve done your research; got your product or service to market, found customers who are interested in what you do…and then you run out of cash. A dramatic, but not uncommon, situation and one not caused by banks not lending.

This situation is often created by not knowing who owes you money, who you owe money to and HMRC penalties for late or incorrect payment and filing of returns. There are more benefits for having your house in order as Emily Coltman FCA, Chief Accountant to FreeAgent Central, explains “Not keeping your books up to date is very risky. Plus, you won’t be able to make informed decisions such as which new markets or new products to try if you don’t have accurate and up-to-date financial information”

“I don’t have the time”

It’s vitally important to make the time, and how much time often depends on the complexity of the business. If you’re a retailer selling a high volume mix of VATable and non-VATable products, your bookkeeping is likely to be more involved than a business which raises 5 invoices per month. A good system will be easy to use, easy to understand and as Emily suggests “we believe that spending just one hour a week on your books will make all the difference.”

It certainly will be if you put these tools in place when you set up your business, rather than play catch-up when you’ve been trading for weeks or months.

“Which system should I use?”

There are a plethora of bookkeeping systems out there, far too many for me to list. So, if you haven’t used one before, seek advice from your peers, accountant or bank manager. An accountant may even suggest using the same system as them, which could be a benefit to you and may even help to reduce your accountancy bill. But is it the right system for your business? Emily warns “Don’t accept an antiquated bookkeeping system because it’s what your accountant has always used. Look for a system that puts YOU in control – after all, this is your business and you are responsible for it to HMRC!”

Using a system that’s different to the one your accountant uses shouldn’t hinder your professional relation with them, as Emily explains “With the right system for you, you will be able to work more closely with your accountant, who will be able to give you proactive business advice such as whether your prices aren’t high enough or you’re paying too much in bank charges.”

Download Software Vs Cloud Based Systems

Market leading tools have historically been QuickBooks and Sage and there is a growing increase in the number of online tools available, with the most popular versions being FreeAgent, Xero and KashFlow. Others are available, but I’d recommend one of these as the starting point for your research.

Online accounting software is, in my opinion, the best way to go. Your information is then accessible from anywhere in the world and, more importantly, it is safe and secure. Also, many online systems offer free trials so you can see how intuitive they are before you commit. When you do try one, also test their customer service/tech support as these will be invaluable to you in the early days of use, and you don’t want to be spending more time on hold or with an unsupportive advisor than you need.

To summarise:

  • Start as you mean to go on, and put systems in place now.
  • Use the tool that’s right for you and YOUR business, not your accountant or bank manager
  • The time spent on this will actually save you time in the future.

Email your comments or questions to info@cambridgebusinesslounge.com