Whilst preparing clients’ accounts we often come across a variety of errors. Most of these can be easily prevented and can not only save your accountants time and therefore reduce costs but also improve the management information that you are using throughout the year.
1. Review your outstanding invoices and receipts
By running an aged customer and supplier report on your software you will be able to clearly identify all of your outstanding invoices. Reviewing these reports regularly is a great way of giving your data a health check and will enable you to keep on top your credit control. Investigate any outstanding items or negative balances that you do not believe should be there. This exercise will help you identify any duplicated or misallocated items.
2. Be consistent
When posting income and expenses make sure that they are allocated to the same place each month and that you are consistent with your treatment. For example motor insurance can go to the motor insurance code, don’t swap to general insurance part way through the year.
General expenses and miscellaneous should be avoided if at all possible. It is very easy to park things in general expenses and the total can soon add up. If you find that you do not have enough codes to analyse your expenses you add new ones to provide you with the detail needed.
3. Keep your personal and business finances separate
You may have a separate business bank account but personal expenses may often go through this account. Avoid this if possible. If the business bank account is used for personal items make sure they are marked clearly and allocated as drawings.
4. Maintaining your books and records
Keeping receipts for small items and petty cash may be a hassle but you do need to do it. Put a system in place for storing your records, whether your receipts are scanned in online, in alphabetical or date order – most accountants won’t mind as long as it is logical. Back-ups of software and online systems are also important to prevent any unintentional loss of your records. Records should be kept for 5 years following the submission deadline to which they relate. For example if your year end is 31 March 2016 your tax return deadline will be 31 January 2017. You therefore need to need to keep the records until January 2022!
5. To capitalise or not to capitalise?
It’s not always clear whether an item should be capital or posted to your profit or loss. We often come across items that have been allocated incorrectly. If you’re unsure always give your accountant a call or double check when something should be posted. They will also be able to help with awkward disposals, part exchanges or purchases that are on finance. The support line for your bookkeeping software is another good resource you should utilise and they will be able to talk you through entering any unusual transactions you come across.
If you would like further information on the above post or to discuss your own specific circumstances, please contact Natasha Root on 01763 247321 or contact us via our webform.