The question we hear most in our line of work is “am I making a profit?” and this is always followed closely by “how much tax do I have to pay?“ Every business wants to know what the figures look like at the end of the year, how they compare to the previous year and how they can be improved.
Budgets, forecasts, cash flows – these are all essential to the running of a good business. So where do these figures come from and more importantly – are they accurate?
Let’s get back to basics – It’s all about the bookkeeping!
There’s an old Irish saying – “Tus maith, leath na hoibre” which translates to “a good start means half the work” and this is so true when it comes to accountancy. If books and records are maintained on a regular basis, then the figures are always easily and readily available. It also means that any queries can be resolved on a timely basis so everything is current and within the right period.
Having quarterly management accounts means that businesses can keep an eye on how things are going and maybe focus in on things that aren’t going so well – having accurate figures and up to date reports means knowing how the figures are looking now – not just at the end of the year. This gives the opportunity to make business decisions based on live numbers during the year and not on historical numbers after the year is over.
How do we manage this? Here are a few tips:
- Prepare monthly bank reconciliations, always agreeing the balance per the bank statement at the end of the month to the balance per your accounting package. Any differences can easily be traced as it only one month of transactions
- Check monthly supplier statements, ensuring the balances agree to what’s in your accounting package. If there are any discrepancies, deal with them straight away – request missing invoices, look for credit notes if they haven’t been issued yet, ensure all payments have been recorded correctly
- Print off an Aged Creditors listing every month and ensure the balances are correct. Have a look at older amounts to see if there are any queries to be resolved
- Ensure all sales invoices are issued on a timely basis and deal with queries as they arise, issuing credit notes if necessary
- Print off an Aged Debtors listing every month and ensure the balances are correct. Have a look at older amounts and follow up for payment or check if there are any unresolved queries. Are there bad debts to be written off? Do you need to focus on getting some money in and chasing those older balances?
Why is this so important?
If books and records are maintained correctly, then everything else follows smoothly including VAT Returns, PAYE Returns etc being up to date and always being Revenue compliant.
It’s like everything in life – you get out of it what you put into it. Good bookkeeping is essential for every business and means that the sought after Net Profit figure is always accurate. The only thing you have to worry about now is the tax you have to pay on it – but that’s for another day.
A good business person will realise the importance of their key numbers and will invest the time and money to get them right, so they can keep a very close eye on their business.
If you would like to know more about getting your numbers right please contact Deirdre here on 051396703 or firstname.lastname@example.org