Last week we looked at why bookkeeping is an investment and why it’s so important for a good business.
This week we are going to look at what a quality bookkeeping system could look like for you.
We will look at
- What is quality bookkeeping
- Dext/Receipt Bank
- Cloud Accounting
- Using the info
What does quality bookkeeping look like?
You must start with getting the basics right so what are the basics?
- Payroll system where all employees get payslips, paid on time and the figures are right
- A proper system to capture expenses – paperwork is right and approved
- Vat returns are on time and correct
- Vat return of trading details is on time and correct. This can scupper tax clearance
- The bank account is up to date during the year
- You are aware of Vat & PAYE payments, and these are paid on time
- You know what money is owed to the business -debtors
- Knowing what money you owe to suppliers – creditors
- You know what business performance is like during the year and can make decisions on up to date numbers
We will look at some of the tools you can use to get there.
This is software that converts bank statements and credit card statements into CSV. This is an excel file that you import into cloud accounting software like Xero or Surf. Irish banks should be able to provide a downloadable CSV file. AIB do this with personal internet banking, but the IBB offering is quite poor. The fact is they are way behind the UK banks on this.
Autoentry can convert the bank data into the type of file that works for your cloud accounting. You will still need to check opening and closing balances against the bank account. This is to ensure that everything has converted correctly. For more information on Autoentry see here
Dext – Receipt Bank
Dext is the new name for Receipt bank. This can take out a lot of the manual data entry type functions that a bookkeeper does. You can scan all your invoices, purchases, and sales into the software. Once your invoices are in Dext then you go through them to do some of the following
- Classify the invoice into the correct expense category that matches the expense category in your accounts. Eg Phone, light & heat, purchases for resale, professional fees, etc.
- Capture the vat – some invoices will have more than one vat rate
- Set up automatic feeds of expenses from suppliers like utilities and phones. Once set-up these invoices will come in automatically from those suppliers
- Integrate with your cloud accounting software
The beauty of this is that you capture all your invoices, extract the Vat and push the information into your cloud accounting software
For more information on Dext see here
We use Xero and Surf. Other products out there are Big Red Cloud and Quickbooks. This is where the magic happens! I know I am getting excited but trust me. If the numbers can put more money in your pocket, then it can be magic for you too. Remember that Autoentry has got all your bank transactions into Xero. Dext has got all your invoices in. It could be that you issue your invoices from your cloud accounting software already. So, your sales invoices are in there already.
Now we are able to reconcile your bank account. You can
- Match your sales invoices to lodgements
- Align purchases invoices and payments
- Match wage payments and PAYE to payroll costs
- Align repayments to loan or lease accounts
- Extract a report that forms the basis of your Vat return
- Draft a profit and loss account for the period
- And more
Using the Info
This is where you get your accountant involved. You don’t have to but if you want to get real value from your numbers you can analyse the numbers to see if
- Sales are increasing/decreasing or in line with expectations
- Costs going up are down and main drivers
- Analyse your sales per customer, product, etc, so what products and services are selling well and what are not
- Are there some products not selling and some customers too expensive to be doing business with?
- Compare this period with the budget for the period to see if you are on track or not
- Compare with prior periods to see what the trends are like
- Look at your key performance indicators [KPI] for your business – margins, percentage profitability, wage costs
There is a perception that with all this technology that your bookkeeper doesn’t have to do any work. Not true. There is plenty set up time to get the systems and processes right for your business. This is why it can be difficult to quote for this type of work. The volume of paperwork and number of transactions can vary a lot from one type of client to another. A services business like an architect or business consultant would have fewer transaction and invoices than a cafe or shop. The bookkeeper will still need to go through all the invoices to
- extract the right vat amount – remember all invoices are not perfect
- split invoices with different vat rates
- categorise the costs
- invoices not paid through the bank but from cash
- push the invoices through to the software
- match all the lodgements with sales invoices
- match the payments with purchases invoices
- reconcile the Bank
- Prepare and file the Vat return
- Liaise with the client for unexplained lodgements and missing invoices etc
The process must improve over time. This is where you, as the client, have to do your bit. We find that the less the client does the better the process works. Sorry clients! But this is good for you and for us. Remember you are not a bookkeeper and your talents lay elsewhere.
Bookkeeping is an investment of time and money. It will pay off for you by giving you quality numbers during the year. Most businesses will have key numbers they need to know. Knowing those numbers 9 months after the year end is historic information. If you know them during the year, and with the help of a good accountant, you can make business decisions to improve. You are building up a bank of quality information over time that will help you grow your business. If you can get your bookkeeping and accounts done under one roof, then better still. The year-end set of accounts and tax returns will be easier. So better numbers, less hassle, and a happier more profitable confident client.
Interested in talking to us about a Bookkeeping Solution for your business? If so, Start here. Tell us a bit about you and how we can help.