Developments in accounting software has automated significantly the process of entering transactional data into the records. With the likes of bank feeds to bring in bank transactions and tools to automate the extraction and population of supplier invoices, many postings can now be done by simply clicking an OK button.
However, there is still considerable scope for error. A few examples:-
• It is often seen that a purchase invoice is entered, but the bank payment is analysed to the expense account too, thus duplicating the expense and large balances appearing to be payable to suppliers on the purchase ledger. This can lead to overclaims of VAT in the short term and a time-consuming exercise to unpick the entries and allocate them against the invoices.
• Not keeping personal and business expenditure separate is another time-consuming area. It is very easy to call into the garage, fill up with fuel, and, on the same credit card transaction, buy cigarettes, groceries etc. These are not business expenses! We do recommend making two transactions to pay, and, preferably, using a personal card for personal transactions.
• Incorrect categorisation of items – there are certain items that can be difficult to classify – e.g. is an item a “repair” or an “improvement”, but the majority are straightforward e.g. payments to British Telecom will generally be a telephone expense. Care is needed when entering data!
• Reconciliations are an essential part of the bookkeeping. Does the balance on the PAYE account agree to that paid, is the net pay control account Nil at the end of each pay period, and critically, does the bank balance shown in the software agree to the actual bank statements.
There are a number of reconciliations that should be run on a regular basis, and differences investigated. Without reconciling figures, the information you obtain from your accounting records to help you run your business may be dramatically different from the actual picture!
We can run reports on a regular basis across our client base where cloud-based software is being used and identify potential “issues”. We can also perform the regular reconciliations, or we can provide you with a “checklist” of points to deal with each month.
Keep on top of your records!If you need any help or would like to investigate us becoming your “virtual bookkeeper” give us a call now.
