2 big reasons why you can no longer do your bookkeeping just once a year
Are you a busy business owner who pulls together all their paperwork for their business once and year and then either delivers it to their bookkeeper or accountant just before the year end or experiences the pain of entering all 12 months’ information into a spreadsheet?
Perhaps you are someone who really doesn’t like doing their bookkeeping and put it off and avoid doing it for as long as possible.
Perhaps you don’t really see why it needs to be done regularly.
Well, we’re hoping that this blog will encourage you to see this differently.
There are two great reasons why regular bookkeeping is critical to your business.
BIG REASON 1: YOU WILL MANAGE YOUR BUSINESS BETTER AND BE MORE PROFITABLE
If you are leaving your accounts to be done just once a year, this means that you don’t really know how your business is performing financially during those 12 months (although you may think you do).
At the moment, if there are issues to be addressed you are leaving it too late to alter the course you are heading in.
Instead, regular monthly or quarterly business enables you to analyse how much income you have and identify action needed, review your expenditure and adjust it if needed, ascertain how much profit you are making and whether your pricing and margins are right for your business and allows you to identify any themes or issues and to plan ahead.
Basically, if you have regular information you can make better decisions in your business which means that you will become more profitable.
We know this sounds a bit depressing but if you don’t know how your business is doing, then you are at risk of losing it because you may not notice problems which are arising and have time to resolve them before your business really suffers.
So, as you can see, if you are serious about running and maintaining a profitable business, it’s really not an option to rely on yearly bookkeeping and accounts.
BIG REASON 2: THE NEW ‘MAKING TAX DIGITAL’ REQUIREMENTS WILL MEAN QUARTERLY REPORTING TO THE HMRC
The new Government Requirements mean that you will no longer be required to submit tax returns just once per year. There will be a quarterly submission required which therefore means that you need to have your bookkeeping up to date.
The specific details on how this will work are still to be announced (the response is due to made by the Government to the consultation in January 2017).
However, we do know that businesses will need to use what are described as ‘designated software packages’ to report to HMRC and this will not include Microsoft Excel. This means that those firms which are not using dedicated accounting software now are likely to need to make the move to such a package.
So, if your business does not currently use a dedicated accounting software package, it is likely to prove useful to make the move early.
We hope that by reading this blog, you are now keen to take action and to at least do your bookkeeping quarterly – although monthly would be the ideal scenario. So, what should you do now?
- Decide whether you are going to do the bookkeeping yourself or to get someone else to do it for you. Only you know whether you have the time, skills and commitment to do your own bookkeeping or not. If not, then just find a good bookkeeper to do this for you.
- Get organised and start to organise your paperwork by month – receipts, bills, invoices, statements etc. Make sure you have a system for making sure that you keep all the paperwork that comes in – via the post, by email, must be downloaded from supplier websites or can be found in your pocket, vehicle or wallet.
- Talk to your accountant and other experts to explore what software you will use for your bookkeeping.
- Get your bookkeeping software set up (again this is something you may want to get a good bookkeeper to do for you) as it is important to get this right.
- If you are going to be using the software just to raise sales invoices for your clients or to do your bookkeeping in full, get yourself trained on how to use it so that you don’t make mistakes which could cost you dearly later on. Many of the softwares provide great online training or if you learn better in the classroom, do a workshop or some 1 to 1 training with someone who knows the software really well who can show you how to use the system effectively.
We would be interested to hear your comments on this blog. At The Bookkeeping Department, we help business owners do their own bookkeeping as well as providing a service where we do it for them. We provide training workshops and 1 to 1 training on Xero bookkeeping software. If you feel we may be able to help in anyway, please contact us for a friendly chat.