With the accounting industry embracing technology, bookkeeping has become more streamlined through cloud accounting software such as QuickBooks and Xero, allowing clients to review their financial position instantaneously. But can we be confident this information is correct? Good bookkeeping is the base of all accounting information, whether you are a sole trader or a worldwide company.
Without adequate bookkeeping, it can be hard to effectively see how the business is performing as we cannot trust the processing being done. A business needs to guarantee that they have good procedures in place to ensure bookkeeping is done effectively with care and attention.
It may be hard for a small sole trader to see if the business is profitable if transactions are not posted into the right accounts, or if direct costs are being coded as administrative expenses, thus giving a higher gross profit percentage. For an SME, poor bookkeeping could make it hard for directors to make critical decisions about the company’s future.
Good initial and continuing training on the software the client is using is essential. Quite often accountants will do one or two training sessions with the client and then have no follow up in place until the compliance work is required. This can allow errors to arise and result in more time spent on the client to fix these issues, which in turn may be hard to fee.
How often do accountants feedback to the bookkeepers, both internal and external bookkeepers? From personal experience, this only happens when things are bad. As part of accounts preparation, however, the bookkeeping should be reviewed, and any points fed back to the bookkeeper. It could be that a monthly transaction is coded to miscellaneous, but then in the accounts, it is reallocated to subscription. Or it could be that the same monthly transaction is being coded into a difference expense code each time. This increases the time spent on accounts production and could affect any forecasting that is being done for the next financial year.
Being actively involved with the bookkeeping process is vital for accountants. It keeps us up to date with the business's day-to-day operations, allowing us to assist our clients. This shows our clients that we are proactive and willing to help them at any point and are not just there to prepare their compliance obligations, but also to become their trusted advisors, which is something both we and our clients want. We would rather have the client ask ten questions in a week to make sure they are posting the transactions correctly than a client who did not ask and instead incorrectly posted transactions.
We look to be proactive with all our clients from the day-to-day things through to the significant transactions. We see bookkeeping as a critical area to get right. With the correct training and the encouragement of client questions, we feel we help them to understand how their business works in order to make better business decisions.