Who could benefit from a crystal ball? Pretty much everyone right now.
Sadly, we can’t offer that, but we do know that the financial data of your business can offer some good insights into what could and could not happen.
Using the facts and figures from your bookkeeper, your accountant can use the data created by your bookkeeper to review your company’s financial position, forecasting future projections and ideally preventing you from running into issues down the line.
It’s more important than ever to have these reports. So, if you have furloughed your current bookkeeper or accounts team, but still need to receive reports, we can help through our scalable outsourced support or training so that someone can upskill quickly.
What does a bookkeeper do?
Financial knowledge is the backbone of any successful small business, and bookkeepers are responsible for providing accurate, up-to-date financial information about your business’s performance over a period of time.
Keeping your bookkeeping up to date also allows you to track profitability and plan for ways to improve this if necessary. It allows you to keep on top of areas such as who owes you money, and who you owe money to.
The most important part of bookkeeping is forward planning, it’s great looking back at what has happened, but more valuable to use that information for cash flow forecasts and maintaining budgets. Having this data means you can run ‘what if’ scenarios to see the results of a good and a bad month – I mean, who isn’t in a position where there’s value in knowing what is potentially lurking around the corner?
7 key benefits of good bookkeeping
- You can track profitability
- You will maintain a watching eye on your cash flow
- You will improve financial management
- You will be prepared for the inevitable taxation
- You will find it easier to access reporting
- You will be poised to evaluate performance
- You will be better able to plan for the future
Taking the pulse of your business
No matter what type of business you operate, or whether you have resources in-house or use outsourced support, having a clear understanding of how it should be done is vital.
Bookkeeping can be split into 3 areas:
- Data entry – the inputting of the day to day financial transactions of your business into a bookkeeping software.
- Reconciliations – the obvious reconciliations are for banks, credit cards and cash accounts. However, to ensure date is accurate you should also reconcile other ‘Balance Sheet’ items such as Wages payable or HMRC liabilities.
- Reporting – this is why bookkeeping is important, to give you the opportunity to be able to get up to data financial performance of your business at the click of a button. You should be able to quickly see how much money you are making and where it comes from, right through to who owes you money.
What kinds of information do bookkeepers need to have access to?
No matter your size, if you are UK company, self-employed person or partnership, the Companies Act requires that you keep adequate records. In this context ‘adequate’ means accounting records that are sufficient to:
- Show and explain the company’s transactions
- Disclose with reasonable accuracy, at any time, the financial position of the company at that time
- Enable the directors to ensure that the accounts they are required to prepare comply with the relevant requirements of the law.
To help you stay compliant, you’ll need to be sharing the following with your bookkeeper:
- Invoices
- Receipts
- Payroll records
- Bill statements
- Bank and credit card statements
- Tax forms and returns
What types of reports can bookkeepers create?
Financial reporting makes up a large chunk of what bookkeepers do on a day-to-day basis. From these reports, your bookkeeper should be able to answer – how much money are we making, who owes the business money, who do we owe money to, are there any concerns we should be aware of, for example potential bad debts, or cashflow difficulties.
A detailed financial report usually includes the following three elements:
- Balance sheet
- Income statement
- Cash flow statement
As a business owner, you’ll most likely have to create a complete financial report at least once a year, for tax purposes. However, there are plenty of reasons to make quarterly, or monthly financial statements as well. Frequent financial reports are a great way to check on your budget, and figure out where you can make adjustments if necessary.
Why would I outsource my bookkeeping?
It is generally cheaper to outsource bookkeeping, as it keeps a cap on training and hiring costs. Advances in digital and cloud accounting mean that an outsourced team can be completely up to date irrespective of where they are based. It also means that there will be guaranteed continuity, with holiday periods covered, as well as the ability to scale up and down to suit the business’s needs. Outsourced support also gives you immediate access to industry knowledge and expertise across multiple sectors which can give insights into other working practices and opportunities.
Getting set up should be quick and hassle-free – we’d go so far as to say we could be up and running within an hour if you’re already using mainstream software.
It would be simplistic to say that the numbers are all that matter. Yes, it’s important that the figures are correct, but there are also opportunities beyond that if you’re working with the right team. In every business there are little quirks that need to be understood. Management information is all about giving you, the business owner, the information you want, in the format you understand, and this is where the difference between a bookkeeper and a GOOD bookkeeper lie.
When in doubt, don’t be afraid to talk to other business owners and find out how they hired a bookkeeper and what bookkeeping methods they prefer to use. We’d be more than happy to put you in touch with some of our clients if you wanted to see how we work and if we’d be a good fit for you.
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