We recently wrote a blog about why it’s so important to outsource your bookkeeping. Clean, clear books provide financial clarity and control over your business, giving you powerful information to guide the big decisions.
You know you don’t have the time or experience to do your own books, but what if you ask your friend or partner to do it? You’ve got a mate who’s great with numbers, so why not hire her? Well, read on to find out why your partner or friend is not the best person to do your book-keeping.
Think of bookkeeping like fixing your car…
Bookkeeping requires a specific skill set: in-depth technical knowledge, diligence and an extreme eye for detail.
It’s like taking your car in for repairs: would you trust a friend to start tinkering with it and changing parts if they had little experience? You’d take it to a garage where a trained expert, who dedicates their professional life to that task, is best placed to fix the problem and won’t cause further damage.
You’ll always need an expert’s input (no matter how advanced your accounting software is).
These days, digital accounting systems make it sound like they can do it all for you! The tech is improving all the time, but you do still need some human input and an expert eye to make sure it’s all done correctly.
For example, if there’s an issue in your books but you don’t know it’s an issue, how are you going to fix it? There may also be some features in the software that could help you get better information but if you or the person doing your books doesn’t know about them, or how to apply them to your business, they’re not much use. For instance, do you know how to use tracking categories in Xero? They can be used to help track income and costs at a deeper level e.g. by customer type or by shop (if you are a retailer).
You’re relying on your bookkeeper having expert knowledge of bookkeeping concepts (at a minimum the debits and credits), the software and your business to make sure nothing slips through the cracks.
Examples of what could go wrong if the person doing your bookkeeping isn’t an expert:
- Claiming VAT back which is not allowable.
- e.g. on entertainment, train fares, fuel receipts (may be allowable but not always, and may be more beneficial to claim the HMRC mileage rate), insurance (there’s no VAT, but rather insurance premium tax which is different).
- Not claiming VAT back.
- e.g. if there is no receipt or invoice.
- Allocating supplier payments to profit and loss (P&L) costs rather than offsetting the payment against the supplier invoice.
- This can lead to duplicate costs in your P&L, and your supplier balances will look higher than they actually are.
- Not checking the bank balances in your software against your actual bank balance.
- The same goes for credit cards. Automatic bank feeds are not perfect; sometimes they will duplicate or miss transactions and it’s important your bookkeeper can pick up on it.
- Setting up add-on apps incorrectly
- e.g. EPOS system not being correctly configured.
- Posting wage payments from your bank to the P&L
- This is the net wage. It’s the gross wage that needs to be posted to your P&L.
- Raising supplier invoices for HMRC payments.
- Sales being posted to costs because the account names are similar
- e.g. if you have an income account set up for consultancy income and also a cost account for consultancy expenses.
- Personal spend being processed as business expenses.
- The most memorable real-life example was a client claiming on his lingerie presents to his partner…certainly not a business expense!
- Allocating payments against the wrong supplier invoice, or worse: the wrong supplier.
- This may occur if the payment is the same amount as a later invoice, leading to a real tangle in reconciling supplier balances.
Even if they have the skills, they need to dedicate regular time.
Good bookkeeping demands a significant commitment; it’s not something that can be squeezed in when your friend or partner has the time. It needs to be a consistent, disciplined activity to produce powerful business insights and ensure compliance.
Getting your mate to do your bookkeeping will also take far longer. Unless they have years of accounting experience and hands-on expertise when it comes to bookkeeping software, they won’t know the shortcuts and tools to speed up transaction processing.
Save time and money by hiring an experienced bookkeeper.
You’re juggling multiple plates while running your business and you deserve someone who’ll go over your books with a fine-tooth comb. That’s where we come in.
We’ll give you peace of mind that your financial admin is in expert hands. You can expect full compliance services, annual business reviews and outstanding support in your corner as you run your business. Fill in our form and let’s see if we’re a great fit to work together. If you already have an accountant, then here is a handy guide on how easy it is to change.
