What’s Missing From Your Accounts?07th March 2017
Imagine that there’s a serious flaw with the way your bank calculates your balance.
The computer keeps accurate track of all the money you have coming in. But for some reason, it just doesn’t “see” the payments you make by cheque. Those never show up on your statement. Similarly, your bank balance never takes into account any money you transfer to your spouse.
Once a year, the whole system is brought up-to-date, and at that point the balance appears correctly.
How much confidence would you have in your bank statement, every other day of the year?
Not much, right? It would be really difficult to trust a system that routinely left out some crucial facts.
Unfortunately that’s exactly what happens in many businesses - without anyone, certainly not the business owner, really noticing.
Last week I started telling you about some of the biggest accounting mistakes which routinely happen in businesses, making it impossible for you to really understand your financial position correctly.
Missing information is one of them.
All too often, your bookkeeper will only process what lands on his or her desk. They won’t pick up on things if there is no paper record.
Take payroll, for example. Perhaps they might process what employees are paid, but never take into account the tax and national insurance you’ve paid on top of that.
Equally, there is no piece of paper to show how your assets have depreciated, so this isn’t factored into your accounts – at least until your accountant gets around to it at the end of the year.
There are all sorts of other missing expenses. What if your MD spends time wining and dining a potential client, but only submits an expense claim every six months?
In the interim, your accounts will simply be wrong – sometime sseriously so. And yet, business owners very rarely question the figures they are given. They make all their decisions based on a bottom line which is skewed.
Luckily, once a year you should get your real figures, when your accountant comes along to do your annual accounts, and gives you a complete picture.
But that isn’t really good enough. You need accurate information all year long, if you are to avoid terrible mistakes.
That means that you need monthly accounts, done to the same high standard as your annual ones.
Is your bookkeeper qualified to do this?
If you’re not sure, time to start asking some difficult questions.
Whoever handles your accounts on a day-to-day basis needs to understand enough about your business to know what information they’re not getting, as well as what information is landing on their desk.
When we do our clients’ monthly accounts, for example, we work to a strict checklist. We also double - and triple-check that what your accounts say is happening matches what your bank says your position is. If not – alarm bells ring. All that should be happening regularly in your business, too.
You wouldn’t dream of accepting regular personal bank statements that weren’t accurate. Don’t accept any less for your business.
And if you would like to receive complete and accurate accounts every month please get in touch. We won’t just send you over the figures, but make sure you can use them to make the best decisions for your business, too.