[Cloud-based accounting software is also referred to as “online accounting software”, serves the same function as accounting software that you would install on your computer, except it runs on the provider’s servers and computer hardware and you access it using your web browser, over the Internet. Your data is securely stored and processed on the provider’s servers—or “in the cloud”.]
Trying to run your business accounts without software is like boiling a kettle without electricity. It takes much longer, it is not efficient, and it wastes your time.
Modern accounting systems are very simple and can be maintained with only a small amount of knowledge of bookkeeping principles and computer understanding. The new breed of accounting software is simple and intuitive to use and it will save your business hundreds of hours of time.
These modern systems have many, many advantages. They are accessible from anyplace at any time with only a computer (tablet or smartphone) and internet connection, all data is backed up for you, everything is electronic (so no more mountains of paper or offsite storage bills), no computer hardware to buy or maintain to run the system and they are simple and straightforward to setup and use.
There are a multitude of these systems available. We recommend enhancing the efficiency of your business by researching the available options or call us for help and advice.
2) Let the professionals help you with software setup.
Whatever system you end up using for your bookkeeping, let the professionals help set it up for you. Your accountant is a great place to start. Your accountant will help you setup the software (chart of accounts, reporting, etc.) so it makes sense for your business.
The setup is crucial to keeping your records accurate and consistent and is best done by professionals. Investing a small amount of time in the setup of your system will save you hours and hours and will also ensure your accountant has the input necessary to make the preparation of your annual accounts smooth and easy each year.
The software setup will also include setting up reporting. Financial reporting, as you know, is the cornerstone of any business. Having correct, accurate and above all meaningful reports, customised to your exact requirements, will help you analyse your business’s financial position at the click of a button. This will empower you to make more informed decisions about future business investments or recruitment.
3) Make use of the ‘cloud based software’
The cloud is a relatively new principal when it comes to accounting software, but utilising new cloud-based systems does help create a streamlined business. We like to call it bookkeeping automation, and the aim is to cut down on manual data entry and speed up the entire bookkeeping process.
The new breed of cloud-based financial account software can help with automation of many routine tasks.
Bank reconciliation – many of the larger cloud-based software solutions allow for a direct bank feed into your accounting system. This means you no longer have to key in each bank transaction – the software will do it for you. Your only remaining job is reconciling the entries, which only takes a few clicks of the mouse.
Scan receipts and use services like Receipt Bank to analyse and post the receipt to your cloud-based accounting software. The advent of modern smartphones has turned everyone’s telephone into a capable scanning device. You can leverage your phone technology together with services like Receipt Bank to automate the posting of expenses. Your only intervention is reconciling the entries and doing the relevant cross checks.
When all coupled together bookkeeping automation can save days and days of time each year on what used to be manual tasks.
4) Be consistent with data entry
One of the biggest causes of questions and inconsistencies is duplicate data entry or keying the same type of expense to different expense categories in your accounting software. Put in process and documentation within your business so everyone is clear on what type of expense is allocated to the correct expense category. Make sure if your bookkeepers are unsure they have open access to a person they can contact to get advice. It is better to get clarity rather than mis-post. Your accountant will be able to help you formulate instructions and documentation so that all of your team have a consistent reference point that is kept up to date. Documentation will also have the added advantage of enabling new team members to get up to speed quicker.
5) Make detailed notes
When making entries in your accounting software make sure you add detailed notes against each transaction. Most modern accounting systems have a notes field. Use this field to make detailed notes, so anyone who is looking at the entry will be able to decipher what the entry relates to.
We often see entries containing code words or industry terms / acronyms – while these may be great for one person to understand they are of little use if someone else in your business or your accountant has to look at the entry.
Make sure that you cross reference receipts – even if you just add a date and a reference number to a paper receipt and enter that reference number in the notes field for the entry in your financial accounting system it will be a great start in streamlining the production of your returns and end of year reports. Instead of your accountant having to search manually through the box of receipts you have sent them, they can now easily tie up each entry with the corresponding paperwork.
6) Reconcile bank accounts on a monthly basis
Regardless of how you manage your bookkeeping (manual or via a software system) it is crucial to keep bank reconciliation process regular, ideally monthly. Frequent reconciliation ensures your accounting system shows as true as possible a picture of your business’s financial position. This makes reporting more accurate and in turn helps drive better decisions and forecasting.
If you are using a modern cloud-based financial accounting system, the reconciliation process should take minimal time as all bank records will automatically be added to your systems via a bank feed (see point 3 above).
7) Review your trade debtors list to make sure you are being paid, on a monthly basis.
If your business issues numerous invoices to clients or customers each month then it is is easy to forget who owes money and who has paid. We recommend utilising the ‘trade debtors‘ report that is available in all modern financial accounting systems to see who owes your business money. A regular review of the debtors list will ensure you take action and chase overdue payments promptly thus keeping your business’s cash position healthy.
8) Review creditors on a monthly basis
As for debtors, it is also important to review who you owe money to on a regular basis. Run the ‘trade creditors’ report in your financial accounting system regularly and review who your business owes money to and when the payment is due. By reviewing the report regularly together with your trade debtors report you will easily be able to get a view on the future cash flow for your business and identify issues in advance so you can take action to remedy.
9) File receipts and make sure you know where to find them
It seems simple doesn’t it? Filing away receipts, invoices, etc. You would be amazed how many businesses don’t have a logical filing system for their financial records. We recommend electronic filing within your financial accounting system. If this is not possible, you need a simple way of filing receipts, invoices and other paperwork for cross-referencing by other people in your business or your accountant.
Keep it simple. Complicated systems fail. Make sure everyone in your business that could get involved in the bookkeeping process knows how the system works and document it as part of your businesses standard financial operating procedures. Try to file by date / reference number and keep a new file for each week / month (dependant on your volume of records). Cross reference the number on the paperwork with the entry in your financial accounting system.
10) Review software reports regularly
As mentioned above for debtors and creditors, be sure to review your other key business reports on a regular basis – e.g. profit and loss report. If your business is not making money, you need to know quickly. If a specific project is not making money you need to know and take action to avoid duplication of the issues in the future. Leveraging the reporting within your financial accounting system will help keep your business healthy.
Bonus) Don’t binge bookkeep – adopt a little and often approach
Don’t let bookkeeping overwhelm you and your team. Many businesses have a mad rush at the end of a quarter to get their bookkeeping up to date. Don’t be one of those businesses. Little and often is the best method. If you spend a few minutes each day on your core bookkeeping activities, you will avoid days of work at the end of the period.
Hopefully, these tips give you a few pointers to help you streamline your bookkeeping process and make life a little easier for those involved in the process and your accountant along the way. Remember the key is to use your financial accounting system as a real business tool to help your business grow profitably and not just view it as a record keeping tool.
DKP are a full-service accounting firm with a highly experienced team. We are Quickbooks Certified Pro-Advisors and provide a virtual financial office for businesses of all sizes and type. If you have any questions about any of the items mentioned in the article, please do get in touch.