Whether you still use manual books, spreadsheets or difficult to use traditional accounting software, bookkeeping is still too hard for those who are not experienced professional bookkeepers or accountants.
There are two major problems that have to be overcome with traditional bookkeeping:
- Firstly, reconciling your bank account or more commonly, your bank accounts. Small business owners have struggled with bank reconciliations for decades. Part of the problem lies in the traditional thinking that your books are more accurate than the bank and that all the bank transactions need to be checked. However, with automated bank transactions the chances of the bank making an error are slim. In addition, now that cheques are so rare there is no longer a difference between the balance on your bank statement and the balance in your books so what is the point of bank reconciliations?
- Secondly, if you keep what used to be called day books of sales and purchases invoices (a fancy word for a list of invoices) you then have to record how and when those invoices were paid by matching those invoices to bank payments and receipts or even cash transactions. That for some is an impossible exercise yet many bookkeeping systems and accountants still persist in this approach.
For the huge majority of small businesses there is a much easier way which will save time and stress and maybe even your marriage, if as is the case with many small business owners, their spouse is expected to keep the books. There is a two-step process:
- Make sure you are on the Cash Accounting basis for VAT. This means you can effectively use your bank account as your bookkeeping system because with the Cash accounting basis you can work out your VAT on your bank receipts and payments, not your sales and purchases invoices. In addition, you do not have to pay VAT you have not received from customers.
- Start using accounting software with automated bank feeds. Automated bank feeds will save you hours of time and frustration as all your bank transactions will appear on your accounting software as if by magic and all you then need to do is to allocate your bank receipts and payments to income and expense categories. Your VAT is calculated at the click of your mouse and as an additional bonus, you can then see roughly how much money you’ve made during the course of the year, also at the click of your mouse.
No longer will you have to reconcile the bank and nor will you have to match up sales and purchase invoices with black receipts and payments. Yes, there is a small cost involved but as a client of mine used to say, there is no point in being penny wise and pound foolish. It really is straightforward and easy so get in touch with us today so we can help you revolutionise your bookkeeping!