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Doctor, doctor, what accounting records do I need to keep and how should I do it?

Accountancy

Dear Doctor, Doctor, doctor, what accounting records do I need to keep and how should I do it?

Michael O'Brien says...

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For many startups maintaining up to date financial records is not at the top of their ever-growing list of priorities.

The good news is keeping accounting records updated and accurate has never been easier. Online accounting software such as Xero, QuickBooks Online and Twinfield, provide businesses with the ability to maintain their accounting records quickly and easily, with high quality user interfaces which are aimed at non accountants. The era of having manual/Excel accounting records (cashbooks, lists of invoices etc) is thankfully long gone.

With accounting software moving to the cloud, a whole new level of automation is being brought to the accounting world. These new online accounting systems can provide direct bank feeds, allowing automatic uploads of your bank transactions each day which means you don’t have to physically post these.

Doctor, doctor, I’ve just incorporated my first company! What next?

Purchase and expense invoices can be scanned into these systems and automatically posted into your accounting ledgers, again automating processes which were once laborious and time consuming.

Most new accounting systems also have open API, allowing third party systems to integrate seamlessly with them – whether that be linking with your payment accounts (e.g. Stripe, iZettle, PayPal), pulling sales information from your POS systems (e.g. Shopify, Vend) or connecting with your payroll and HR software (e.g. MyPAYE). This all means that your financial information can be kept up to date, in real time, with very little effort.

This means that businesses can easily see at the touch of a button their standard accounting reports in real time – Profit & Loss Account, Balance Sheet, Accounts Receivable and Payable reports – but also with the added sophistication of these systems, you can build in KPI’s and other non financial performance measures to get a fuller understanding of the business’ overall performance.

How this information is shown – whether it be number based reports, graphs or online dashboard infographics – can be tailored to specific users and their needs and preferences.

Having up to date accounting information on the performance of your business is critical to the success of any business. Reflecting on what has happened and how money has been spent in a business is very important in highlighting where future funds should be allocated and identifying potential inefficiencies.

Past performance can also highlight the trends of the business and in turn used effectively to forecast where the business may be going in the future, and assist management in developing targets, goals and strategies to achieve these.

Up to date information will not only assist management to make sensible decisions but external investors will expect up to date records as a matter of course and will look unfavourably on a business that does not have this level of basic corporate and financial governance in place.

HM Revenue & Customs are also introducing under the “Making Tax Digital” legislation the requirement for digital record keeping and quarterly filing of information with the tax authorities for most businesses. The current proposal is that these plans will be phased in from 2018, therefore having up to date accounting information will be a necessity in order to meet these requirements.

Many businesses now feel comfortable to undertake their basic financial record keeping themselves due to the advent of these new cloud accounting systems. However many still outsource this role to accountants who can work as your Virtual Finance team to not only keep your accounting records up to date (so leaving you with more time to focus on growing your business) but also provide you with advice and support in understanding the numbers and developing your business growth strategies going forward.

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