Bookkeeping is one aspect of business that everyone I come across seems to dislike very much. I personally can’t understand that because I love accounting! However, over the years, I have continually come across people who have the following “pain points” with accounting:
1. Stay up to date!
How boring it is. There is never enough time to do everything my growing business needs without worrying about the books! All I need to know is who owes me money! I am only required to keep records because I am an unpaid tax collector for the government! My accountant takes care of the books at the end of the year. I just can’t be bothered! I’m sure VAT comes out more than every 3 months! I’m just guessing the figures for each quarter of VAT – I’ve been in business for 10 years and never had an inspection, so why bother doing it properly?
Do you identify with any of these comments?
2. Compliance deadline!
Never sure which deadlines are relevant to me? I can’t believe I was just done with VAT – they said my last return was delayed but I posted it on the last day of the month! I am so confused by all the deadlines I have to meet that I have no idea which ones are legally binding and which ones are not. I thought I paid the salary deductions at the end of the tax year when the forms are sent to the Tax Office, right? The guy in the pub last week said he could ignore a reminder from the Tax Office about salary deductions, they don’t really bother with the small amounts, but now they’re taking me to court!
Are you confused by the deadlines?
3. Current information!
I keep all the relevant things in my head, I don’t need to write them all down! I’m not VAT registered so I don’t need a full set of books! The only person interested in my business figures is the Tax Agency, why should I tell them everything? I only update things when the bank manager insists on reviewing my overdraft. I can never understand why he thinks things are so bad all the time! Only big public companies need detailed books, right? I wish my books were up to date, maybe I can see why I never have any money, but how do I do them?
Do you know how your business is doing each month in terms of cash flow and profit?
4. Visits and Inspections!
I just received a letter from the VAT office. They’re coming next week for a full inspection. What should I do? Can the Tax Office really demand all my records, bank statements, everything, what can they get with only the fragments that I keep? Why would the Tax Office want to see my wage records? I only have half a dozen casual workers and they all get paid in cash, so I don’t bother keeping track of everything. I just went through an IVA visit and I can’t believe how much VAT they say I owe them. Where am I going to get that kind of money? All my deals are in cash, so I don’t have to present anything to the Treasury if they ask me because they can’t prove anything if it’s not in writing! What is a declaration of capital? The Tax Office said that since I have no records, my income will increase from what I spend. How much should I put?
You haven’t had an inspection yet, you will sooner or later!
5. Defense against HM tax and customs assessments!
I just went through a tax inquiry and they think I owe a large amount of tax; my accountant had been pestering me for years to get my books in order, but I thought he wanted more money out of me; now he’s facing bankruptcy. Because I don’t have a record to fight against the discharges that the Treasury has estimated! My business is all cash and I never use a box because boxes leave traces. Why does the Tax Office insist that my income is not declared? Why don’t you accept what I say and leave?
Tax investigations are the government’s way of controlling the self-assessment regime
6.Free time!
I don’t worry about appropriate books because they interfere with my family and social life; nobody looks at them anyway, my accountant only deals with what I give him! I used to be good with my books, but as the business grew I just couldn’t keep all the plates turning! I just have to be in the pub at 5pm otherwise I miss the crowd – books don’t really matter anyway! My vacations are much more important than boring accounting! I just won’t miss any of the games. I paid good money for my season ticket!
I also value my free time, but accounting cannot be ignored.
7. Complications!!
When the business was small, the books were easy, but as it grew, things got more complicated and I couldn’t take it anymore, so I left it to the accountant at the end of the year! I get into trouble every time I try to use this accounting package that my accountant recommended to me: he cost me an arm and a leg, but I don’t know how to make it work and his training courses are also very expensive. I used to use a software package but they kept sending me updates and one of these completely ruined my books so now I don’t bother anymore, if the Tax Office insists on looking at my stuff maybe they can understand. then i could!
How does someone choose an accounting method that is right for them?
8. Helpful spouses!
My business grew very quickly so I asked my wife to keep the books, I thought she took care of everything, but when the bank manager phoned to tell me that the account was too overdrawn I found that she hadn’t bothered , And now what do I do? do? I don’t have time to fix everything! My partner would rather be in the shops than do the books. I thought the books were fine! My husband is an accountant so I don’t bother with books for my hair salon! My wife knows a bookkeeper and she told me she would pass everything on to them but now I can’t contact them and they have all our stuff! My husband put the records of the last few years on the bonfire, he thought they were just old garbage, what do I do?
Your books are the most valuable part of your business. Protect them!
9. Bookkeepers…
I really want help with my books, but where can I find a bookkeeper? How will I know they are good? Will a bookkeeper end up costing me money because they don’t know the business like I do? I really don’t want anyone to know all my trade secrets! How will I know if they mess up the work? I don’t understand what they are doing! I can’t afford a bookkeeper!
A good bookkeeper is an invaluable asset to any business!
10. Misconceptions:
Having a bookkeeper is like having a leech sucking money out of the business for no profit! I’m sure my accountant works for the government – VAT seems to grow every quarter! My bookkeeper keeps pestering me about receipts. Why do you need them? I never did it! My tax bills will skyrocket if I use a bookkeeper and all sales are reported! Where can I find a “bent” bookkeeper who will keep profits and taxes low? Isn’t it good enough that the accountant puts a few things together at the end of the year? I just don’t feel right declaring it all
Do you know any other?
It’s true that most accountants never want you to question their bookkeeping because they’d like to keep making great money off of you while they clean up the mess each year. If they also recommended a computer accounting package to you, they probably made money from that too, both from the sale and when you call and ask simple questions about how to do this and that with it.
The problem is that most entrepreneurs simply don’t realize how valuable a great set of records is to them. Or how your books are the cornerstone of your defense when they are the subject of an in-depth Tax or VAT investigation.
Let me explain those two important points in a little more detail.
Your business records are, if well maintained, the most valuable asset your business has. For example:-
1. They hold the key to how profitable your current activities are
2. How important each of your customers is to their order size and purchase frequency
3. How much money do you have committed to your customers who have not yet paid?
4. How much money do you agree to pay your suppliers?
5. All the contact details of everyone you deal with are there
6. The indications of how each of your employees is performing are there.
7. The exact amount due regarding VAT can be seen increasing day by day, so no nasty surprises at the end of the quarter!
8. Instant reports of profits/stock levels/cash flow/receivables/creditors, etc., available at the touch of a button
9. Impress the bank manager when you ask for this item or report and he can produce it instantly.
There are many more factors, but these give you an idea of why records are so valuable, and never more so than when you want to sell the business and get the most money because everything the buyer needs is so clear and accessible.
An excellent set of records is your best defense against a thorough VAT or tax investigation because they are so complete, up-to-date and straightforward. The fewer opportunities you leave for gaps or omissions in your records, the more difficult it is for these officials to claim that your records are understated and incomplete.