Posts

6 Reasons your bookkeeper is harming your business

Whether your bookkeeper is someone you have employed years ago, maybe it’s the admin assistant, or even your wife or mother in law, you need to be confident that they are doing a good job and looking after your business’ bottom line. A competent bookkeeper could be the difference between helping your business grow or letting it spiral out of control with mounting costs and decreasing margins.

As a busy business owner, you have plenty of other responsibilities that come with running your business and you might not know if your bookkeeper is taking you to the cleaners. The stories we year about bookkeepers defrauding hundreds of thousands of pounds from the businesses they work for and spend it on nice cars, expensive holiday and designer clothes. And these are the ones that got caught and were sent to prison!

How do you know what good bookkeeping actually looks like, let alone spot the warning signs that your bookkeeper is bad at their job and hurting your business?

To help, we’ve put together this list of tell-tale signs to help you determine if you’ve hired a bad bookkeeper who is harming your business or one worth keeping.

  1. They’re not qualified and not backed by professional body

Anyone can say that they are a bookkeeper just because they can enter invoices into your accounting system. However, bookkeeping is much more than just data entry. Someone without formal training can create chaos and confusion with the figures in your accounts, make VAT or PAYE errors and give you wrong information which you then use to make business decisions. To avoid hiring a bookkeeper that can’t do the job and do it well always check whether they have bookkeeping qualifications such as The Institute of Certified Bookkeepers (ICB) or Association of Accounting Technicians (AAT). A qualified bookkeeper would have certification and backing of their professional body and would have to adhere to professional standards set by them too.

What you can do: Before hiring the bookkeeper ask to see their training certificates or practice licence. If they do not have formal qualifications, you would have to assess if their experience is extensive enough to support your business appropriately.

 

  1. They don’t understand basic bookkeeping terminology

Your bookkeeper should know standard bookkeeping terms, including double-entry bookkeeping, cash and accrual basis, aged debtors/creditors, assets, liabilities, journals and so on. This relates to point 1 above too. Worryingly, we have spoken to other ‘bookkeepers’ who didn’t know what ‘reconciliation’ meant and also some have never seen or entered a journal. Lack of understanding of these terms will reflect in the basic bookkeeping entries and in turn the overall picture of the business’ financial position. One of the major jobs we do when taking over clients books from other bookkeepers is untangling their accounts by correcting wrong postings of payroll costs, VAT and PAYE liabilities, fixed assets and simple duplication of costs.

What you can do: Speak to your bookkeeper using the terms you want them to use. If they don’t use the correct terminology and it remains an issue, consider replacing them. A competent bookkeeper must be able to talk the talk.

 

  1. They are always behind on the books

Your business can’t grow if your books are always behind and you are forever catching up. You need to have correct and up-to-date information when you are making business decisions, such as how much can you spend on marketing, can you hire another person, can you find savings if you moved office – to name a few. Things can come up to cause delays, just as they do with any job, but a good bookkeeper looks for opportunities to get caught up and maintaining deadlines.

What you can do: Set clear deadlines at the outset of your relationship with the bookkeeper and hold them to these. Check in regularly to make sure they are on track and have everything they need to complete their tasks.

  1. They don’t let you see the books

A bad bookkeeper will want to keep you out of the know and will be unwilling to let you see the books. This is a major sign that they are hiding something, like mismanagement of your books, or worse – they could be stealing from you. If they become defensive or overly protective when you ask to see the books that is the time you must step in and seek transparency. Remember, with cloud accounting software like Xero transparency is always there and all parties can see the same live date using their own access. It becomes more difficult to hide bad work or blame someone else.

What you can do: Demand control of the books and take ownership of account login. If your bookkeeper puts up a fight or denies you access, seek an alternative bookkeeping solution. Such behaviour is not part of professional conduct of a certified bookkeeper.

 

  1. They don’t ask questions

You might think that bookkeeping is a repetitive, mundane chore that doesn’t require any sort of inquisitive thinking. But that’s wrong. A good bookkeeper is not afraid to ask questions and dig deep to find answers. This helps them identify problems and suggest costs cutting opportunities, find areas to improve on, which helps drive your overall goals of growing your business. If your bookkeeper never asks questions, do they care about your books or your business? Indifference will lead to missed opportunities to help your business.

What you can do: Ask your bookkeeper questions, challenge them, and request suggestions on how to cut costs.

 

  1. You question their work

Trust your gut – deep down you know when things are not right. If you don’t know what your bookkeeper is up to because you only hear from them after you’ve chased and chased again and you have no idea where your business is financially, then it’s time to take action right away. Similarly, you have that feeling that your bookkeeper is doing it wrong, or you’ve seen the same mistakes over and over again, then it’s time to find a new solution.

What you can do: Trust is important when working with your bookkeeper! After all you are sharing your business’ (and personal) most sensitive information with them. If you can’t trust them, you need to find someone you do.

 

In the end it all comes down to your bottom line. Are you happy with your current bookkeeping solution? Or do you need to review your approach and find a better solution?

 

Talk to our experienced team to find a trusted bookkeeper for your business, have less stress and gain clarity for yourself and your business.

 

What does Balance Sheet tell you about your business?

Balance sheets are used internally to guide management decisions. Externally, they can be used to report the financial status of your business to lenders, investors and other stakeholders.

The balance sheet gives you a snapshot of how much your business owns (its assets) and how much it owes (its liabilities) as at a given point in time. That might be today, or it might be at the end of your business’s accounting year.

It summarizes the financial health of a company, showing how it is funded and what it has done with that funding. This is why a balance sheet is also recorded as a ‘Statement of Financial Position’ in accounting terms.

What is on the Balance Sheet?

The balance sheet is presented in three sections:
Assets such as properties, furniture and fittings, equipment, stock for sale, cash and money owed to you.
Liabilities such as your bank overdraft, loans and other money you owe.
Equity such as share capital and Retained Earning.

What does Balance Sheet tell you about your business?

The balance sheet presents a company’s financial position at the end of a specified date. If your business owns more than it owes, then the balance sheet total will be a positive figure. If your business owes more than it owns, the balance sheet total will be negative- and that’s not good news, because it means your business doesn’t have enough money available to pay all its debts.

As well as this quick check, you can also use your balance sheet to calculate some useful ratios.

Tracking your company’s finance can help you identify potential issues before they turn into major problems. Ultimately, a balance sheet provides the information you need to sustain and grow your business over time.

Components of the balance sheet

A balance sheet has three sections: assets (what the business owns), liabilities (what the business owes both now and, in the future,) and owners’ equity (assets + liabilities). Let’s take a closer look at each.

Assets

Assets include current assets, fixed assets and other assets. Current assets include:

  • Cash
  • Accounts Receivable
  • Inventory
  • Assets that can quickly be converted to cash such as certificates of deposit

Fixed assets are long-term assets that your business will have for more than 12 months. They include:

  • Equipment
  • Buildings
  • Land
  • Vehicles
    You may also have intangible assets, such as trademarks or patents.

Liabilities

Current liabilities are those that need to be paid within the next 12 months, such as:

  • Accounts payable
  • Taxes
  • Payroll
  • Debt service
  • Credit card payments

Long-term liabilities will not be paid within the next 12 months. These include:

  • Outstanding loans (minus the current portion of these debts)
  • Mortgages

Owners’ or shareholders’ equity

Add together assets and liabilities to arrive at your owners’ equity or shareholders’ equity. Ideally, this should be a positive figure, but if things aren’t going well, it could be a negative number.

If your owners’ equity remains negative, it will affect not only your profitability, but also your ability to get capital from lenders or investors. Financing sources want to see that a business is doing well enough financially to service its debt or make a profit for investors before they will put any money into your business.

What does the Balance Sheet say?

It Determines Risk and Return
A Balance sheet briefly lists your assets and liabilities in one place. Current and long- term assets reflect your ability to generate cash and sustain operations. In comparison, short and long-term debts prioritize your business’s financial obligations. Ideally, you have more assets on your balance sheet than liabilities, indicating positive net worth.

Comparing your current assets to current liabilities determines whether your business can cover its short-term obligations. If your current liabilities exceed your cash balance, your business may require additional working capital from outside sources. However, a balance sheet can also show you when your debt levels are unsustainable. If you have too much debt on your balance sheet, you may default on debt payments or declare bankruptcy.

It can be used to Secure Loans and Other Capital
Your balance sheet allows people outside of your company to quickly understand its financial condition. Most lenders require a balance sheet to determine a business’s financial health and creditworthiness. Additionally, potential investors may use it to understand where their funding will go and when they can expect to be repaid.

When updated over time, your balance sheet effectively shows your ability to collect payments and repay debts. Plus, it shows lenders that you have a track record of managing assets and liabilities responsibly. If you apply for a loan, it will also show lenders that you’ll likely repay your debts in a timely manner.

It Provides Helpful Ratios
Ratios are often used in financial statement analysis to indicate a company’s operational efficiency, liquidity, profitability, and solvency. These financial ratios are particularly helpful when assessing the long-term sustainability of a business. They can be determined by a company’s balance sheet accounts.

For example, your balance sheet is a snapshot that reveals your company’s overall capital structure. It can also tell you how long it takes to sell inventory and the length of your accounts receivable process. This information can help you identify trends and see how your company’s finances and operations compare to competitors.

What’s your business worth
Ultimately, a balance sheet calculates the value of your business. Even if you are not planning to sell your business in the near future, think of it as a way to keep score.

You may find out your business is less successful — or more successful — than you thought it was. Most people greatly overestimate the value of their businesses, so getting a reality check can be helpful. By pinpointing shortfalls in your business’s finances, a balance sheet can help you make long-term changes that will improve your company’s chance of success.

  • Balance Sheet helps in knowing past and present position of an enterprise.
  • You can use it to obtain a very thorough summary of the company’s financial health by analyzing its working capital and liquidity
  • It provides an insight into the company’s likelihood of defaulting on its credit obligations or even its bankruptcy risk

A Balance sheet is actually a valuable tool for businesses of all sizes to monitor their progress and see how they’re doing. It can help you make long-term changes that will improve your company’s chance of success. Collectively a Balance Sheet is a mirror of a business.

If you need any help with understanding your Balance Sheet we, at Cloudit Bookkeeping, will be happy to assist you.

Are you wasting time processing expenses?

Expense claims are an administrative burden for all businesses. From taxis, flights, meals, supplies, and everything in between – there are countless expenses that need to be reimbursed to the people who work at the company. But it’s amazing how the simple task of reimbursing employees turns into a paper-filled back-office nightmare.

With many apps now available, the task of tracking and recording expenses is becoming easier and more efficient, saving business owners and their accounting team hours in administrative time.

We love Xero and their new Expenses function where employees can capture receipts and submit claims for their work expenses with their mobile device. Let’s have a look at how it works and how it can save you hours in dealing with paperwork.

Xero Expenses:

Xero Expenses works seamlessly with Xero accounting package, and has all the tools and insights small businesses need to efficiently track and manage expense claims. You can now Capture expenses on the go and keep everyone up to date with push notifications.

A better way to manage expense claims in Xero

The Xero Expenses offers small businesses a more efficient way to manage expense claims with:

Expenses Mobile

  • Faster expense captureto reduce data entry through automatic scanning of receipts and eliminating the need to store paper versions.
  • iOS and Android appspush notifications to let businesses, employees and advisors capture, submit and keep up to date on the status of expense claims from anywhere.
  • More flexible user permissionsto give complete control of whocan view, submit, and approve or pay an expense claim for or on behalf of someone else.
  • Simple and intuitive workflowsto make it easy to see where an expense is at, review and approve all unpaid expenses, and create batch payments to get employees paid promptly.
  • Greater insights and powerful analyticsto empower businesses and their advisors with a detailed and real-time understanding of spending habits and patterns.
  • And with multi-currency, relevant notificationsand seamless Xero accounting integration, the new Xero Expenses is smarter, easy to use, and designed to benefit both the small business and their employees.

Advantages

  • Easily capture and submit expenses

You’ll find automatic receipt processing in the Xero Expenses. Small business owners can easily capture and submit expense claims through their mobile device on both iOS and Android. Simply take a quick picture of the receipt and let Xero submit the expense claim. The design and workflow improvements make it easy to capture and submit an expense claim without the paper chase or endless follow up.

  • Eliminate Hidden costs

With reduced data entry and by streamlining everything from submitting expenses through to reconciling transactions, you can eliminate the hidden costs.

  • Better visibility

You can see all the most important information at a glance, so you always know where your expenses and cash flow stand.Expenses chart

  • Enables Growth

Access valuable real-time reporting and powerful analytics to monitor patterns, plan ahead and make fast, informed decisions.

  • Flexible controls and permissions

The user permissions model gives more flexibility and control to the right people at the right time during the expense claims process. This significantly simplifies the workflow and boosts efficiency. That’s because only appropriate people in the business can view, submit, approve or decline, and pay an expense claim.

You can also find a highly-requested feature – the ability for a user (typically an accountant or owner) to submit an expense claim on behalf of other people in the organization. The relevant people will receive real-time push notifications on their mobile phones, which makes it easy for accountants, business owners and employees to keep each other up to date.

  • Easy review and payment

Xero expenses provide you list views and expense drill-down views, which can save you time and let you enjoy better functionality:

  1. The expense claim list immediately gives you a high-level view of your own or your employees’ expense claims in easy-to-consume groupings, such as by status or by employee. The most important information required for review, approval and payment are available at a quick glance. These include status, amount, expense account, description, vendor and date. From the list, just one click will let you drill down into the details of the expense – and provide a view of the receipt, tax details, tracking categories and associated label.
  2. You can view approved expenses claims that are awaiting payment within bills. Xero provide links to and from bills, so you can conveniently view bills associated to expense claim reimbursement side by side with vendor and supplier bills. This allows you to more easily make a decision around who and what gets paid in one simple view.
  • Expense analytics

Quite simply you have to know how your staff spends money and if they follow established rules and policies. An exciting new feature gives small businesses and their accounting partners deeper insights into spending and expense claims that will provide actionable findings. Accountants and business owners have access to a real-time and accurate view of their expenses.

With Xero Expenses function, expense claims are no more a burden. It makes create, review, approve and paying an expense claim not only easy but also quick. It saves a lot of time and provides you the opportunity to enjoy better functionality. If you need any help exploring Xero Expenses or any other Xero features, talk to one of our trained bookkeepers and we will be happy to assist you.

GDPR explained for small business

What is GDPR?

The GDPR comes into force in May 2018. It’s a wide-ranging regulation designed to protect the privacy of individuals in the European Union (EU) and give them control over how their personal data is processed, including how it’s collected, stored and used. It affects every company in the world that processes personal data about people in the EU.

What does GDPR mean?

Although GDPR might seem scary at first, many see it as a positive step forward for data protection. Some of the key areas GDPR covers are:

  • personal data about EU-based people (absolutely all of it)
    This includes your customers, employees, suppliers and any other individual you collect personal data from. Personal data includes names, contacts, medical information, credit card or bank account details and more
  • how you collect personal data
    You can only collect personal data if you have a legal reason to do so. You might need it for a sales contract, for example. Or your customer may have asked you to send them some information on your product or service. In all cases, you must make it clear what the personal data will be used for – and only use it for that purpose.
  • user contracts and terms and conditions (on websites, for example)
    These need to be simple, clear and easy to understand – with no complicated legal text.
  • the right to know
    Individuals can ask a business what information is being held about them. This isn’t a new right, but organisations must now respond within one month and can’t charge a fee (which they used to be able to do).
  • the right to erasure
    Customers can ask a company to delete all stored personal data about them, unless the company needs to keep that information for legal reasons, such as tax.
  • data portability
    Individuals can request a digital copy of their personal data to use however they like, including transitioning to a new service provider.
  • data breach
    You’re obliged to report certain types of data breach to the relevant supervisory authority.

The UK government will be replicating GDPR into UK law prior to Brexit, so if you’re a UK company, Brexit won’t impact your obligation to comply.

GDPR and data protection

It’s important to understand the spirit of GDPR. The legislation came into existence because of the way personal data has been treated in the past. Many companies treated personal data as a resource they could utilise without regard to the rights of individuals.

For example, some companies sold customers’ email addresses, allowed sensitive data to be seen by unauthorised people, and failed to adequately protect data against hackers.

GDPR gives control of personal data back to the people who own it and requires organisations to make data protection a core part of their operations and processes. This is likely to affect big, data-driven organisations first. But small businesses aren’t exempt. We’ve set out some steps below that you can take to make sure you’re prepared.

Goes GDPR affect data security?

Data security is a big part of GDPR. If you process personal data of people in the EU you have a duty to keep it safe so it’s important to ensure that any personal data held by you is securely stored.

GDPR also governs where companies store personal data, and what safeguards you must have in place in order to store and process that personal data outside of the EU. For example, if you’re transferring personal data to a US-based company (that will store and process it in the US), you should check that they’re certified with Privacy Shield, which is a mechanism designed to allow data transfers from the EU to the US.

Summary of GDPR for small business

There are many aspects to GDPR, but it really boils down to being clear and ethical with the personal data you process – that means treating it as you’d treat something valuable of your own. Some initial practical steps you can take to get GDPR compliant are:

Check products and services

  • Check which of your products or services collect and process personal data.
  • Ensure you have a legal basis for the processing of personal data.
  • Ensure you can comply with the obligations to your customers as set out in the GDPR (such as the right of access and the right of erasure).

Review notices and contracts

  • Update your internal and external notices for GDPR compliance.
  • Ensure your customer contracts are GDPR compliant.

Assign responsibility

  • Make someone in your organisation responsible for data protection and privacy.
  • Consider whether you need to appoint a Data Protection Officer – check out the ICO’s guidance for more info.
  • Provide data protection training for staff.

Take care over security

  • Ensure systems that collect, process and store personal data are secure.

GDPR resources for small businesses

You can get useful information on GDPR from:

The UK Information Commissioner’s Office (ICO) – 12 steps to prepare for GDPR.
The Federation of Small Business (FSB) – How to prepare for GDPR.

You should also talk to your legal advisers to ensure you are compliant before May 2018.

source: Xero.com