Bookkeeping – When does it become accounting?
You will find bookkeepers hard at work in every industry and sector. They are essential to every business. However, whilst there are many excellent bookkeepers, the truth is you do not need a formal qualification or a minimum level of experience to call yourself a bookkeeper.
So, have you ever wondered about how thorough your bookkeeper is?
For many owner managers the job is a dark art and it is unclear where the role of their bookkeeper ends that of their accountant begins.
Here are 5 things therefore that we would expect your bookkeeper to be doing.
1) Accruals – This is where some of the costs for a particular month do not show up in time. Your bookkeeper should be aware of these and be making sure that you have the correct figures in the correct month. We come across missed costs all the time leading to inaccurate books being maintained, normally resulting in a great month followed by a poor month.
2) Fixed assets – When items are bought which have a useful life of more than one year, your bookkeeper should be spreading the cost of these items over their useful life and not immediately hitting your profits in full.
3) Corporation Tax – Put simply, when profits are made taxes are paid! These will impact on the company’s ability to pay dividends and should really be recognised on a monthly basis. We are not expecting a full corporation tax calculation to be carried out monthly, but at least an appreciation of the tax incurred should be registered.
4) Deferred income – Where a company receives cash in advance, usually for things that are going to span a period of time in the future, you can only recognise the income for the part of the sale that has actually happened.
5) Dividends – Whilst dividends are normally recognised at the end of the year along with the appropriate paperwork, shareholders should be updated on whether or not their dividends can legitimately be paid. Leaving dividend payments in the director loan account is risky as this way assumes that the profits are there to be distributed.
At WCL our team of experienced bookkeepers are backed by a support network of qualified accountants to whom they can refer meaning our service offers exceptional value for money.
