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Post Info TOPIC: Source for book keeping best practice


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Source for book keeping best practice


Morning All

I'm trying to explain to a company director why their company book keeping is not up to scratch. Eg. the director can't check sales and expenses for last month, the balance sheet is incorrect because the accountant makes adjustments but they are just one lump sum so directors can't reconcile reports, loan amounts come into one account but don't specify who the lender is, repayments go out from a different account so can't be matched up. There's no monthly accruals, prepayments etc.

While I can make the points as above - it comes over as ranting so I was wondering if there was a source for best practice info? A webpage for example which shows which information a well run company should have available on at least a monthly basis?

Thanks in anticipation...



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Harry 



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That's a good question, for all bookkeepers in practice. I am sorry but I don't have an answer to this, hopefully someone else will add to this soon. 



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Lorraine 



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This is clearly connected to your last question.

As a bookkeeper of long standing this is something Im sure you could write as a suggested list yourself. #

The problem you have is that many Director's really do not care about the nuts and bolts and see bookkeepers and Accountants as an overhead that they could do without, just a necessary evil.

Best way to tackle it - what information DOES this Director use that he gathers from the financial data? They push that point home - lets face it rubbish in means rubbish out.

Does he have any kind of management accounts now? If he does, what does he hone into on that report, even if there is JUST one piece of information he is relying on - you can, by the sounds of it, explain why he actually cannot rely on it.....with some factual proof, evidence in the number.

If he doesnt see management info, but perhaps he doesnt need it, because he has an otherwise firm grip on what goes on the business (there are some like that, I know a fair few!) then you are beating your head against a wall, but beat it you must because from what you have said the Statutory Accounts will be inaccurate and therefore he is not fulfilling his legal duties as a Director, blur blur blur.

Is this business struggling due to COVID-19 and possibly looking to apply for a CBILS loan - that is one of the best examples of when best practice in both bookkeeping and Accountancy are pretty fundamental - how would he produce the cashflow forecast to support a loan? Never mind the rest.

# Ask yourself questions about all the roles a bookkeeper/Accountant undertakes eg why do a stock take at regular intervals? Wht do a bank rec? Why record your credit v cash sales separately? Then for each you can suggest a reason and how that helps (or indeed hinders) the busines - ie this will enable you to sell the benefits rather than the features.

Failing that just google - why is bookkeeping important? or using the words you did what are bookkeeping best practices and you will get all sorts popping up.



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 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



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Hi

Thanks for your comments.

I did try to Google this question first but only saw adverts for software companies. But changing the wording, as per your suggestion came up with an American site which was useful but I wrote a bit more:

 

In my opinion, the stakeholders in the company should be able to, without having to ask the bookkeeper, pull up a report showing for example

  • Last months income and expenditure by project
  • Cumulative expenditure by project (WIP)
  • Bank balances
  • Work commissioned but not invoiced  (info comes from using a purchase order system)
  • What money is owed to which lender and the underlying transactions that result in each total
  • What money is owed to each director (DLA) or directors associated company
  • Salaries by employee
  • List of invoices entered but not approved yet
  • List of invoices approved but not yet paid
  • Petty cash held balance
  • Monthly liabilities re rent, utilities, interest 
  • Forthcoming liabilities: eg rolled up interest costs, end of loan finance fees, VAT
  • Unrealised profits (eg a figure updated monthly for each project to reflect value of wip rather than just cost)
  • Assets owned by the company and their book value updated monthly.

 

In each of those reports, the stakeholder should be able to drill down into the information, down into a copy of the relevant document (eg the loan agreement, the quote, the invoice, etc) so as to minimise queries.


That's my list but would be interested to see what I've missed...



-- Edited by HarryStottle on Monday 30th of March 2020 07:44:38 PM

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Harry 



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I think I would also add - 

 

PAYE & NI liability

pension contributions (employee and employer) 

employee expense claims 

any discounts given to customers 

 

If I think of anything else, I will post it. 



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Lorraine 



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Thanks, Lorraine.

It would also be interesting to learn if there is anything too ambitious in the list too. Maybe the use of purchase orders in order to anticipate future invoices is a step too far.

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Harry 



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Hi Harry
You may wish to delete your link before the moderator gets on, given it breaches site rules.

You do not indicate the size of the company, nor the sector.

Is this really realistic, for the stakeholder to do it I mean? I would suggest not on several levels.

1) Would the stakeholders know the software intricately enough to be able to extract such reports?
2) Given (1) - is that the best use of the stakeholder's time?
3) Has all the processing and updating been done at the point in time that the stakeholder decides to extract such info?
4) Given (3) how will they know when it has been done?
5) If so much information is required, why is the business using the services of a bookkeeper? Rather than an in house finance function?
6) Some of these items are for management information and this will be a separate information base (and software use) from the financial accounts function.

Loads more points I could make, but frankly I havent got the time what with COVID -19.

But you do not say - in ALL your years as a bookkeeper, could your stakeholders do ALL of this?

You can add anything into the mix that you want to report on but surely that depends a lot on the type of company/size/secto etc etc 

 

edited as I forgot what I was typing!



-- Edited by Cheshire on Monday 30th of March 2020 07:14:07 PM

__________________

 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



Master Book-keeper

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The list is as endless as you wish to make it.



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 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



Member

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Thanks again for the input.

In light of the points raised, I would change,

"the stakeholders in the company should be able to, without having to ask the bookkeeper, pull up a report showing for example"

to

"The bookkeeping system should enable the stakeholders in the company to pull up reports accurately showing:"

 

The main purposes for the directors are a)  so they can get a better feel for where the company stands financially and b) for them to be able to check for errors in the entries.

 

Thanks.



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Harry 



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HarryStottle wrote:

Thanks again for the input.

In light of the points raised, I would change,

"the stakeholders in the company should be able to, without having to ask the bookkeeper, pull up a report showing for example"

to

"The bookkeeping system should enable the stakeholders in the company to pull up reports accurately showing:"

 

The main purposes for the directors are a)  so they can get a better feel for where the company stands financially and b) for them to be able to check for errors in the entries.

 

Thanks.


So then you need also need to include actual v budget

variance analysis

kpis

financial ratios

cff

sensitivites

lots more, still.



__________________

 Joanne 

Winner of Bookkeeper of the Year 2015, 2016 & 2017 

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position



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HarryStottle wrote:

Morning All

I'm trying to explain to a company director why their company book keeping is not up to scratch. Eg. the director can't check sales and expenses for last month, the balance sheet is incorrect because the accountant makes adjustments but they are just one lump sum so directors can't reconcile reports, loan amounts come into one account but don't specify who the lender is, repayments go out from a different account so can't be matched up. There's no monthly accruals, prepayments etc.

While I can make the points as above - it comes over as ranting so I was wondering if there was a source for best practice info? A webpage for example which shows which information a well run company should have available on at least a monthly basis?

Thanks in anticipation...


you seem to be approaching this from the wrong angle.

take it from the perspective of a need rather than a luxury.

Ask who owes us money? how much do we have in the bank today? what is our current burn rate? how much does xyz cost to make?

Find out what question is really important to the director and ask him how he's going to answer it?

Put it in a different context, ask him if he were in front of the bank manager looking not to have a loan called in then how would he answer the question, how would he prove that answer?

Its the old Jordon Belfort sell me a pen scenario. You don't attempt to sell the pen, you attempt to establish a perceived need and let the taregt sell to themself.

HTH,

Shaun.

 

 

 

 



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Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.



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Great - thanks to all for your inputs.

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Harry 

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