My last blog talked about the importance of having up to date bank statements that agreed with the accounts package – Xero, Sage, Quick books etc.
Reconciling bank statements isn’t all there is to bookkeeping. The information on the bank statement is just a figure. This figure represents either income or expenses and by accurately matching it with other information provided the figures tell you what your profits are and other useful information. This is where bookkeeping comes in.
Many people think that because we are computerised and have a number of accounts packages for our business accounts we don’t need bookkeeping anymore. It’s all there online so why worry? There are even comments that online and cloud accounting will make bookkeeping obsolete!
Well, probably not because the information doesn’t just appear on the programmes. There is still human input to get it there and then reconciled and interpreted. The mechanics of getting it online are becoming less and less manual but it is still necessary to check that matching the payments and receipts is correct.
Bookkeepers do this by looking at the bank statement and matching it to any paperwork given to them. In Xero, for example, you can upload invoices. It will then automatically pick up amounts and ask to be matched. The important part is to check that you are matching it against the correct invoice – incorrect data will mean that an invoice isn’t matched and looks like you still owe it (or it is owed to you). To help with this encourage whoever makes payments through the bank to include an invoice number on the payment. Just a name on the bank statement may not mean anything unless it has some reference like an invoice number to link it to other information given.
To make sure this is correct the bookkeepers need as much information as you can give them. Check that the sales and purchase invoices you give them are correct. That is, that they are for the right period, that they are all there and none have been duplicated. Any errors here will mean your expenses and income are incorrect and possibly even your year end debtors and creditors. That will affect your year end figures.
If there have been any unusual payments or receipts let them know, especially if they are large. You don’t want them to post it to your Director’s Loan account for no reason!
Then the important part, without the accurate figures on Xero, your KPIs and other information can’t be calculated. Happy, accurate bookkeeping makes financial information much more readily available for you, helping you get a better insight to your business.