By Jon Smith, author of Smarter Business Start-Ups
It might not be the most interesting of topics, but like it or not if you want your company to be successful you need to have your accounts in order.
An auditor is appointed to ensure that what you have reported in your quarterly or annual accounts is in fact a true and honest representation of the year’s financial activity.
They will either work in your office or take the documentation they require away with them and report back in a couple of weeks. Auditors aren’t trying to catch you out, unless of course you really are doing something a little bit naughty like buying timeshares in France with company money.
They are just making sure that the payments you made went to the right beneficiary and the receipts you took were for the correct amount and ended up in the correct account. The more helpful you are with their enquiries, the quicker the whole thing will be over with.
There are very few companies that continue to manually record their accounts in double-entry ledger books. Although this works fine, it is not very time efficient and doesn’t allow multiple users to be inputting financial data simultaneously. From a security point of view it is harder to ‘cook’ the electronic books because programs like Sage record every transaction, even if it is later edited or deleted.
The benefits of using accountancy software are speed, quick access to data and the ability to import and export figures, graphs and reports at the push of a button. Your accountant will advise on their preferred software and they will be happy to receive disks, printouts and reports generated by your software to work on.
Like anything, if you keep on top of it, the workload required is minimal. However, if you let your accounts slip, even for a month, the molehill soon becomes a mountain and rushing to catch up is often when mistakes occur. As a rule of thumb, try to keep your software up to date with entries at least every third day. As soon as your bank statements arrive, reconcile them. By doing this you will be able to spot discrepancies very quickly.
You will have a good idea which questions the auditor is going to ask: they will be the questions you are hoping they don’t ask. Sudden or strange purchases that seem very high value and likewise sudden spikes in sales that don’t seem to fit the mean pattern will raise an eyebrow. Any payments made to either yourself or staff members not related to salary or wages will also catch the eye of an auditor, and if the payment was related to expenses it is imperative that you have the corresponding receipts. Don’t throw anyway anything and give it a home in a box.
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