What is Good Bookkeeping?

What is Bookkeeping?

Bookkeeping is the practice of recording a business’s financial transactions using a method called double entry.

What is Double Entry?

It works on the principle that every transaction affects at least 2 accounts with one entry as a debit and another as a credit. The accounts fall into 5 main categories. Assets, liabilities, Equity (which make up the balance sheet) and revenue and expenses (which make up your income statement). For example, if a business purchases Equipment for cash, the equipment account is debited (increased) and the cash account is credited (decreased). For every transaction the total of debits will always equal the value of credits.

What Does a Bookkeeper Do?

A bookkeeper records financial transactions such as sales invoices, purchase invoices, receipts, and bank transactions into ledgers within an accounting system.

Why Do You Need a Good Bookkeeper?

A bookkeeper is responsible for the accuracy of your profit and loss report and balance sheet, which are crucial for business decisions.

What Makes a Good Bookkeeper?

• Decision Making: Knows when to record transactions as assets/liabilities or revenue/costs.
• Accuracy: Attention to detail is essential.
• Timeliness: Ensures timely entries for up-to-date business performance.
• Knowledge: Understands accounting principles and software.
• Qualification: AAT qualification provides a solid technical foundation.

Bookkeeping vs. Accounting

So if you’re looking for a really good bookkeeper, you’ll want to include some technical questions during the interview process. That will make sure you hire someone with a similar level of skills and knowledge as a management accountant.
If you hire the right one, you’ll likely pay less for your year end accounts preparation! A good bookkeeper or management accountant will also make sure you’re being compliant in areas such as VAT, P11Ds, and making sure you pay your taxes on time. It’s important to note that bookkeepers and management accountants usually have different qualifications. Bookkeepers are typically AAT qualified and management accountants are typically ACCA qualified and there is big difference between the two. As they say, you get what you pay for.

What are the Pitfalls of Poor Bookkeeping?

• Missing VAT registration thresholds.
• Incorrect VAT charges.
• Misusing the reverse charge mechanism.
• Poor cash flow from being on the wrong VAT scheme..
• VAT errors leading to fines.
• Misclassified transactions affecting profits.
• Overpaying vendors and taxes.
• Inaccurate accounts for investors.
• Overpaying bookkeepers lacking digital accounting skills.

Bookkeeping Services

Bookkeepers can make bank payments, chase overdue invoices, handle supplier queries, organize document storage, and manage the accounts inbox. Services can be delivered remotely.

How Can I Reduce My Accounting Costs?

Have a management accountant review your accounts regularly so they can provide feedback on the quality of the bookkeeping. If the advice is that you need a better bookkeeper then you’ll want to introduce more advanced questions and tests in your interviews. Alternatively, you could hire a management accountant where the expectation levels around the service quality are much higher. Be careful, regardless of their title, you’ll want a very thorough interview process.