How to get the best book-keeping arrangement.

What is book-keeping?

Book-keeping is the process of keeping track and noting down your business income and expenses. For those on an accounting software package such as Xero or Quickbooks, it’s also the ‘reconciliation process’ of matching invoices against payments and assigning the correct type of expenditure to payments. In some cases, book-keeping includes making accounting adjustments, for example accruing (or spreading) income if its earned for work over a period or expenses if they relate to a full year, such as insurance.

Why is it so important?

If you do not keep on top of book-keeping it means the end of year process (whether it’s for your Tax Return as a sole trader, or accounts and Corporation Tax Return if you run a limited company) is highly stressful and time-consuming. The more up-to-date your book-keeping is, the more information you will know about how your business is performing during the year. This allows you to make informed business decisions – whether that’s looking at costs if they are creeping up – or deciding to make investments if you have profit.

What makes a good book-keeping arrangement?

There are various ways you can do your book-keeping and it will depend upon your specific circumstances and budget. Your needs as your business develops may change, so it’s important to revisit the arrangement periodically.

Doing the book-keeping yourself

A lot of business owners are happy to do basic book-keeping themselves to keep costs down. This is a great solution in the early stages of running a business to help with cost. There are plenty of online videos on how to use accounting software (and we are always at the end of the phone to help with questions).

It is worth bearing in mind that this won’t include accounting adjustments, so any figures you look at before your accountant becomes involved will be subject to change – and you typically won’t know the amounts of Corporation Tax that will be due at year-end.

Keep in mind that the time you spend on the book-keeping will be time that you’re not investing in growing your business, or doing the thing that you’re great at, so it’s worth challenging yourself as to whether investing money in someone else doing the book-keeping will free you up to increase your client base / revenue / sales - because time is money!

Using a book-keeper

Book-keepers are often self-employed and your accountant should be able to recommend someone in their network; they provide a great solution to keeping on top of your book-keeping. We work happily alongside our clients’ book-keepers and typically have fewer questions for the business owner when it comes to doing year-end accounts and tax filings.

When looking for a book-keeper it’s worth asking the following questions:

1. Will they come on-site or will they work remotely? (For businesses with lots of paper receipts, some onsite presence is usually required).
2. Do they understand your industry? If you work in an industry with particular needs, such as stock-taking, it’s worth making sure your book-keeper has the relevant experience.
3. How often will they get the book-keeping up-to-date? This is important to know, particularly if your accountant is doing VAT Returns or Management Accounts for you, as they won’t be able to carry out those tasks until the book-keeping is up-to-date for the relevant period.
4. Will they also be raising invoices and making payments? Many book-keepers will also offer this as part of their service.
5. Can they support with cash collection? Late payments from clients is one of the biggest challenges in business – so if your book-keeper can help with this, it can alleviate any cash flow issues.
6. Do they do accounting adjustments, or will they be just inputting income and expenses? Either are fine, but if it’s the latter, bear in mind that any numbers you look at during the year won’t be entirely accurate until the adjustments are done by your accountant.
7. Are they happy to work with your accounting software? While many book-keepers work with all types of software (and spreadsheets), some have a preference.
8. What is their scope? If you are also working with an accountant it’s worth an open discussion so each party knows their remit so you are getting the best service.

Using your accountant

This is typically a more costly solution as hourly rates tend to be slightly higher. Most accountants offer a book-keeping service for an additional fee. This can be a great arrangement as your business scales and you want to have accurate information and use your accountant as a business advisor.

Many accounting firms will also offer regular calls or meetings to talk through your numbers and can offer Management Accounts (so that you can understand your business performance on a real-time basis and start to make informed business decisions). By having book-keeping in one place can help to have a holistic approach – although it’s worth noting this can also be achieved with your accountant working closely with a book-keeper.

We are always happy to talk through book-keeping and suggest the best arrangement for you. Please get in touch if you have any questions.

Catherine Bond

Managing Partner

Blue Peak Consulting Limited

Blue Peak is a dynamic boutique Accountancy and Tax business based in the Thames Valley. The team includes tax and accounting professionals with a wealth of experience both in practice and industry in technical and commercial roles. They work alongside their clients to become trusted partners in their business, understanding their needs and supporting their business strategy. Just as importantly though, they provide expert advice and explain in an easy-to-understand way how they can meet their statutory obligations and stay compliant.