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Are your clients keeping good records?

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17th Jan 2014
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We have been small business accountants now for more than eight years and during that time we have noticed a big problem with the quality of records that we receive from new clients, says The Accountancy Partnership’s Lee T Murphy.

This prompted us to conduct some research into the number of businesses out there that do not have adequate bookkeeping records.

We looked at just over 2,000 businesses that had registered with us over a six year period. The businesses were from different sectors including IT, construction, finance, hospitality and so on. For each business, we looked at a certain amount of factors to ascertain whether we believed the records to be adequate or not. These factors included whether or not the records were complete, if a double entry system was adopted and if the bank and cash accounts were reconciled or not. The usual bookkeeping errors were not taken into consideration but rather the system as a whole that was adopted by the client.

We found that 79% of our new clients that presented records to us for their first trading period were inadequate. Furthermore, 52% of the records presented to us by new clients who engaged us for a period after their first trading period were not up to scratch either. The biggest issue we found was that most new business owners did not have the necessary knowledge to complete their own bookkeeping but could not yet afford to outsource it or pay for an in-house bookkeeper.

Given the staggeringly high percentages found in these results we decided to look into ways that we could help improve the quality of the records that new small businesses were keeping. We decided that the best place to start was to provide all new clients with a starter guide that explained in simple terms, the basics of the tax system and their obligations as business owners along with explanations of their financial periods and corresponding deadlines. We found that once clients had understood what was expected of them from HMRC/Companies House and the timescales involved, they were more inclined to put systems in place early on to produce proper records. Following this we recommended good and simplistic bookkeeping systems for our clients to use and spent some time helping them get set up.

When the time came for these clients to submit their records to us we found that our initial time investment paid off as we did not have the usual back and forth asking for more and more information which ends up being frustrating and costly for both us and the clients.

Have you experienced this issue to the same extent in your practice? What solutions have you adopted in an attempt to combat it?

 

Lee T Murphy is the managing director at The Accountancy Partnership – an accountancy firm specialising in small business accounting services.

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Teignmouth
By Paul Scholes
19th Jan 2014 22:58

It's always been our job to educate clients....

it's just that, traditionally, firms would make money by correcting poor bookkeeping with the year end accounts work and charge (and moan) accordingly, never thinking that if they spent some time telling clients what they were doing wrong, it would save both sides a lot of grief and make life so much easier.

For the above reason, I can't remember the last time we got a poor set of books from a new client in that part of taking them on has always been to do what you propose above and let them know from the start what's expected and how they can achieve it.

With regard to the client handling their own bookkeeping, whether themselves or via a bookkeeper, if they are not prepared to then we don't act for them. 

Cloud accounting has made this all so much easier, ie you can monitor & support the bookkeeping throughout the year, providing a near perfect set of books at the year end.

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