Hi,
Please could some of you more experienced practitioners advise how you go about sorting out a shoe box full of invoices/receipts etc. Do you meticulously tick back all of the bank statements which includes both personal and business expenditure and input from those? Or do you just work from the invoices and receipts that have been provided?
I have been given all the invoices/receipts in date order and have input from these, but I am now very nervous that there may be items on the bank statements that I will have missed.
Thank you!
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Replies (13)
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I would ...
... scrutenise the statements for anything that looks like business expenditure and look carefully at all income, and ask for details if unsure of any banking, or anything else that might leap out at you.
Do your best
I draw up a set of accounts ( using accounts software ) on the invoices & receipts provided, then reconcile these with the bank statements. Having done that any questions should become clear. If you have sales of, say, £10,000 but £15,000 has gone into the bank then you have to ask why. You may also ask if there are any cash transactions and so on. It is rare there are not questions and in some cases you have to just do the best you can. The only other point to make clear to your client is you are doing this on the information provided and also to keep a log of the questions & answers provided.
Yes, it needs to be done
I think it's very dangerous to work on the invoices only and ignore the bank account. You are at risk of missing both sales and purchases. The way I approach these type of jobs, using VT, is to enter the bank transactions, to customer and supplier accounts, so that the bank can be reconciled. Then enter the sales and purchase invoices to the customer and supplier accounts. Then go into each sales and purchase ledger and match off against eachother all that are obvious, which normally is the majority, leaving a relatively small amount of transactions unmatched which can then be dealt with on a one by one basis, asking the client as necessary. The beauty of VT is that it's easy to enter debits and credits to supplier/customer accounts and then easy to match them against eachother - none of the faffing around that you'd end up with if you used Sage or QB which would take far more time to sort out, reallocate etc.
I disagree
I hesitate to disagree with the earlier responses, all of whom I generally agree with most of the time, but in this case I (probably) do.
It does depend on how big a business you are talking about but, if it's a one man band type of thing, then I'd personally just go with the list of invoices and ignore the bank statements (even assuming you get them all). Yes, you should do some "sanity" work: if the invoices say £10k of income but the bank stats have £30k of receipts, there's somethign wrong somewhere! And yes you should review the bank stats for obvious business expenses not found via the invoice listing. But no IMO you shouldn't go to the faff and expense to the client of listing / entering a shedload of bank transactions, 95% of which could well be private.
I do agree largely with Adam
I hesitate to disagree with the earlier responses, all of whom I generally agree with most of the time, but in this case I (probably) do.
It does depend on how big a business you are talking about but, if it's a one man band type of thing, then I'd personally just go with the list of invoices and ignore the bank statements (even assuming you get them all). Yes, you should do some "sanity" work: if the invoices say £10k of income but the bank stats have £30k of receipts, there's somethign wrong somewhere! And yes you should review the bank stats for obvious business expenses not found via the invoice listing. But no IMO you shouldn't go to the faff and expense to the client of listing / entering a shedload of bank transactions, 95% of which could well be private.
When there is no separate business account, it is pointless and soul destroying to go through the bank statements and weed out all the sainsburys/new look/pizza express bills and guess whether abcde is business or personal.
I tend to start with the invoices and receipts as given to me then go through the bank statements and make sure all the income is recorded or clearly personal, then ask about receipts that are not clearly either. Basically do the sanity check that if HMRC came looking there wouldn't be an extra £10k income in the bank statement over the accounts. I also then have a look through to see if there are obvious business expenses that I have no paperwork for and ask about those.
Obviously if it is a business bank account with only a handful of personal transactions then fair enough, start with the bank but the other way round is over the top in my opinion.
A common query at this time of year
We had a very similar thread to this in 2010 which included some practical advice, some bickering and a bit of nostalgia for those who have left this sort of job behind.
If, after wading through all the answers, you'd like more light-hearted view, try the pounds per pound formula suggested by "Whinger" in Silly questions 1.
Hmm
"Just chuck in a return with estimated figures and then do it properly next month."
Just though I'd share this quote from someone I used to work with...
Shoe box accounting
Ah, happy memories. Many years ago, most of our clients were of that type and low and behold, taking my exams, I can't remember whether it was Intermediate or Finals, one of the questioon was based on "incomplete records". Answering it was just like a day in the office!!
There speaks ...
Ah, happy memories. Many years ago, most of our clients were of that type and low and behold, taking my exams, I can't remember whether it was Intermediate or Finals, one of the questioon was based on "incomplete records". Answering it was just like a day in the office!!
You must have ran out of time before answering the other questions then!
Couldn't resist it.
one who's not only got the T-shirt, but it is so old they are now using it for dusters!
Shoe Box Accounting and Potential Business
I have to agree with most of the above replies, the personal bank statements are often a litany of surplus information of no value. Concentrate first on income - this is normally easier then move to the expenditure and look for a pattern, normally it may precede the income. Look for all the regular 12 month charges from phone to professional subscriptions. Then look for gaps, once this is completed use the tried and tested comparison with a similar client, if you have one, to review margins and overheads. If all of this looks OK your sensibility check is complete and then prepare the accounts with a page to clarify to the client the accounts have been prepared from the information supplied and make them sign to acknowledge.
This is a great time to then point out that they can insure themselves against any future costs of Fees if HMRC do decide to launch in Enquiry, you can sell them a Fee Protection policy - "....just in case." to give them and yourself some peace of mind. This is easy to source and then offer your clients.
Bank Reconciliation Software
For any accountant dealing with Shoebox clients. This bank rec software may be useful.
AutoRec can reduce the time you spend on paper/ PDF account reconciliations by up to 90%.
AutoRec allows you to:
Extract data from paper or PDF statements in minutesEasily track cheque paymentsAssign VATAssign nominal codesDo full payments and receipts analysisExport data to many other software packages such as Digita, Excel, IRIS Accounts Production, Relate Accounts Production, Sage Line 50, Sage Accounts Production, Viztopia, VT, Xero, ClearBookswww.ocrex.com/autorec