5 Common Bookkeeping Myths
Last month I attended a conference run by the Bookkeepers Alliance, where one of the questions posed to us was about the term “bookkeeper” and whether it’s still relevant. A lot of the discussion focussed on the observation that it’s often used prefaced with “just a”. Bookkeepers just record all of your expenses. We just use language that business owners can understand. We just provide accountants with high quality information in the format they need. We just tailor your information to help with any reporting you need. This prompted me to look at some other common bookkeeping myths.
1. It’s just cheap accounting
There is a lot of crossover between bookkeepers and accountants, and the lines are certainly becoming more blurred than they used to be, but they are actually distinct specialisms. Generally speaking the two professions can be broken down into:
|Analysing business performance||Recording business transactions|
|Budgeting||Processing receipts and bills|
|Financial statements and reports||Invoicing and chasing payments|
|Individual and company tax returns||Payroll|
Without bookkeeping it would be pretty difficult for an accountant to prepare the annual accounts, what would they base these on?!
2. Only big businesses earning lots of money need a bookkeeper
Often the businesses who think they can’t afford a bookkeeper yet are exactly the ones who really need one. In the early stages of running your business you may find yourself feeling completely overwhelmed at the breadth of tasks that need to be performed. Hiring an external bookkeeper can be really beneficial in the long run as they’ll be able to identify where savings can be made, not to mention the fact that they’ll free up your time to concentrate on bringing in more income.
I also speak to a lot of sole traders who are unsure about what they can include in their self assessment tax return, so end up paying more tax than they really to. Often they’ll save much more than what it will cost to get someone to prepare it for them.
3. Anyone can do bookkeeping
They probably can, if they study the qualifications and develop a strong understanding of the theory that underpins it! When someone says this they normally mean that their husband/wife/child/dog can do data entry, which is a very different kettle of fish to knowing exactly how things should be categorised and what is and isn’t allowable for tax purposes.
Although it’s true that anyone can call themselves a bookkeeper, or an accountant for that matter, anyone providing bookkeeping services (including invoicing and credit control) must be supervised under the anti-money laundering regulations. This can be by HMRC, or one of the bookkeeping or accountancy professional bodies - my supervision and license to practice are provided by the International Association of Bookkeepers.
4. We’re all old and stuffy
Would you like to see my post-it note collection?! When people think of a bookkeeper they tend to think of a more, ahem, mature lady in a twinset and pearls, entering figures into large tomes, possibly with a quill pen. The reality is that many bookkeepers fully embrace technology (although if anyone’s offering, I would love a quill pen!) With the introduction of software such as Xero and AutoEntry, we’re now able to spend much more of our time interpreting the data and helping business owners make sense of the results.
5. Xero/Quickbooks does my bookkeeping for me
No, it will help you, but it doesn’t do it for you. Accounting software nowadays, particularly if it’s cloud-based, is fairly simple to use, but as I mentioned earlier, bookkeeping isn’t just data entry. Pretty much anyone can enter numbers into software, but do you know what the numbers mean? Care still needs to be taken to make sure that the information is being recorded accurately…rubbish in means rubbish out!
If you’d like to discuss these, or any other myths you’ve heard, do get in touch as I love talking to people about bookkeeping (I’m not really helping the stuffy image am I?!)