Implementing a Bookkeeping System
What was the problem?
Our client never had the time, or the know-how to implement a thorough, robust accounting system because, in their words, “they’ve always been too busy running and progressing their business”.
The business operates as a company in the Care Industry, has 4 Director Shareholders, all of whom played a distinct role in the business which included dealing with “their separate bit of the overall accounting system”.
Their accounting routine consisted of sending Sherlock & Co various electronic reports, manual records including bank statements, purchase invoices, expense receipts and a hand-written petty cash book. From these records, Sherlock & Co would prepare 6-monthly management accounts so that the client knew how they were progressing and every 12 months, Sherlock & Co would prepare annual financial statements etc.
Quite simply, the problem was that other than seeing the current bank balance, the client never knew how they were doing until after the period end at which point it was too late.
What was the solution?
As a result of a series of poor results shown in the 6-monthly management accounts and a few issues with sales invoices not being chased and/or paid, Sherlock & Co advised that a proper bookkeeping system be implemented as a matter of urgency.
The solution was to speak to all parties concerned and develop, implement, and provide training such that the new bookkeeping system would:
- Stand up to scrutiny from HMRC.
- Not cost the earth.
- Be easy to operate and maintain.
- Provide the business owners with real time information to help them run their business more efficiently, and
- Provide the Accountants with better information for simplifying the overall accounts process and for providing more opportunities for in-year tax planning.
What was the result?
Sherlock & Co reviewed the business processes in full, with the Directors and employees of the company, to identify each income stream, each category of expense, each business process, who was responsible for it and how all the above could best be captured, recorded, and processed.
After careful consideration, Sherlock & Co proposed a digital bookkeeping system, hosted in the cloud, which could be accessed by multiple people, at the same time, from multiple devices at any time of the night or day.
Digital sales invoices are now issued to customers directly from the client's time management system and those invoices are automatically fed into the bookkeeping system where they are matched against sales receipts once received.
Purchase invoices and expense receipts are captured digitally on an i-Pad, Mobile Phone or Scanner and are approved, as necessary. Those expenses are categorised automatically in the App and are then automatically fed into the accounting system.
The accounting system has an automatic bank feed which means that the bank and credit card entries are automatically imported into the software. Each day the bank receipts and payments are easily matched against the relevant invoices.
The client now operates a real-time bookkeeping system which shows accurate profit and loss details to date, summaries of monies owed by customers and invoices awaiting payment and how much money is in the bank. All the information that you would need, in one place!
As a result of implementing the above system, the client has been able to reduce the number of admin staff by 1; they have changed the monthly billing routines so that they are paid more quickly, prices have been amended to improve the gross profit margin and annual accountancy costs have reduced overall.
A quote from our client, “because we implemented the Xero bookkeeping system, we now feel in control of our business and the information produced has made it much easier to manage the business. Conversations with my accountant are now far more pleasant and having them on the end of the phone when we need support is fantastic. On balance, I wish we had done it years ago”.
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