Next Section: Taxation >

• Chart of Accounts (click to expand)
  • The basic road map into any accounting system is the chart of accounts. It is this chart which helps establish the information which will be captured by your accounting system, and what information will subsequently be readily retrievable by the system. This tool, like the rest of the accounting systems, needs to be dynamic and should grow as the size and needs of your business changes.
    
    To help establish a good working chart of accounts you need to answer some questions, in conjunction with Bennett Brooks, as to how your business will operate and what is important to you. Some of these considerations might be:
    
    1. Will your business have stock to account for? If so, will it be purchased in finished form or will there be production costs?
    
    2. Are fixed assets a significant portion of your business?
    
    3. Will you sell only one product or service or will there be several types of business?
    
    4. Will you have accounts receivable from customers for which you will have to track?
    
    5. Are you going to sell in only one location or will you do business in several places?
    
    6. Are the products you sell subject to value added tax?
    
    7. Do you need to track costs by department?
    
    8. What type of government controls or regulatory reporting are you subject to?
    
    
    Each one of these questions can have several answers and will probably generate more questions. Each answer will have an impact on how the chart of accounts is structured. It may seem that developing a chart of accounts is not particularly high on your list of things to do as you start a new business; the amount of time and money which a well organised accounting system may save you can be significant as the need to generate information for various purposes increases. An example of a basic chart of accounts follows this section.
     
• Accounting Records and Record-keeping (click to expand)
  • Another question which the owner of a business must answer is “Who will keep the books of the business?” Will you do it yourself, will the receptionist or a secretary double as a part-time book-keeper, will you have a book-keeper that comes in periodically, or will the volume of activity be such that a full-time book-keeper will be required?
    
    Very often the owners of a business decide to keep the books themselves and underestimate the commitment they have made to other phases of the operation and the time required to maintain a good set of financial records and books of account. As a consequence, the record-keeping is often low priority and must be caught up later This approach, though rarely planned, can require a substantial expenditure of time and money. While it is important for the owners of a business to maintain control and stay involved in the financial operations of the enterprise, this can be achieved by maintaining close control over the cheque-signing function and scrutinising certain records. Bennett Brooks can help develop a good programme of record-keeping duties for you, your employees and any outside book-keepers you may engage.
     
• A Word about Computers (click to expand)
  • The computer is probably the single, most valuable, invention for book-keeping and accounting since the advent of double entry book-keeping. If your business includes any of the following, then a computer would be a useful tool in your business:
    
    1. Many repetitious or routine tasks.
    
    2. Lots of paperwork, i.e. suppliers’ cheques, sales invoices, purchase orders, mailing labels.
    
    3. Lots of general correspondence.
    
    4. Written reports, contracts, newsletters, catalogues or brochures.
    
    
    Bennett Brooks know about both your business and computers and can take much of the confusion out of the selection process by assisting you in the purchase and installation of your computer.
    
    
    There are a number of very good, easy to use, accounting software systems which are commercially available, but none of them will solve the problems of inaccurate or poor quality financial records. All they will do is generate bad information faster. This is one of the reasons that the computer has also probably caused more headaches for the owners of modern businesses than any other single cause. If you want to use a computer-based accounting package, either in your own business, with a service bureau, or through your accountant, it is imperative that you generate accurate information to be entered into the system.
    
    
    The real value of the computer becomes apparent once it is running smoothly in your business. Your accountant can then function in the capacity for which he was trained, not as a “number cruncher”, but as your business adviser, consultant and strategist. Both of you can focus not on producing reports for various regulatory agencies but on analysing your business to make it more profitable.
     
• Internal Control  (click to expand)
  • What is internal control? It is the system of checks and balances within a business enterprise which helps to ensure that the company’s assets are properly safeguarded and that the financial information produced by the company is accurate and reliable. When you are operating as a “one man shop” or at least handling all of the company’s financial transactions, maintaining good internal accounting control is relatively straightforward.
    
    
    However, when your company grows to the size where you must delegate some of the functions, it becomes more difficult to ensure that all the transactions are being accounted for properly.
    
    
    No matter the size of your business, you should always be able to answer “YES” to the following questions:
    
    
    1. When my company provides goods or services to our customers, am I sure that the sale is recorded and the debt is recorded in accounts receivable or the cash is collected?
    
    2. When cash is expended by my company, am I sure we received goods or services?
    
    
    The method used to ensure that these two questions can be answered affirmatively will be widely varied. They are essential stepping stones to maintaining good control in your business. The solution in your particular instance may be as simple as numbering the sales tickets and being sure ALL TICKETS ARE ACCOUNTED FOR or reviewing all invoices and timecards before signing company cheques. These are fundamentals in a well-run business. As the company grows you will need to consider concepts such as segregation of authority as well as employee fidelity bonds or controlled access storerooms.
    
    
    No matter what the size of your enterprise, you should consider controlling your business and safeguarding hard earned assets as a priority from the outset.

To arrange your free initial consultation click HERE or call us on 0845 330 3200.