Is Your Small Business Bookkeeping Taking More and More Time?

Is Your Small Business Bookkeeping Taking More and More Time?

The Small Business Bookkeeper is an important pivotal role.

They will often be the only financial role in the business. As your business grows you may feel that it seems to take longer and longer to just produce the figures, let alone have a chance to analyse them.

From working with many a small business bookkeeper over the last few years I have seen many instances where

"it is due to the way that the Bookkeeper carries out the tasks that makes the job more and more inefficient."

Usually the volume of transactions will increase as your business grows. Ensuring you build lean and efficient bookkeeping processes will meab you have the best chance of getting your figures when you need them.

The 3 areas below, cover for me, the most common reasons why you may not be getting the numbers on a timely basis.

Prioritisation and Being Able to See the Big Picture

Busy-people-running-in-circles Is Your Small Business Bookkeeping Taking More and More Time?

The most common reason why your Bookkeeping is taking more and more time, is lack of prioritisation.  A busy Bookkeeper can feel fully occupied trying to keep up with the day to day tasks. I refer to these as the Core tasks.These include  ensuring Suppliers are paid, Sales Invoices are raised, and Employees are paid correctly.

They may feel like there is no time to step back from the role and really think about what should be done in what order.

However, this review needs to be done. Whether by you or the Bookkeeper if a change is to happen.

Furthermore, they need to consider what doesn’t need to be done by themselves. In fact would it be cheaper and less time consuming to contract out.

There needs to be a fundamental understanding that

“ Bookkeeping time should be focused on those tasks which will add value to the business”

This might include

  1. Proper in-depth analysis of key cost and income components,
  2. Ensuring the sales processes are working correctly because income is the life blood of the business and
  3. Ensuring that we process the costs correctly so that the profit and loss provides insight

These points above are the final outputs they should be striving for.

The way they achieve this will be through carrying out the Core Tasks.  These Core Tasks are meaningless if they do not deliver the outputs described. Seeing more and more time being spent on the Core task can be frustrating and stressful for you,  when you badly need the value adding information that comes from this.


Busy-people-running-in-circles Is Your Small Business Bookkeeping Taking More and More Time?

Is your Bookkeeping mindlessly counting Beans, but not delivering the gems of information you need to improve and grow your business?

I  recommend that for small business of a certain size (Typically 6+employees) they should subcontract out the provision of their payroll. It is time consuming to keep up to date with the latest rules and legal aspects around payroll. I believe the processing and administrating of the payroll is best done by a business which all they do is this. Most Payroll Agencys are very competitive, and quotes should be in the range of around £120/mth for up to 20 employees.

The decision-making and prioritisation of work loading is key if you are going to get the most from your Bookkeeper. It is important that your Bookkeeper knows what figures are important and hence need to be worked on to a greater degree than others.

where your Small Business Bookkeeper does not understand these differences, they will spend much time carrying out 'meaningless tasks'

Examples of what I call meaningless tasks might include:

-Reconciling 2 sets of data when they might never reconcile due to the nature of the task!

-Inputting figures into a spreadsheet when the figures are already delivered via an automated report in your accounting system

- Printing out and filing of invoices or other data when they can just as easily be stored electronically.

Being able to see the Big Picture of the Financial Management of the business is a skill that is often lacking in this type of resource. It conflicts with the role. We want someone who can have attention to detail, to ensure the figures are accurate and yet we also want someone who can step up and take a more “helicopter view”, so they can see where they need to focus at different points as the business grows.

What is your priority as the Business Owner may not be the priority for the Bookkeeper. If your Bookkeeper is focused on trying to ensure that the employees are paid on time and with the right amounts, they will have little time to deal with your requests for information. The level of urgency seems different. Not being party to your prioritise as the Business Owner may lead to a postponement where possible of your demands.

So, the importance here is to ensure the emphasis is on how important it is to improve the processes so that time can be freed up to work on the management information demands.


Set up of New Processes.

As your business grows you can find that it must do more financial compliance work. Some of these require specialist knowledge or involve more complex calculations. E.g. a business trading abroad will find that as it passes the VAT sales thresholds in different countries it will need to register for VAT in that country. A new process then needs to be developed to be able to account for the vat in the foreign country. A Bookkeeper may not have the necessary skills to know how to extract the relevant data and then compute the vat in a timely way. This on top of understanding the EU VAT legislation will be time consuming as well as requiring ongoing updating on this specialist area.


Busy-people-running-in-circles Is Your Small Business Bookkeeping Taking More and More Time?

Where expert knowledge is required, Subcontract it out! Yes it is an additional expense, but the time saving to ensure you get your vital management information, could lead to you being able to increase your business by £’000s.

I have seen many businesses who decide to diversify their products and services and the new areas then require a separate and specific accounting to be carried out. E.g. a business that decides to move into taking on larger or higher value commercial projects. These will need to be accounted for in a different way. Instead of the simple cash accounting whereby income and receipts are processed as they happen. Now there is the need to try to “match” your sales with costs based on a process which can accurately identify these 2 components of profit.

Does your Bookkeeper understand this, and can they put a reliable process in place to capture the data and calculate the relevant figures?

What about accounting for your Stock?

The most common error I find from the Bookkeeping function is the miscalculation of Stock.

Whether Stock is under or over valued this can have a massive impact on the businesses view of profitability. Just being able to identify if there is any stock accounting necessary for the business is also important. This maybe an area you are not even aware of and Raw Materials, Work in Progress and Finished Goods Stock can be heavily disguised by other factors like mispricing or poor invoicing processes.

Likewise exchange rate differences. If not correctly accounted for, will hide signals and important changes to your business.

What ever the new process should be, it is at the point of implementation that this will define how your business views the impact in the accounts. This point also  defines the amount of time spent on producing the figures.

The only way you can implement lean and efficient bookkeeping processes will be firstly in understanding the whole end to end process. It is important to understand what this rocess is trying to achieve. Your small business Bookkeeper must be prepared to get involved outside of Finance. They need to understand what data and processes are already available when implementing  new finance processes.

Poor Use of Technology

Unfortunately, this area of inefficiency is not solely restricted to the Bookkeeping role. However, where there are poor IT skills or lack of understanding of the existing IT system, its inevitable that there won’t be the most efficient production of the figures.

Busy-people-running-in-circles Is Your Small Business Bookkeeping Taking More and More Time?

Many times, I have come across simple processes taking  so much longer than they need to. Linked spreadsheet or drop and link format spreadsheets assist auto uploading to the accounting software. This is 10X quicker than using a manual process to type individually type in figures. the efficinecies increase further where bulk uploads are used over larger collections of data. Good examples of these are:

  • Auto uploading sales invoices
  • Creating repeating journals
  • Creating Spreadsheet to automatically reformat data into upload journals like payroll.

 Furthermore, the lack of control checks or auto reconciling totals means that where there is an error in a spreadsheet this either takes ages to find or worst still, it isn’t ever found!

VLOOKUP’s, IF statements and MATCH statements are good examples of other more advanced formulas in spreadsheets. These will save huge amounts of time in carrying out the Core Bookkeeping tasks. Matching, reconciling and inputting tasks can all be vastly speeded up when these formulas are applied in the right way to a spreadsheet.

The set-up of such a spreadsheet may take a bit of time in the first instance. It is the time saving in subsequent months from using this process for repetitive tasks, which will help to contribute to keeping this task simple and quick.

And then, what about your Core IT system, which is used by your business? Often, the Accounting system is interfacing your core system e.g. Booking system or Order Handling system. There is often some great reporting in these core systems which can be used by your Bookkeeper to help you get the management information that you need. Simple integration techniques will help you match non-financial data with the financial detail. This integration with your accounting system will reduce wasted time on duplicating data input.

Again, I come across many stand-alone spreadsheets set up by Bookkeeping which replicate in a complicated way, already available data in your Core system.

For today’s Small Businesses who are ambitious to grow, it is important that you keep your Bookkeeping systems lean.

If you find that your information is never ready or becoming later and later, it is time to act now. Simply not having the figures you need, could mean you are blindly moving your business in the wrong direction. Growing the areas that are not profitable or spending on a cost base which is outsized for your business.

Calling for efficiencies in your bookkeeping is not about being irrationally demanding on your Small Business Bookkeeper. Timely, credible and accurate information is a must if your business is to grow successfully.

If you would like help in leaning up your Bookkeeping processes, get in contact today!

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