Keeping accurate financial records is easier than you think

In today’s digital age, keeping accurate accounting records is much easier than you think, Carl Reader says

Paperwork is a necessary evil in business. I suspect there are very few people in the world who can honestly say sorting out receipts, invoices and other paperwork is their idea of fun.

But staying on top of your bookkeeping and compliance is vital in franchising, even for the smallest businesses, and being disorganised just isn’t an option - unless you like paying late penalties and fines.

Vital for success

It’s important to know exactly what’s going on with your franchise’s finances for a variety of reasons. Maintaining a healthy cash flow, spotting trends and problems and working within your budgets is vital for the success of your business.

If you, like the vast majority of business owners, hope to one day grow or sell your business, being able to give a clear picture of where you are will make it far more attractive to potential investors or buyers.

In a franchise situation, where there are further recording necessities, such as management service fees and cross network performance to consider, keeping accurate records can be especially important.

Accounting in the cloud

Many people consider keeping accounting records a daunting task, but it’s much easier to keep financial records than you might think, particularly in today’s digital age.

Maintaining a manual cash book or spreadsheet of your income and expenditure periodically to satisfy HM Revenue & Customs is a time consuming and outdated process that comes with a high risk of error.

You can save yourself time and effort by looking for a solution for your business that allows you to record things quickly and easily whenever and wherever you are, while also allowing you to run reports, so you can use your financial data to guide your decisions.

For most businesses, there’s no question that cloud accounting software is a far better option. Market leaders in cloud accounting software such as Xero and QuickBooks offer secure, easy to use services that allow you to keep a full record of your banking activity, sales and purchases.

You can access this anywhere you have an internet connection. This allows you to run useful, real time reports, such as actual performance versus budget, profit and loss accounts, balance sheets and detailed reports of creditors/debtors.

Usually paid for through a monthly subscription of around £30, cloud accounting software allows you to use your time far more effectively, as there’s no need to be chained to a single desk or device. You can access your financial information on any compatible device - such as a phone, tablet or laptop - anywhere in the world, not just one desktop computer.

At this point, it’s important to remember that organisation and efficiency doesn’t just affect ‘behind the scenes’ of your business - it can improve service across the board, including customer service.

You can use the software to raise invoices and track any stock you hold, as well as use a ‘bank feed’, meaning your banking transactions are automatically imported straight into the cloud accounting software, saving you the admin.

It often integrates with other packages, such as customer relationship management systems, too, so you can minimise your time spent bookkeeping. These functions are made super easy and can genuinely transform the way your business runs.

Desktop software packages, such as Sage, which you buy upfront and install on your computer are also still available. Some people use these very successfully and are powerful tools.

However, if you’re making the switch to digital, I’d recommend cloud accounting software, as these are built to be user friendly, not just accountant friendly. Generally, desktop software is a bit more complex to use, plus you run the risk of your computer breaking for some reason.

Cloud accounting software is easy to use, comes with plenty of support and avoids the risk of losing access, as the data is all stored securely in the cloud.

Making Tax Digital

Another reason to embrace keeping your records online is that it will soon become essential.

Under the government’s Making Tax Digital scheme, most businesses will be required to submit returns online and, unlike previously, where tax returns were an annual requirement, they will instead need to be filed quarterly. The new system is designed to minimise tax inefficiencies and errors and will require businesses to use some form of software to keep digital records.

In the digital age we live in, it’s important to future proof your business’ finances and I recommend getting on top of online accounting now, so you’re ready, familiar and prepared, rather than switching in a rush when it becomes compulsory to do so.

It’s not just about being ready for the Making Tax Digital changes either. Compared to manual bookkeeping and accounting processes, cloud accounting software will make life much easier for you and your staff, plus improve efficiency in your business.

Regardless of the size of your business, speak to an accountant that specialises in cloud software and they can get you set up and running on a system that suits you in no time. It’s much easier than you think.