Inachee(noun) [In-a-chee-]: Home Grown Energy in Motion.The importance of bookeeping
October 25, 2012
A client who owns a Shs 350m($106,000) poultry firm hired a colleague's accounting firm to do some accounting work. As it turns out when they started preparing his accounts, they noted that for example whereas the books showed sales had been Shs. 4m the analysis showed they were infact closer to 32m!
They eventually had to make amendments to their original records as they had in some cases not recorded transactions worth at least Shs. 25m.
How could this happen?
The main problem is that the client staff (he is based abroad) had not been maintaining proper records. They have no accountant on their team.
Our experience with many clients particularly SMEs shows that when they start a business, they seem to get very busy with aspects like legal registration, setting up production facilities etc and neglect putting in place a system for bookeeping to capture vital financial information. They only then seem to remember it in hindsight when they are starting to wonder where all the money is going.
If you are going into business, we would recommend that right at the start, if you cannot afford a full time accountant, you consult one to help you design a simple system to capture financial information.
Even a simple excel based spreadsheet in which all expenses arerecorded and a simple filing system would help you prevent the difficulties faced later on in trying to reconstruct numbers.
An alternative would be to outsource accounting services. Find an accountant who on a monthly basis can perform this bookeeping function. Outsourcing can be cheaper than a full time accountant as the outsourcing firm often has several other clients and so can spread costs and provide you with a cheaper service.
Best of luck and of course if you need help, speak to us.
They eventually had to make amendments to their original records as they had in some cases not recorded transactions worth at least Shs. 25m.
How could this happen?
The main problem is that the client staff (he is based abroad) had not been maintaining proper records. They have no accountant on their team.
Our experience with many clients particularly SMEs shows that when they start a business, they seem to get very busy with aspects like legal registration, setting up production facilities etc and neglect putting in place a system for bookeeping to capture vital financial information. They only then seem to remember it in hindsight when they are starting to wonder where all the money is going.
If you are going into business, we would recommend that right at the start, if you cannot afford a full time accountant, you consult one to help you design a simple system to capture financial information.
Even a simple excel based spreadsheet in which all expenses arerecorded and a simple filing system would help you prevent the difficulties faced later on in trying to reconstruct numbers.
An alternative would be to outsource accounting services. Find an accountant who on a monthly basis can perform this bookeeping function. Outsourcing can be cheaper than a full time accountant as the outsourcing firm often has several other clients and so can spread costs and provide you with a cheaper service.
Best of luck and of course if you need help, speak to us.
Posted by The Blog Administrator. Posted In : accounting
