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Accounting tips for small businesses: How accounting software can help prevent discrepancies

8th November 2018

MGI World

MGI UK & Ireland's Darren Clarke from member firm Rickard Luckin Limited offers his views on the automated options for SMEs when it comes to accounting and bookkeeping.

Anyone who owns or manages a small business will know that there is a lot to do, from securing new clients, to ensuring that jobs are completed for existing contacts. However, one aspect of running a company that can often get overlooked in the middle of day-to-day operations is keeping track of accounts.

Small to medium-sized enterprises (SMEs) might find their record-keeping is somewhat haphazard, yet managing the books and keeping tabs on finances is key if serious issues are to be avoided further down the line. Business owners must know what money is coming into the company and what is going out as expenses, as well as any payments due from clients, if they are to have an accurate record of performance. In addition, banks and HMRC may at times require information concerning financial transactions. Having an accurate, transparent and easy-to-understand record is essential in order to prevent penalties.

It is possible to balance the books yourself, but MGI Worldwide member Darren Clarke of Rickard Luckin Limited says that he sometimes finds that this can be problematic for SMEs whose expertise does not necessarily lie in finance.

"Some clients may not maintain any financial records for their accountant other than just providing us with copies of the primary records," he pointed out, adding that other common mistakes include putting expenses in the wrong categories, duplicating transactions or omitting them entirely and forgetting to note the sums of funds withdrawn.

To get around these issues, Mr Clarke suggests that SMEs might want to familiarise themselves with online accounting software that includes features such as automatic bank feeds. This, he explains, should reduce the likelihood of mistakes with transaction data, and also speed up the process of bookkeeping.

Other beneficial features can include links to apps that are able to scan in data from invoices, and facilitate credit control, further streamlining the accountancy process. "You can also utilise bank rules which, once set up, can assist in automating the process of categorising expenses and increase consistency," Mr Clarke points out.

Using accountancy software means that reports on business performance can be provided quickly and easily. SMEs could find they gain insights into their operations and become aware of where they might improve.

This type of software will not replace professional accountants, but it will allow them to work more effectively alongside their small business clients rather than spending their time rectifying errors.

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