Do I need a business bank account?

That depends! Are you running a proper business?

Business is business, and it's about making money! First you have to get used to that, and you have to be comfortable talking about money. Then you need somewhere to keep it and that means a proper business bank account.

The business bank account is just about the most important piece of organisational infrastructure that you can get, and so you have to look after it.

If you cannot keep track of your bank account, then how can you keep track of anything else? Or put it another way, if you don't know if you're winning or losing, then what's the point in trying?

Keep copies of all your business bank statements. It's the first place you need to look to see what's happening. And it's the first thing your accountant will ask for, and it's the first thing the tax office will want to see!

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Can I help you?

That depends! What sort of help do you need?

The good news is that a clearly defined relationship with your accountant will help you both! What does your accountant do for you? And what are you expecting?

• Accounts
• Tax returns
• VAT
• Bookkeeping
• Payroll
• Business plans
• Company secretarial
• Pseudo FD

That's a whole load of different things, and it's not always done by the same person. Think about it like the relationship with your doctor . . .

You wouldn't ask your GP to prescribe your glasses, or to crown a tooth. And accountants vary as well. The chances are that the more things you need, the more people you'll end up dealing with. And overall, you'll be paying more for their services.

So it pays to get your stuff organised, do what you can yourself, keep your costs down, and then bring in a specialist only when it's necessary. One of the big differences is that when accountants talk about “doing the accounts” they mean year end accounts or statutory accounts. When some people talk about “doing the accounts” they mean “bookkeeping”, and that's quite a different subject!

Bookkeeping is like a jigsaw puzzle

Start with the bookkeeping. It has to be done properly. If the books don't make sense, then the accounts won't make sense! And bookkeeping normally means using proper software to do it properly. If you're doing it yourself then you need to buy a mainstream bookkeeping package and get training on it.

Bookkeeping is like a jigsaw puzzle. The last thing the accountant wants to do is unpick badly done bookkeeping and to have to do it all again, properly. It takes twice as long and it costs twice as much! At least with a jigsaw puzzle you get an image to work from. With bookkeeping there is no sneak-preview of the end result. Badly done books means a complete rework!

It's a false economy to do the books yourself, unless you know exactly what you're doing. Most small businesses need one of the following:

• A proper bookkeeping package and proper training on it; or
• A classically trained bookkeeper with a classic set of ledgers; or
• A trained bookkeeper who comes in once a week or once a month to work on your system; or
• A bookkeeping bureau which takes in your records and gives you regular reports; or
• A fully functional crystal ball.

The recent trend for on-line bookkeeping services (which you maintain purely through a web portal) are not proper bookkeeping services. Invariably they mix up VAT and non-VAT items and that means that the trial balances they produce are wrong! Don't use them. They charge a lot of money for a sub-standard service.

Trail Balance

In order to do the accounts and the tax return, the accountant needs a trial balance from the bookkeeper, together with full sets of business bank statements and probably a nominal ledger activity report. If you can do it yourself, that's fine.

If you need help producing a trial balance, then you need a bookkeeper and not an accountant. Make sure your bookkeeper knows exactly what you're expecting from them. And make sure that your accountant knows exactly what you are expecting them to do!

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What do I do about refunds?

That depends. What sort of refund is it?

There is no category called "refunds" because a refund is nothing more than a reversal of some other category.

Customers

If you're making a refund to one of your own customers then it's a negative fee. Create a "Credit Note" in your system, and if you cannot do that, then create a "negative invoice".

Suppliers

If one of your suppliers is making a refund to you, then post it (as a negative purchase) to the same category that you used when you made the original purchase.

PAYE or VAT

Refunds of PAYE or VAT go against the "Creditor - PAYE or Social Security" account or the "Creditor - Net VAT due" account.

Corporation Tax or Income Tax

Lastly, if it's a refund of mainstream tax it goes against the "Creditor - Corporation Tax" account. You'll probably have an account like that if your business is a Limited company, and you probably won't if you're self employed.

So Limited companies should record the tax refund against the mainstream corporation tax account and (generally) self employed people don't show tax provisions and tax refunds in their books!

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