The majority of farms use computer accounting – we get some tips from an accountant on how to get the most from your system.

Using a computer program for record keeping not only gives quick access to see how the business is doing through the year but also reduces the amount of work that we as accountants have to do in preparing accounts.

However, using a computer accounts package can be quite daunting for those who have been used to a manual book system.

Done properly, computerised record keeping and accounts can trim your accountancy costs ; done poorly, they can be worse than a manual system.

The bookkeeping points below highlight common questions and problems in keeping computer records and accounts.

Bank reconciliation

Every set of accounts starts with the inclusion of all transactions that have passed through the business’s bank accounts in the year.

• Make sure that you are reconciling your bank account as you process your bookkeeping information – get to grips with your computer program’s bank reconciliation feature

• A bank account that doesn’t reconcile can add hundreds of pounds to your accountancy fees

• Include a copy of your reconciliation as part of the information that you pass to your accountant.

Posting accuracy

You are likely to be posting or allocating information into your sales and purchase ledgers from invoices you have raised or received. Each of your customers and suppliers should have their own account in your system allowing you to check how much you are owed or how much you owe.

A common error when processing your subsequent bank payments or receipts is to bypass the sales and purchase ledgers and post straight to a nominal account – the one which details certain types of expenses such as such as fuel or feed – forgetting that you had already entered an invoice.

This will lead to duplication of the income or expense and quite often if VAT is involved, an over claim to HMRC. So, spend a little time looking over the entries left in your sales and purchase ledger accounts once a month. If you think that you have paid something that is shown as outstanding, the chances are that you have. Look back through your bank statement and bank entries to throw light on where you have made an error.

VAT

Many of our clients worry about making a mistake with their VAT returns. Accounting software is designed to help reduce errors but this requires proper use of the software features.

Many programs have a reconciliation feature or enable you to “flag” transactions for VAT. These help to ensure that the entry is only included once on a single VAT return.

We often find that entries are included on more than one VAT return where the reconciliation feature has been forgotten after processing the previous return. So it is good practice to make reconciling the transactions for VAT part of your routine procedures, doing this before you allow yourself to log on to HMRC and file the return.

Also, check the amount shown on the VAT return agrees with the amount shown on the trial balance to ensure that you have included everything. If in doubt, ask for help from your accountant to avoid costly errors and HMRC inspections.

Top 10 computer bookkeeping tips

  • Be consistent with the coding of invoices to nominal accounts
  • Do not over use the “miscellaneous” heading. If this includes a multitude of different expenses, it will need to be reanalysed at the year end so it may be better to examine this class of expenditure before the next year begins and introduce more headings rather than having another complicated miscellaneous heading
  • Look at the last set of accounts prepared by your accountant. Try to use similar nominal categories as they have used.
  • When entering purchase invoices include a narrative that describes the expense. This will help you and your accountant to quickly spot mispostings.
  • Take regular backups of data and check that the backup works.
  • Keep copies of hire purchase and lease agreements to give to your accountant.
  • Look over your work before sending the data to your accountant.
  • Review the list of outstanding receipts and payments from the bank reconciliation. Remove any old items that you do not think will clear.
  • Seek help if you are unsure of how to process a transaction.
  • Ensure you request opening balance adjustments from your accountant once they have completed their work to bring your system up to date with the annual accounts.

Hardcastle Burton LLP is firm of accountants with a large farming client base in East Anglia

More on this topic

Advice on how to prepare for a VAT inspection