Business Clinic: Advice needed for farm’s new bookkeeper

Whether it’s a legal, tax, finance or management question, Farmers Weekly’s expert panel can help.

Here, Kate Bell, of Albert Goodman chartered accountants, advises on bookkeeping practice so that year-end information goes to the accountant in the right form. 

See also: Business Clinic: where do we stand on IHT with let farm and small beef enterprise?

Q: We have a mixed dairy and property business and are approaching our year-end. I am keen to provide records to our accountant in the best possible state to try to avoid additional charges.

However, I have only this year taken on the bookkeeping, which may not have been up to scratch in the past. I don’t have any experience, so can you give some guidance please?

A: First, well done for taking on the bookkeeping. Your accountant can work with whatever you provide, but well‑organised records will reduce the time required and therefore help avoid additional charges.

Review the output, not just the input

When entering invoices and bank transactions for VAT, it can be just an inputting exercise. The key step, which some may do, is reviewing the output.

At year-end, run the following reports dated on your year-end and check them carefully. In an ideal world, steps A to D below should be carried out with each VAT return, along with reviewing the VAT reports.

A. Debtors (outstanding sales invoices)

• Check whether each customer genuinely owes you money
• Look for duplicated invoices, cash payments not recorded, or transactions entered straight from the bank feed rather than matched
• Investigate and correct anything that should not be there
• Once tidied, printed/exported lists with a narrative on each are helpful to the accountant, especially for items over 30 days.

B. Creditors (outstanding purchase invoices/bills)

• Confirm the business really owes these amounts
• Identify duplicates, cash payments, amounts netted off, or bills entered incorrectly
• Investigate and correct anything that should not be there.

Again, printing/exporting the list and adding narrative is useful.

C. Bank reconciliation

Even when your software is linked to your bank, year‑end reconciliations can go wrong. Common issues include:

• Manually added transactions that never went through the bank
• Deleted items that did go through the bank
• Missing or duplicated bank‑feed days.

At year-end, the only unreconciled items should be uncashed cheques (if you use them), which should be included when they are written, or transactions a day or two out of sync.

D. Nominal ledger review

Consistency is more important than the exact code used, but reviewing the ledger helps spot mis-postings such as:

• Wheat sales in barley codes
• Fertiliser in sprays
• Heating oil posted to vehicle fuel.

A quick scan will highlight anything that doesn’t look right and can be coded – you may be surprised how wild some of the postings are.

Additional steps at year-end

A few extra checks can really improve your year‑end information:

• Make sure loan and HP interest is posted correctly so that closing balances agree with lender statements
• Review capital introduced to ensure it reflects all amounts you have personally contributed, including any items paid for privately (for example, online purchases, fuel). Missing these could mean lost VAT recovery and income tax relief
• Record turnover gross and show contra charges, such as commission, charges and levies, separately to ensure correct VAT treatment.

However good your management information is, the accountant may remove system‑generated depreciation or stock entries if they do not align with accounting standards.

Stock and cut‑off

Stock is often one of the largest figures in farming accounts, so accuracy is essential.

At year-end, clearly identify all items held on farm or in your ownership, including livestock (wherever grazed and whoever’s holding number it is), crops in store (your own store or rented space), deadstock not yet used, tillages, and any other stored items.

Your accountant will appreciate a clear reconciliation similar to that below for livestock businesses but using area grown and yields achieved for arable farms:

Opening livestock numbers + births + purchases – sales – deaths = closing livestock numbers.

If you can also evidence a lower cost of production compared with HMRC’s recognised method of valuation at 60-75% of open market value, this can help improve accuracy and may reduce taxable profit through a lower stock valuation.

Clear descriptions matter

Your accountant should not need to inspect every invoice. Good transaction descriptions really help, for example:

• Number of animals or tonnes sold
• Details of work done by contractors
• Which property utilities or repairs relate to
• Which vehicle costs relate to.

The more informative the description, the smoother and more accurate the year‑end process will be.

Providing complete and well‑organised records will always help your accountant and reduce the likelihood of additional charges.

Don’t hesitate to ask for bookkeeping feedback – small improvements can make a big difference.

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