By Emily Coltman of AskM
Reading back through the Xero blog this morning, I found this post from Vivian Morresey, who says;
It’s amazing how many people have joined Xero recently, that actually come from ‘no system’ at all, ie shoebox, Excel or paper, and I’m sure that once people truly see that it can be done better, the better off we will all be.
By "Excel or paper", I'm guessing Vivian means accounting records kept either on an Excel spreadsheet or a manual cashbook. And I'd take issue with his/her statement that these are "no system".
I agree that spreadsheet records or a manual cashbook would probably only suit the very smallest of businesses. Elizabeth Jackson of Great Guns Marketing says in her book "Start Up!" that when she began her business, it was a one-woman band, and she kept her records on spreadsheets, before upgrading to QuickBooks when the business grew bigger.
For micro businesses, a neat well-kept set of records on Excel or a manual cashbook can be more than adequate. They've certainly done just fine for me in the past when it came to preparing year end accounts for those businesses.And, I keep my own records on an Excel spreadsheet :-)
In the next paragraph of his/her article, Vivian says;
Generally, it’s at the end of the (financial) year when all the real pain comes to the surface, such as collating all your receipts and trying to remember why you spent that money, and what was it for, do I claim the GST or not? Digging up your bank statements, and realising you’ve lost one, it won’t matter how far back, or how efficient the online bank statement export is, you know it will still miss the thing that you need. Finally, sorting through your invoices and realising that you haven’t been paid or worse, that you still have to pay someone. I could go on, but I think you get the point.
Now there I would say that (s)he is spot on.
Trying to go through a pile of receipts at year end and remember what every receipt was for is a nightmare. By then you won’t have the foggiest idea why you might have bought a train ticket to London . To visit a customer? To go to the theatre? To go to a lap-dance club? (I did know a business owner who tried to claim "entertaining" for his visits to an address in Soho ...)
It’s not just your accounting records that you need a good system to keep track of. What about employee expenses? Purchase orders? Credit control? The list is endless.
So, Excel and paper systems do most definitely still qualify as systems. Pick a system that’s the right size for your business and keep on top of your paperwork as it comes in. The day after your trip to London , you’ll remember what it was for. The following month, you probably won’t.
[P.S. My apologies for the use of "his/her" and "(s)he" in this article, but "Vivian" can be either a man's name or a woman's and I don't know whether Vivian at Xero is a man or a woman.]
Emily Coltman is a qualified Chartered Accountant who, after several years in practice, now runs her own business making bespoke screen-capture videos.