What’s been going on at Penguin HQ this week?

Something that drives me nuts – mainly because it’s me who has to unpick the whole thing – is business owners who think bookkeeping is a piece of p*ss and why should they pay someone to do it for them. (This isn’t a plug for me – we don’t offer bookkeeping – but it’s a critical part of your finance function.)

Also, I’ve managed to take some time out of the office to visit our local nursing home (Calway House in Taunton) where Gertie is a therapy dog for the residents.

Bookkeeping – You’ve got Xero, how hard can it be?

As your business grows, so will your admin needs. And that includes accurate record keeping which is right first time, and on time, every time. Business owners can see bookkeeping as a cost, and try to keep it to an absolute minimum, refusing to consider the benefits of actually paying someone money to deal with it.

Firstly, let’s get this straight – accounting software is the perfect way to record all the transactions in your company. It beats a spreadsheet, hands down. And if you’re VAT registered and therefore caught under “Making Tax Digital”, spreadsheets aren’t permitted any more.

But, it’s a dumb machine. When you raise an invoice to your customer in Ireland, it’s not going to say “Are you SURE this should have VAT on it? Have you checked VAT notice 741A?”

When you reclaim 20% VAT on something you bought off eBay, it won’t ask you why the supplier isn’t actually registered for VAT.

It’s never heard of partial exemption. It won’t say “do you realise you’d be £2,500 a year better off on the Flat Rate Scheme” or “you’ve got £10K of VAT which could be deferred by three months if you moved over to the Cash VAT scheme.”

Having Xero is like buying the whole of the Screwfix catalogue and thinking you can renovate your house single-handedly.

You get the picture.

In practice, we see business owners trying to save money in two ways:

Either, they give up part of their weekend to sorting out the books, and in the pursuit of saving money they spend less time with their family and kids. Which is a tragedy.

Imagine looking back on your life and thinking “I know I missed all those Sunday morning football matches with the kids, but you’ve never seen a tidier set of bookkeeping records” 😢

Or, if they already have staff working for them, they pull out the old “oh, Tom on reception can do the books for me between answering the phone and speaking to customers, how hard can it be?”. 🙄

There’s THREE reasons never to do this, if you’re serious about your business (and your sanity!).

FIRST: Unless you’re going to enrol Tom on a professional bookkeeping course such as at the AAT, he’s going to make a hash of it. Not his fault, but as a business grows in size, it also grows in complexity, and there’s just more “stuff” to go wrong – and the ££ effects of that get bigger and bigger. VAT is a case in point here.

SECOND: Poor Tom is not going to want to put his balls on the line and say “Listen Boss, I’m way out of my depth of this Reverse Charge/Partial Exemption/Flat Rate/Foreign Purchases/HP Agreements” whatever it may be. Instead, he’s going to just plough on, keeping his head down and hoping he’s doing it right.

And hence THIRD: when it comes to the year end, your accountant 🙋‍♂️ will ask for your records and when there’s adjustments to be made all over the place that’s extra time for us – time is money! – and could be either a shock bill from HMRC for underpaid VAT, or we find out you’ve paid waaaay too much VAT and we now have to try and claw it back from HMRC for you.

Either way, it’s a ticking time bomb. 💣

I’m running a proper business here – what should I do?

Get a professional. BUT WAIT! That doesn’t necessarily mean an accountant. You’ve two options.

You can hire a self-employed or freelance bookkeeper. Look for someone who’s qualified with the ICB or AAT. They’ll take care of everything either weekly, monthly or quarterly depending on the level of transactions. For the smallest business, we could just be talking £tens of pounds a week, that’s all. If you’ve got lots of transactions going through the books, you’ll pay more of course.

A bookkeeper will be able to log in to your Xero/Quickbooks and give you a quote based on the size of the business.

The other option, once you get to a certain size, is to employ a bookkeeper in house. And I don’t mean “my mate down the pub who used to cash up at the end of the day in Woolies”. I mean someone who is qualified (or at least training) as a bookkeeper. They could work full or part-time for you.

In turn, you’ll get two things back: Peace of mind. And your Weekend.

Blue Penguin don’t offer bookkeeping [hence, what I’m saying here isn’t just marketing BS], but we do have good relationships with some excellent firms locally, so I’m happy to make you some recommendations. Get in touch.

I should caveat the above by saying that bookkeepers don’t know everything. There are times when they will need to refer to your company accountant for clarification (what? not us? jeez, you need to sort that out for next year…!). And that’s another reason why professional bookkeepers are so valuable – they know what they know, and they know when to refer for help rather than just fudge it and hope for the best, like poor Tom.

And, hence, it’s important that your bookkeeper and accountant have a great working relationship throughout the year. So that after the end of each financial year, if your records are nice and tidy, this will directly affect how much work is required by the accountant and, let’s not be coy about it, how much we need to charge you to get the work done.

Off to the nursing home…

Not related to accountancy at all, but today we have been to see the residents of Calway House, in Taunton. We’ve been doing it for about a year now – once a month I close the office for the morning and head over to see them.

It’s part of the work done by the amazing people over at Therapy Dogs Nationwide: https://tdn.org.uk/

Gertie and I really don’t do much – we just walk around asking people if they want to see her. Some just want to stroke her. Some give her a biscuit. For a couple of the residents who are not able to sit up, Gertie will (gently!!) get up on the bed and snuggle in with them 😍

From speaking with the residents it seems a lot of them had dogs before, and some of them having to give up their pets recently when they could no longer live at home. All very sad.

Gertie is on the right. The other dog is Ace, he’s absolutely bonkers and I think letting him loose in a room full of very delicate old people could end up looking like someone tried to play dominoes during an earthquake.

Doing this costs me nothing more than a bit of fuel and some dog biscuits. It’s easy for a small firm like Blue Penguin to give people a morning off work once a month, but if you’re thinking of doing something in your community, have a chat with your staff – there might be causes close to their heart that perhaps just a couple of hours of paid time off per month could really make all the difference.

And if you think Therapy Dogs could be for you, give me a call I’d love to tell you more about the work they do.

Right then, I’m off to fill up the car before Putin turns off the taps again….🚗