Do you stuff your pile of receipts into a bag or a box, ready to drop off at your accountant’s office?
Do you give your accountant only a couple of weeks to get your accounts done before your taxes are due for payment?
If this sounds like you, then you are doing it all wrong and you need to stop right now.
Here are the main reasons you need to stop giving your accountant a pile of receipts:
Reason #1 – It will save you money
Your accountant will have a lot of work to do if all you hand over is a disorganised pile of receipts. Maybe there are missing receipts! He will have extra work to do sorting them all out and I can guarantee that you will be charged for this work. It’s not something you should be paying an accountant to do for you.
Reason #2 – Your accountant will love you
OK, maybe that’s a step too far. But your accountant will be much happier, and he will be more willing to keep you as a client. It’s not unusual for accountants to let go of their least favourite clients. I’ve certainly done it in the past!
Reason #3 – You will feel better
If you are organised, you are guaranteed to feel better about your business. If at the end of the day you just chuck your receipts in the accounting pile, you will do it knowing that it is not the best option for your business.
Reason #4 – You will have a better idea of how your business is doing
If you don’t review your receipts you will have no idea how your business is performing. But, if you actually take the time to analyse your receipts and business expenditure you will have a much better idea of how much you are spending and what you are spending your hard earned cash on . Waiting to be told by your accountant after your year end how well your business has done is not a good way to run your business.
Reason #5 – If you need another reason, read this true story
I left the corporate world on a whim. The boss was in a bad mood (not unusual), a piece of tech wasn’t working properly so he decided to give me a bollocking in the middle of our open plan office. I decided there and then I was leaving. Calm as ever, I phoned my partner for reassurance that I was doing the right thing and handed in my notice.
What to do next?
I started my home based accountancy from scratch, with very few clients (1 actually, my previous employer). The boss was quickly forgiven and we still have a good relationship 6 years later. So, I needed more clients to pay for the kids’ school uniforms!!
In the early days, many business owners are not too fussy about the clients they take onboard and I was no exception. So despite my plans to run a paperless office I ended up with the client that promised the world, but the reality was a bit different. Let’s call her Debbie. Debbie along with her hen-pecked husband ran a commercial cleaning company. Debbie watched my Xero demo, loved it, agreed to sign up and become a committed Xero user.
But paperwork wasn’t her thing, so she quickly suggested I could enter her Xero transactions instead. She promised to drop off her organised receipts on monthly basis for me to deal with. Not ideal, but the kiddos had school trips to pay for!!
Ok, so what happened to the monthly receipts? They never turned up! Maybe 3 months at a time, and were they organised?? Not only were they a mess, but instead of in a carrier bag Debbie saved them in scented dog poo bags. It made me laugh, but also annoyed me. What happened to my dreams of online working, the paperless office? Here I was having to deal with scrappy pieces of paper. I never signed up for this!
The solution …
Little Miss teenager was looking for a job. She could do admin, and she was more than willing to work for £5 per hour. Meanwhile as Debbie had changed the goalposts, instead of charging her a fixed monthly fee we agreed she would pay £50 an hour for my time, which now included processing her transactions in Xero from the poo bags of receipts.
So I decided Debbie wasn’t such a bad client after all.
Charge out rate per hour – £50
Cost per hour – £5
Profit margin – bloody good!!!
Actually, Debbie was never going to be my favourite client, and soon after we decided to part company.
But the moral of the story is that you shouldn’t be paying an accountant to sort out your scrappy pile of receipts. It’s childs play, no expertise or skill is required so at least organise your receipts before handing them over.
Here’s how to organise your receipts – the bare minimum
- Make sure you always get a receipt in the first place
- Keep them in date order
- Give them a reference number – mark with a highlighter pen
- Avoid including business and personal expenditure on the same receipt (fuel and fags don’t go together)
- Make sure it’s clear how payment was made
- File them – hard copy or better still online
And even if you don’t want to sign up to Xero you may have a go at doing your own accounts.
I hope I’ve convinced you that handing your accountant a pile of receipts is never a good idea.
Do you agree?
Have you had an interesting experience with a pile of receipts?
I would love to hear in the comments below.