All Posts by Quentin Pain

UK Spending Review 2010

George Osborne announced his long awaited spending review today to reduce Britain’s deficit by around $81bn over 4 years.

All departments will need to reduce expenditure significantly with an overall job reduction in the public sector of just under 500,000.

HMRC have published a series of graphs and charts on the subject available on Flikr.

Quentin Pain, founder of software company Accountz said:

“whilst we welcome cuts that are necessary for the country there was a significant lack of proposals for the SME business sector. It is that very sector that generates the tax that keeps this country going in the first place. If you concentrate on cuts without remedial help for growth, it is a recipe for disaster.”

Quentin also added: “I would predict we will lose a further 500,000 private jobs over the same period as a direct result of a cut on contracts and other factors. This is not good news for the UK’s future.”

Quentin appeared on the UK’s BusinessZone Expert Panel during the parliamentary speech.

Invoicing and VAT in the UK

In the UK and most of the EU there are rules on what must appear on a sales invoice if you are registered for VAT. Obviously those rules vary from one country to another, and you will need to check with your local inland revenue service, but there are some general rules that you should observe.

In the UK, VAT on sales is known as Output tax. That has always seemed an odd label to me since the tax is coming in to the business!, but the Inland Revenue see it one step further in that it will then go OUT from you to them.

It will come as no surprise then that VAT on purchases is called Input tax. If you are VAT registered, then you can reclaim that VAT, but this is where the rules come into play.


In order to claim the VAT, you will need to make sure the supplier’s invoice is valid. This is the minimum it must have:

  • Valid EU VAT Number
  • Supplier’s name and address
  • Description of goods/services
  • Tax Point (date of sale)

The above is known as a simplified VAT invoice and is only valid if the supply is £250 or less. It is up to you to check the VAT rate for the items you have bought. For example, if the goods were exempt, then even though you have the VAT number you cannot claim the VAT (because there isn’t any). If in doubt always ask for a modified or full invoice (see below).


Then there is the modified invoice. The legislation says you can issue this ‘if your customer agrees’. What they mean is, if your customer doesn’t mind an invoice that shows the total VAT for each rate rather than a complete breakdown item by item.

These are the things you need to show in addition to the simplified items above:

  • VAT inclusive total for each VAT rate
  • The total VAT for each VAT rate
  • The VAT exclusive total for each VAT rate

In other words you must show the exclusive and inclusive totals plus the VAT totals for each rate of VAT included in the transaction (eg. standard, reduced and exempt).

Full Invoice

In addition to the above, a full VAT invoice must include:

  • Customer’s name and address
  • Invoice number
  • Invoice date (if different to the Tax Point – which is the actual time of supply)
  • The unit price or rate and quantity of items supplied
  • Cash discount rate or amount
  • A total for each rate (so it is obvious how much of the invoice is zero rated for example)

The Tax Point is crucial. It is the date of the time of supply and it could be different from the Invoice Date. The reason is that the VAT must be accounted for by both customer and supplier at the same rate, and that can only happen if both are using the same date.

The rules state that if you are a retailer then you do not need to issue a VAT receipt (of any type) unless you are asked to do so by the customer. If any supplier fails to issue an invoice having been asked for one, a fine or other penalty can be issued by HMRC.

DISCLAIMER: Remember, ALWAYS check with your local Inland Revenue service or tax authority. Advice issued on this website is simply advice. It is not the law and cannot be used as evidence in any legal matters. Click here for more details: HMRC Website.

UK VAT Early Settlement Discount or PPD New Rules

This article on UK VAT last checked and updated November 2016 by Quentin Pain

If you offer a discount for early payment of your invoices, then the VAT is also discounted at the same rate.

This is a new rule that came into effect from 1st April 2015 onwards.

Full details are available on HMRC’s website in the publications section to do with (UK) VAT:

Example Invoice: If you issue an invoice for £100 + VAT (at 20%), the total is £120 with a VAT liability of £20. If on that invoice you offer a 10% discount if paid within a certain time period, then the invoice total will reduce to £90 + VAT, which makes the final total £108 (£90 + £18 VAT at 20%).

So the customer has a choice in this example: 1) pay the invoice early and pay £108 or pay it within the normal agreed period and pay £120. Either way, the VAT is properly apportioned at 20% and both the suppliers and customers books will agree.

This is of course the logical way to deal with VAT, but it wasn’t like this at all prior to April 2015, when this article originally came out.

So for posterity (and anyone who needs to resubmit earlier tax returns) I’m leaving the original article in full below.

UK VAT Early Settlement Rules Prior to April 2015

==============ORIGINAL VAT ARTICLE===============

In the UK, if you allow a discount for early settlement of an invoice (aka prompt payment) then the VAT is calculated on the discounted amount regardless of whether the discount is taken.

Sub Total: 10.00
VAT: 1.80
Net Total: 11.80
10% Early Settlement Discount (ESD)

So the VAT (20% in this example) is applied to 9.00, not 10.00 (hence the 1.80 and not 2.00).

However, if the customer pays by instalment, then you must account for VAT at the actual price paid.

Also, if you offer any incentive to a customer, known as an unconditional discount, then the VAT is calculated on the discounted amount provided the customer pays the discounted amount. Otherwise the VAT is calculated on the full value.

Finally there are contingent discounts. If you offer a discount on some contingency, eg. pay x amount by such and such a date, whatever happens, the VAT is calculated on what is actually paid. That of course may mean an adjustment is required in your accounts to accommodate it (eg. the discount taken).

Bear in mind that laws and regulations are subject to change so always check with UK HMRC if in doubt (as they have – see the start of this updated article – Ed).

Note: it seems that this VAT rule only applies in the UK as I can find no reference to the rest of the Eurozone. Countries like the USA don’t suffer from this type of beaurocracy, but note that VAT is being talked about in the States as an alternative to Sales Tax.

==============END OF ORIGINAL VAT ARTICLE===============

Bookkeeping for Beginners

Money Laundering Update

Ever since the terrorist attacks, governments around the world have introduced more and more red tape in the hope of curtailing criminal activities. One of the more obvious ways has been to set up so called ‘Money Laundering’ regulations.

In the UK anyone involved in handling or looking after the finances or accounting of other people needs to register with HMRC on an annual basis (and at a cost) in order to comply with the regulations. This is true in many other territories too. Read more on money laundering here…

Money Laundering

Money Laundering

Money Laundering

Money laundering is a very recent change in statutory law around the world (although it has been going on since time immemorial) brought on by terrorist events over the last decade or so.

Money Laundering in the UK and elsewhere

In many countries including the UK you are required to record and keep proof of clients if you are a bookkeeper or accountant for money laundering purposes. This serves two purposes:

  1. Due dilligence
  2. Client Identity Proof

Due dilligence means you have taken the trouble to look at your client more closely by asking them to prove who they are. Client Identity Proof is just the evidence you can supply should something go awry with your client. That is, at some point, your client should become involved with money laundering (ML), terrorism, drug smuggling or any other criminal activity, which is why ML was brought in in the first place.

Many practitioners, and the vast majority of ordinary people see this as a typical example of beaurocracy, and I agree, however it is something you must do with every client you take on board, by law.

Money Laundering Proof

You will need photographic proof (driving licence or passport is acceptable) and proof of name and permanent address. The best source for that is a utility bill (gas, electric, water or telephone). Records should be retained for a minimum of five years, but retain them permanently to be safe.

When photocopying documents make sure you do not photocopy parts that are not relevant (eg. travel pages in a passport). In the UK you cannot use colour photocopies, they must be black and white. We are not sure what the requirements are for the USA, but I suspect they are similar.

Money Laundering and Inland Revenue

Finally remember that you must register with your Inland Revenue service (HMRC in the UK, where there is also a fee to pay). HMRC have a useful section on Money Laundering on their website.

Have you read our guide to running a bookkeeping business, money laundering is just another aspect you need to know about? Bookkeeping Business From Home

In part 1 of this guide we covered the basics. Part 2 introduced finding your first partners. Part 3 looked at your image and how you present that to prospective clients. Part 4 looked at ways to market your business. This part focuses on how to keep your clients.

Getting clients is not too hard as you have already seen. Keeping them is actually very easy too. But you will lose them rapidly if you are not punctual. If they ask you for their VAT return and you do not return the call quickly, they will start to lose faith in your service, and then in you. So it is vital you set out your terms and conditions at the start and stick to them. Your clients will respect you even more if you have a set of terms and conditions. It is the professional thing to do. If you belong to a bookkeeping association, they will not only be able to provide you with guidelines, they will also have a strict code of conduct. Use that to your advantage. State it clearly on your marketing materials.

Things to include are:

  • How quickly you will respond to queries (eg. all enquiries will be answered within 2 business days)
  • When  and how often you expect to receive paperwork
  • When and how often you will deliver reports
  • The scope of work (eg. bookkeeping, VAT returns [Europe], Sales Tax [USA], debt collecting)
  • When you expect to be paid (eg. all accounts must be settled in full within 30 days of invoice date)
  • Surcharges for overdue invoices
  • A disclaimer stating that your figures can only be as good as the documents provided to you (you are not responsible for other people’s errors, although you will always point them out if you spot them)
  • Your business name and address and contact details

This list is not exclusive and you should contact a solicitor to make sure it is water tight and you have not missed anything out. Remember UK law is ‘case law’. That means each case has a possibility of changing the way law is interpreted. If you should ever be taken to a small claims (or larger) court, the judge will always look at things from a ‘fair’ point of view. For example, if your terms and conditions state that you are in no way responsible for anything, the judge will not view your case kindly!

Some countries impose regulations on money laundering (following the terrorist scares of the last decade). In the UK for example it is necessary to register with HMRC if you offer bookkeeping or accounting services to other people. There is a charge involved for this, so please check with your Inland Revenue service. Some bookkeeping associations cover this cost as part of their membership (which can often be cheaper than registering independently).

To ensure you keep everything up to date and you do not miss deadlines, open a spreadsheet and record your client details together with when you expect to receive and deliver paperwork, tax returns etc. Do one for each year. You could open new worksheets in the same spreadsheet, which will give you quick access to previous years.

Make sure you get all your client details including main contact, address, telephone numbers, who is responsible for delivering paperwork to you, who is responsible for paying you.

Add a date for each client to contact them on a regular basis so both you and they can discuss any issues that have come to light. Always do this. That call can really help your relationship. Your clients will know you care about their business. Of course, if your client runs the entire business on their own, then this wont be necessary as you will be in regular contact anyway.

OK. That completes this mini guide. Next we will be publishing a series of marketing articles to really get your business noticed online. It is much easier than you think, so whatever you do, do not spend a fortune on internet marketing or even starting a web site until you have read these articles. I can pretty much guarantee that if you follow them your site will get to page 1 of Google for a very relevant keyword in your target area, and the cost of doing that will be minimal.

If you would like to understand a little more about bookkeeping, subscribe to our 12 week bookkeeping course.

Bookkeeping Business From Home Part 4

In part 1 of this guide we covered the basics. Part 2 introduced finding your first partners. Part 3 looked at your image and how you present that to prospective clients. This part focuses on how to get those clients.

By now you should have a good idea of how much to charge, how many clients you need in order to be completely independent, how partners can help you, and why your image, from your business name down to what you wear is absolutely vital. So, let’s put it all into practice and go win some clients.

But first a note of encouragement. Once you get a few clients on board, you will find that they start recommending you to other business people they meet. So although you need to get on the first rung, after that it should be plain sailing providing you follow the advice in these guides.

Here’s a great question: How many cars do you see driving around in your local area with a sign on the side or back that says ‘Local Bookkeeping Service…’? None right? So go to a sign maker and get some magnetic car stickers made. That way you can remove them whenever you need to (eg. if you sell the vehicle).

The message on the sign must be absolutely clear and simple. Since you will be displaying the sign in your local area you can use your business name ‘Jill Smith Bookkeeping Service’. It is absolutely vital you put your landline number on there too. The STD code also tells people you are local. You will also need a simple selling slogan. Eg. ‘Best Rates in Town’. It sounds corny, but if someone is looking for your service, they need reassurance they are making the right decision, and ‘best rates’ works. So you will end up with a 3 line ad:

  • Line 1: Who you are
  • Line 2: Why they should use you
  • Line 3: Call to action

The text must be legible at a distance. Do not use fancy fonts. Simple is best and works. Make sure your landline forwards calls to your mobile when you are out (or your partner is aware they will get calls if they are in).

Advertise in your local newspaper. There is usually a section for local services. You may see competitors in there, so all you need to do is study their ads and look for their weakness. If they offer ‘Established 1899’, make yours ‘Modern Fast and Friendly Service’. Or you could counter it with ‘Fully Accredited’ if they do not mention that. Look for what they have missed off and highlight it in your ad. You will find that these people only advertise occasionally (as you will also do in time yourself) because most clients come from recommendations.

After you advertise, contact that paper’s editorial staff and offer to write a piece on small business and how to succeed. Make it relevant to the readership. Do not ask for money, offer it free. It should be helpful to small businesses, not about bookkeeping. You are gaining trust with peices like this and gaining credibility as an expert. If you can get a regular spot, in 6 months, you will not be able to stop the stampede.

Produce a hand out. Drop them in letterboxes. Ask if your local library would accept them in their local services section. They will display them if there is value in the leaflet. Eg. ‘How to do your bookeeping’. Contact your local chamber of commerce. They may want you to join, but you do not have to. They are there to promote local businesses and you offer a service that will help local businesses. Explain that and they may help. Contact all local networking groups and attend their breakfast meetings. If you get the chance of a 5 minute speaking slot, grab it. All you need to say is that you are a local bookkeeping service, fully accredited and qualified and charge the best rates, come and see me afterwards. Once you have done that a few times, you will find it easy. It will also help with your confidence when meeting other business people in any context.

There are many more ways to promote yourself and your business, but follow the above as a starter and you should have no problem getting your business started and growing it rapidly.

In part 5 of this course we will look at how to keep your clients and meeting deadlines.

If you would like to understand a little more about bookkeeping, subscribe to our 12 week bookkeeping course.

Bookkeeping Business From Home Part 3

In part 1 of this guide we covered the basics. Part 2 introduced finding your first partners. This part focuses on going direct to clients.

By far the hardest way to get clients is to try to attract them directly. Having said that, it is really easy to find them! the hard part is getting them to give you business.

Your first problem is convincing them that you are trustworthy. After all, you are going to be dealing directly with the finances of their business. Ask yourself this: would you trust someone you had never met before with looking after your money? No? well there you have it!

So, how do you overcome this. The simplest answer is in how long you have been established. If your sign says ‘Established 1980’ great. You must be bona-fide, the problem is, you haven’t even started yet! (that’s why you are reading this, right?). So, what to do.

Basic Marketing Checklist
1. A real postal address. Do not use box numbers.
2. A landline. Always have a landline.
3. Always use your real name for the business (see part 1)
4. Qualifications and member of bona-fide bookkeepers association
5. Professional stationery. Business card, letterhead and compliments slip
6. Always dress professionally

A real postal address lets your potential clients know you are permanent. A landline really adds credibility to this. So many service businesses start up using a mobile number. But for a business thinking about outsourcing its bookkeeping, a mobile is just too, well… mobile! Don’t use free or premium numbers either. You are aiming at a local market, so give them a local landline. Business owners want to know where you live. They want to be sure any paperwork they give to you is safe. Freephone numbers are terrific for established businesses, but for new businesses they are a hindrance. It suggests you are not local. And not local implies you are not really interested in local business.

Your business name is vital for establishing credibility. Would you use a firm called ‘ACME Bookkeeping’ or ‘James Smith Bookkeeping’. See part 1 for more on that.

Qualifications are also absolutely vital. It’s the same thing again. Put yourself in the shoes of your clients. If you mess up their VAT, it is they who suffer the consequences, not you. So would you entrust your bookkeeping to an unqualified person?

Become a member of an established bookkeepers association. Make sure they have a code of conduct. Advertise that fact on your stationery, website and advertising. Advertise it on any sales letters or handouts you produce. Use the associations logo and any other marketing material they can provide.

Make sure your stationery is designed by a professional designer. Do not make it fancy. You must be seen as a safe pair of hands. Do not design it yourself to save money (unless you happen to also be a designer of course). Your image must be professional and simple. Do not use tag lines. Eg. ‘Bookkeeping to die for’! Let your business name and stationery design speak for itself.

If you get an appointment to visit a client, always dress smartly. You are a professional. They are trusting you with a very sensitive part of their business. You will probably be the first to know if they have problems or are making a success of their business. Your confidentiality is vital to them. Show them you are professional by dressing appropriately.

In part 4 we will talk about getting new clients. If you haven’t signed up to our free bookkeeping course yet, just enter your name and email in the form on the right.

If you would like to understand a little more about bookkeeping, subscribe to our 12 week bookkeeping course.

Bookkeeping Business From Home Part 2

In part 1 we talked about starting a bookkeeping business working from home. In part 2, we talk about exactly how to set that up.

You can choose to be self-employed or set up a company. This is a simple decision. Self-employment is the way. The reason is that you will not have to pay tax until much later. That is really important when you are starting a new business. Cash is king as they say. Whilst you build up your client list, you need to conserve as much money as possible. If you were to form a company, any money you pay yourself in remuneration you will need to pay tax on there and then.

Another consideration is why you would want a limited company. If you were a retailer or someone supplying and selling other people’s goods, then a limited company is probably vital. You will be buying these goods on credit, hoping to sell them to make a profit. If, for some reason, the goods do not sell (maybe a competitor our prices you or a better product comes along) you may have to sell them at a loss. You could end up losing not just money, but your house! If you are self-employed, that is exactly the situation you do not want. Whereas selling a service such as bookkeeping, involves mostly your time.

The next thing you need to consider is your trading name. You have two choices here:

1. Use your real name

2. Make up a name

Both have pros and cons. Using your real name will invoke trust. You are displaying a degree of confidence in that you are happy to be exactly who you are. On the other hand, creating a trading name will let you advertise what you do. For example, ‘ABC Bookkeeping Services’. However, the best way is to combine both concepts. If your name was June Smith, then name your business June Smith Bookkeeping Services. Perfect. You are saying who you are and what you do in one go.

Do you need a logo. The simple answer is NO. Don’t waste your money. Your logo will be meaningless to most people unless you have a huge marketing budget, and even then you would be wiser to spend that budget on selling your services not your brand. Yes, so many marketing gurus talk about brand being everything, but it is a waste of time, effort and money for something as simple as a bookkeeping service.

So, your name IS your logo. Choose a classic font everytime you use it and people will remember you. Do not use any fancy fonts. It must be legible and clear. That is all you need to know about logos.

Now, what for most people, is the hardest part of all. Getting customers! It is the same problem for everyone. Where are your customers? Well I can tell you exactly where they are: everywhere! The fastest route is to contact all your local accountants. More and more businesses are starting. There is almost an exponential  growth going on. In these recessionary times, people (like yourself remember) are thinking about an alternative to the 9-5 job. And what is the first thing they need to do? Ask questions, get advice and maybe get some training. Part of the group of people supplying those services are, you guessed it, accountants.

Open a spreadsheet (or a notebook) and start with the Yellow pages. Enter the contact details of all your local accountants. You could also include bookkeepers. They may be in competition with you, but if they are overstretched, it may just help you get started. You may have to accept slightly less money, but it will get you on the road to success.

First off, write an introductory letter. I have found in business one of the most powerful words is ‘introduce’. Your first sentence should say something like: ‘I would like to introduce myself to you. I am June Smith, and offer a local bookkeeping service to accountants’. For this marketing letter, the accountants are your target market, not their clients. You do not need to say too much, certainly do not mention pricing, but say you would be happy to arrange a visit to talk about the posisbility of working with them. End with a call to action, such as ‘I will telephone your office in a few days to arrange an appointment if that is OK with you’.

Now, there is one more vital thing. Experience. Do you have any. If you have years of experience, say so, eg. ‘I have 20 years bookkeeping experience to TB’ – feel free to use abbreviations like TB for Trial Balance, you are speaking your target markets’ langauge.

What if you have no experience. No problem, you will have taken some bookkeeping course and have a qualification right? (if not, do it, you will find it much harder otherwise). So now the line is ‘I am a fully qualified bookkeeper to level 3 and a registered member of <insert some bookkeeping association here>’. That should do the trick. If you have experience and qualifications shout about both of them. Anything that can add trust will win you clients.

Send your letter. After a day or two (do not leave it too long) if you have heard nothing back, telephone your list. Persistence is everything. When you phone, ask them about their business. Don’t talk about your own unless they ask. Make them feel you care. Ask them what problems they have with bookkeeping. If they give you any indication of a problem, jump on it and say you can help them.

Follow these steps methodically and you will start to build your client list.

In part 3 we will talk about going direct to clients. Far more lucrative, but requires more effort, as you would expect of any business.

If you would like to understand a little more about bookkeeping, subscribe to our 12 week bookkeeping course.

Bookkeeping Business From Home Part 1

Anyone can start a bookkeeping business from their home. Amazingly, you don’t even need to be qualified, though it does help!
To give you an idea of what it involves once you are up and running, the average number of clients per bookkeeper is around 30. This makes it fairly easy to figure out how much you will need to charge for your services. In very simple terms, decide how much you want or need to make a year, then divide it by 30. You now have your cost per client.

The next important point to consider is the size of business you want to target. The larger the business the more work there will be. Larger businesses will want more analysis, and although that analysis may not be done by you, the bookkeeping will become far more involved and therefore time consuming. Accounting for items when they are actually consumed, rather than when they are paid for, means extra accounts and more transactions (insurance spread over 12 months but paid for in a single sum for the year is just one example).

So, if you are just starting out, target micro businesses. That is, those with a staff count of less than 5 including the owner(s). The turnover is not that important, it is the number of transactions and the nature of those transactions that matter.

You are not competing with accountants here. That is probably one of the main things to understand. Accountants are your friends. They can actually give you loads of work if you are struggling to find your own clients. Accountants do not like bookkeeping! Their work is in interpreting the books, advising about tax, and preparing statutory accounts for the Inland Revenue.

Another important thing to remember is to keep your overheads to the minimum. Working from home is the best and simplest answer to this. It also means you can claim expenses from your household costs. If you have 6 rooms in your house and you use one of them as your office, you can claim back 1/6th of many of your utility bills (eg. electricity and gas).

You could also claim back 1/6th of the interest on your mortgage if you have one, though be careful of capital gains tax if you should subsequently sell your house. Take advice from your own accountant in this case (if you take on freelance work from an accountant, you will find they will be more than willing to help you out with advice in this area).

In part 2 of this article, we will give you a step by step guide on how to start your own bookkeeping business.

If you would like to understand a little more about bookkeeping, subscribe to our 12 week bookkeeping course.

Self-employed Bookkeeping

Bookkeeping is the art of tracking money; where it came from and where it went to. That is all there is to it.

A simple transaction involves 2 accounts. The ‘from’ account and the ‘to’ account. This is what the concept of double-entry means. Trained bookkeepers and accountants use the term ‘credit’ and ‘debit’ to do this. A transaction credits one account and debits another. Hence a double-entry (it’s not two identical entries, it’s the two sides that make up a transaction).

By transposing ‘from’ with ‘credit’ and ‘to’ with ‘debit’, business people (not trained in accountancy) can get a simple handle on how accounting works. But enough of the theory, let’s look at a few examples.

This article explains some common transactions the self-employed need to make plus some of the differences and common pitfalls experienced in bookkeeping tasks between a limited company and the self-employed.

Limited Company Employee And Director Pay

In a limited company, all workers including the directors are employees. Their pay and salaries are direct expenses of the company. A company, for example, could account for its payroll with just a few transactions. The accounts affected would be the bank (the ‘from’ account, ie. where the money is coming from to pay the wages) and some expense accounts to track how much is going to the employees and how much is going to the Revenue for tax etc. (these are the ‘to’ accounts).

Self-Employed Pay

For the self-employed, it is a different story. Their ‘salaries’ are not expenses. As a self-employed person, when you take money from the business, it is usually only as a result of the business making a profit. These transactions are typically called ‘Drawings’. You are ‘withdrawing’ money from the business, hence the name.

So, for the self-employed, you will need a ‘Drawings’ account. This should be set up in the ‘Equity’ section of your chart of accounts. Whenever you take money out of the business, create a transaction From Bank To Drawings. In a traditional double-entry system you would credit the bank and debit drawings (so remember the rule: from=credit and to=debit if you want to make sense of it).

Using Personal Cash To Buy Things

Another common transaction is where you have bought something using personal money or a personal credit card. As your personal credit card or money won’t be included in the books, the simplest way is to treat it as cash, as follows:

Create a cash account in your ‘Current Assets’ section of your Chart of Accounts. All payments will be From Cash To [some expense account]. When you decide to pay yourself back from the business make another transaction, but in reverse: From Bank To Cash.

A better way, from an auditing perspective would be to set up a ‘Loan’ account in Current Liabilities. This is important if you need to track cash separately. The transactions are exactly the same as described except you will use Loans instead of Cash.

Opening Balances

Finally, opening balances. For a limited company, the opening balances will involve the shares bought by the shareholders. A typical transaction for this would be From Shareholders To Bank.

For the self-employed, you would have an account called ‘Capital’ and make a transaction From Capital To Bank.

All the above and more is explained step by step with tasks and answers in the Accounting for Everyone online certified bookkeeping course. Click below to find out more.

Join The Accounting for Everyone Online Course

Treasurers Guide Part 3

Every year you will be responsible for presenting the accounts at your annual general meeting. This is generally not as daunting as it may appear. All the facts and figures you need are right there in your account books. Your committee will not want a blow by blow account of every transaction, nor will they want to hear the detail of every account balance. All they are really interested in is how much is in the bank (and therefore available to spend in the forthcoming year). However, a short statement should be made as to how much was received during the year, how much was spent, and whether the accounts show any unusual trends (eg. “subscriptions have doubled during the year”).

The finer details (eg. the balances of every account, and an income/payment statement) should be included in a printed report available to everyone for later digestion.

If you are treasurer of a registered charity there will almost certainly be legislation that you will need to follow. Please check with your local Inland Revenue Service.

Hints and Tips

Use dedicated computer accounting software. It will save you a lot of time even if your organisation doesn’t have many transactions.

Learn the basics of double-entry. If nothing else, it will make you more confident as a treasurer.

Keep your accounts as simple as possible. It results in less work and makes them easier to read.

Always make regular backups of the accounts. Keep them in a safe place. Ensure the committee knows where to find them in case anything should happen to you.


office of Jacob Fugger; with his main-accounta...

Image via Wikipedia

There are many ways of keeping your accounts (including a shoe-box!), but the preferred method, used by every trained book-keeper and accountant throughout the world, is double-entry.

Many books and courses are already available. However, most are taught from an academic view point. They tend to throw you in at the deep end and assume you will not be overcome by the tidal wave of jargon.

The Accounting for Everyone Certified Online Bookkeeping Course takes an entirely different approach. By using just a few transactions and some simple guidelines you will understand the logic of double-entry, and by the use of a few key words the jargon will fall into place.

Words like nominal, general ledger and trial balance will become second nature. You will have no problem with your debits and credits. In short, you will be able to post a journal just as easily as you can now post a letter!

By the end, you will be able to talk, and understand, the same language as the professionals – and that includes your bank manager, accountant and tax inspector.

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Treasurers Guide Part 2

A receipt, obtained in Swiss mountain restaura...

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All the money received by your organisation must be recorded no matter how small the amount may be – ‘accountability’ is all important. If someone gives you £1 for the cause – write it down in your account book.

Use as many accounts as you think fit to record the receipts of the organisation. Attention to detail early on will prove invaluable as a management tool later. A simple example would be a charity that advertises and also attracts income by direct mail. Using an account to record the receipts from each source will tell you which one is more efficient (or which one needs improvement).

You can group your accounts under general headings. An example set of account groups and accounts could include:

  • donations
    • 1. from individuals
    • 2. from business
  • subscriptions
    • 3. annual
    • 4. lifetime
  • merchandise
    • 5. direct mail
    • 6. charity shops
  • others
    • 7. refunds
    • 8. grants

Always include the name of the person or organisation which gave you money as well as the date. It is also useful to note whether it was in the form of a cheque/cash or other source (eg. a direct transfer).

All payments must be written down – even if it was for a pint of milk. If you fail to write everything down, not only will your petty cash be short, others may wonder if anything else is amiss regarding your book-keeping.

It is for this reason that a receipt must be produced before you allow any money to be paid.

If someone buys a small item and forgets to get a receipt, a petty cash slip is fine – provided their name is written on it and they sign it.

Use as many accounts as you like to record payments, but keep in mind the maxim ’simplest is best’. Postage is a good example: you may be tempted to breakdown the costs into ‘recorded’, ‘registered’, ‘1st class stamps’ etc. Unless this kind of detail can be used as a management tool (eg. to discover if a 1st class mail shot worked better than a 2nd class one) don’t do it – it only complicates things and results in extra work not just for you, but also for an auditor should one be required.

Try to keep each group of payment accounts relevant to the requirements of your organisation. For instance, if it has a permanent office, it is worth keeping payments relating to the office in a group of their own (the committee can then keep track of whether the office is ‘paying’ for itself).

If your organisation holds regular events, it may be worth noting in your accounts which payments belong to which event (so you can later decide which events prove the most lucrative).

Treasurers Guide part 3 here…