Yet another accounting mess! Surely the proprietors deserve better support and service?

Another new client last week....and one of the worse messes seen for some time!

The previous accountants had prepared and filed company accounts for the first months of trading from September 2017 to 31 March 2018 in December 2018. However, running a trial balance now, the current figures in the cloud-based software bear little resemblance to the figures on the accounts. The previous agents did have access to the cloud software and posted some adjustments- no posting to share capital though, and they did not make sure the period was “locked” down to prevent further postings to that closed period.

10 months on from those accounts being prepared, and 18 months from the last accounts….the clients do not have the slightest idea where they stand, if they are making a profit, which departments might be running at a loss etc.

A big problem looms…turnover exceeded the VAT registration threshold in May 2018, but nothing had been done about it, so there are potential late registration penalties and all the other “nasties”. Turnover levels may prevent use of the flat rate scheme – so this presents lots of problems too….

The clients were using a sales system linked which didn’t link to their cloud accounting software. Therefore, sales were entered manually, and being so busy, the bookkeeping had fallen behind – the last sales data entered was January 2019.

They also used a system to scan and extract data from purchase invoices and push this data across to the accounts. However, the software needed each invoice to be marked as “paid”. This could have come from a bank, cash or credit card account but it had to have a posting for each invoice, yet some of them were batched and paid monthly in traditional purchase ledger fashion.

There are over 500 transactions in the bank which do not match to actual payments on the statements. No VAT has been extracted – not a problem if the VAT flat rate can be used, but a major problem if it cannot!

A “bookkeeper” is still being paid – no idea what she actually does!

Yes, the client has to take some of the blame for the mess – but this is a not untypical scenario – clients know and run their business but the accounting and record keeping and understanding the numbers is not their forte.

The outgoing agents do not appear to have taken any interest in the business and its development and growth – just another set of annual company accounts to file – take a trial balance and run it through the final accounts software to ensure they are in the right format for filing.  

Surely even a cursory review of the figures in December 2018 when preparing 31 March 2018 accounts would have identified many issues? A bit of advice on extracting funds from the company would not of gone amiss either!

How many businesses out there are run in a similar way? Far too often we see trial balances that contain absolute “rubbish” – the accounts are prepared by taking the movements in the balances and posting these movements into the final accounts software, with no attempt at making the figures on the internal accounting records agree to the “final accounts”. Drawings figures of over £1 million pounds raise alarm bells in most cases, but this might be an accumulation over many years!

Some clients are not prepared to pay for assistance during the year – but unravelling this mess is going to cost a whole lot more than regular accounting fees to keep on top of the records!

How often do you come across instances such as this?