Time for my soap-box again. As my clients know I have a fairly jaundiced view of computerised book-keeping. Today I will let readers know why.
Nothing pleases me more than a new client who comes to me because they have embarked on that wonderful and fulfilling journey into self-employment. But nothing depresses me more than them proudly announcing they have been out and spent hard-earned money on a computerised system for recording their transactions. (Rarely have they got to grips with it.)
Don’t get me wrong – there is a place for computerised books – in big business. In my opinion though, 90% of the UK’s businesses would have an easier life if they simply used paper-based books. Or maybe a simple Excel spreadsheet. Less time would be wasted.
Record the invoices raised, then list and categorise the money coming in and going out. Job done.
There are many reasons for my view that paper is often best, including:
- Money saved by not buying software.
- Money saved by not paying for upgrades and support.
- Time saved not learning the complex computer setup.
- No worries that the computer will crash.
- Time saved by recording on paper compared with computer
- Less paper used than all the printouts produced by software.
- Your accountant can see where you made mistakes.
- Your accountant can see where you made a change.
That’s probably enough to be going on with.
£15 spent on paper analysis books will probably last you 5 years, compared with much more for software, upgrades and support.
Why then do wise owls in the accountancy profession encourage clients to buy software? I can think of two reasons:
- Many accountants are ‘resellers’ of software. (They make money on the sale.)
- If their firm also has the same software THEIR life may be easier.
Notice I say your accountant’s life may be easier. If you have properly entered all your transactions and supply the electronic data to your accountant then his software may make preparing your accounts easier. Downsides to this include the fact that most people do not record all their computerised transactions correctly. Secondly the computer work takes them away from making money in the business – which is what business is actually about.
And all the while you are probably spending more time each week keeping the computer books sorted.
Using a simple paper-based bookkeeping system most UK businesses could do their books in 1 to 3 hours per week, if the books are kept up-to-date. (Payroll time would be extra.) If you or your staff are spending more time than that then computerised books may be doing you no favours.
Just in case you think I am a complete techno-phobe – I am not. I know all about the Interweb (as Jeremy Clarkson calls it), and I use computers all day for emails, accounts presentation, my YouTube tax training, research, social media, Tax Returns, letters and spreadsheets.
I mentioned above that payroll time would be additional to normal bookkeeping. Now here is a job well worth computerising. If you have one member of staff, maybe up to four, then the HMRC’s own free software may do all the sums you need. If however you have more staff then a cheap payroll package can save hours and loads of hassle. It does the sums and even prints out the forms P60 at the end of the year. Check out Qtach or PTP Software for a solution that will cost perhaps £150 per year.
Computers are for payroll, paper is best for the rest.
Buy a 7 cash column analysis pad for about £15 and you are ready to go. Read my article “Manual Book-keeping for idiots” for further tips on how to record the business activity.