Too often we see examples of companies where the published accounts at Companies House bear little resemblance to the numbers in the client’s accounting software.
They should be the same.
How could they be different?
And what is the impact?
Here’s how
A company, it could be yours, does its own accounting in its accounting software and everything is seemingly working OK.
The company goes past its year-end and then sends off a copy of the accounting software file to the accountant or, in a cloud accounting world, the accountant logs in to the software in order to prepare the annual accounts.
The accountant, in their accounts preparation software, makes some adjustments – typically to do with bad debts, accruals, corporation tax, dividends etc. – and produces the accounts to be submitted to Companies House.
So far, so good, but the accountant should then make very sure that all of the adjustments are properly reflected in the client’s own software. If not, the client’s own bookkeeping is simply wrong.
Management accounts will be wrong, possibly VAT returns will be wrong and if this goes on for a couple of years then the discrepancies just get bigger.
If your management accounts are wrong then, to put it bluntly, you don’t know how your business is performing.
HMRC turn up for an inspection of the adequacy of accounting records (something they’ve started to do) and find that the accounts they have received with the corporation tax return are different from the records they’re looking at and it’s not a good start to their inspection!
Couldn’t happen to you, could it?
It is one of the first things we check when companies change to Blue Dot Consulting for their accounting work. Worryingly, more often than not there is a difference between the company’s books and the accounts at Companies House.
What can be done?
As more and more businesses adopt cloud accounting solutions we should see this problem less often.
But you should insist that your accountant either:
- sends you the list of adjustments that need to be made to your books along with instructions for how to make them or
- logs in to the accounting software and make them directly
Get your accountant to take responsibility for ensuring that your books agree to your published accounts. After all, it should be part of the service they have asked you to pay for.
It seems this is not always happening. Go and check yours now!
Michael – @bluedotmichael
www.bluedotconsulting.co.uk
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