How to spot a good bookkeeper

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As you get bigger, you employ more and more specialist staff. Until you get there, you need people with all-round competencies. This checklist is designed to help you spot what you need when there’s only one person looking after your books.

A really good bookkeeper is someone who :

 

 

  1. Can reconcile a bank account;
  2. Can do a VAT return and reconcile it;
  3. Keeps neat, methodical, self-explanatory records;
  4. Keeps paid and unpaid bills very separate;
  5. Reconciles supplier statements to your accounts;
  6. Can code up transactions meaningfully;
  7. Knows the accounting software well;
  8. Can do credit control;
  9. Can produce a trial balance and summary profit and loss and balance sheet, including accruals and prepayments, and do so soon after the month end;
  10. Acts to resolve the issues they uncover.

Many of these things will be demonstrated together : e.g. (1) and (3) combine to give a clear history and excellent evidence if ever your bank makes a mistake (not that they ever do. Do they ?!)

If reconciliations are not made regularly, then your financial statements are worthless. This is a giant killer and has brought down huge companies and banks. Your bookkeeper should have reconciliations for every item in the balance sheet and be able to explain them.

Having such a person will reduce your audit and tax bills, because your accountant’s job will be much easier.

As an aside, the list doesn’t mention spreadsheet skills. These are good to have, but spreadsheets are dangerous. Even in competent hands, it is very easy to design-in errors. Good spreadsheets have lots of checks built-in. Lots. So look for spreadsheet skills too, but treat any spreadsheets with extreme caution, no matter who produced them.

 

The same list with a little more detail, to help when interviewing.


When you ask a potential employee “Can you do x ?”, some will say yes, confidently. Some of them will be saying what they think you want to hear, so this is designed to help you ask “Explain x to me ?” and distinguish them better.

A good bookkeeper is someone who :

  1. Can reconcile a bank account. That is, can produce a clear list, itemising the differences between the bank statement and the record of the bank in your accounts, for a specific date. The most important thing of all is having someone who can tell you why your bank balance is £950,000, but the accounts show you have only £17,000 to spend;
  2. Can do a VAT return and reconcile it to the accounts. Done properly this will zero the VAT payable and VAT receivable into one separate VAT payable (/ receivable) account. This separate account should agree exactly to the amount showing as due to/from the VAT man. An amazing number of companies get into a mess with the VAT. The reconciliation is a basic control to catch it early and fix it. If it doesn’t zero to the number on the return, there is something wrong. The VAT man is someone you really, really want to keep happy. Also, when the system says you owe the VAT man £75,000, you need to be able to trust it. A good bookkeeper will save you money and rescue you from grief;
  3. Cares about keeping neat methodical records; payments separate from receipts, a clear document explaining each (e.g. invoice for each payment, invoice instruction/record of despatch for each sale), each document uniquely numbered so that you can go from records to document or vice versa;
  4. Keeps paid and unpaid bills separate, with obvious records on paid bills to show they are paid e.g. date and cheque number or (electronic payment run number) in red pen in the same corner on each. A quick flick through the "unpaid" file will give you an at-a-glance assessment of how much is owing and the file makes it easy to find the source for anything you query on the Aged Creditors listing your bookkeeper gives you.  Be very wary of "copy" invoices. You will pay that supplier twice for the same thing.
  5. Reconciles supplier statements to your accounts. It is relatively common for invoices to be paid twice, and there are companies that rely on ambiguous second copies and statements to receive duplicate payments. Oddly enough, they don’t bother to mention mistakes to you. Then there are credit notes which don’t get offset or refunded. A good bookkeeper will systematically prevent most “sillies” happening and highlight those that get through the net. It happens in all companies, big or small, so don’t think it doesn’t happen in yours.
  6. Develops a feel for your business, so they can code up transactions meaningfully. By this I mean that they can categorise payments and sales into where they belong in the accounts, so that the accounts make more sense. If they are really good, they’ll also know which items need to be kept separate because the taxman wants them reported separately.
  7. Knows their way around your accounting software, such as how to back-up, where and which reports to produce. Will understand double-entry bookkeeping and the relationship between debtor, creditor and general ledgers; reconciles any separate manual /electronic sales system to the sales recorded in the accounts. (Are you billing all the work you do ? It happens. A lot.)
  8. Can do credit control. Understands the importance of sending statements, followed by a red reminder letter, followed by a seven day legal notice. Can prioritise from an Aged Debtors list and get on the phone to ask “Is there any problem with our invoice ?”. Keeps a note of the answer, date, time and contact person. After a suitable interval, follows up and , if necessary, gently reminds the contact person of what they said last time. Is not afraid to go legal;
  9. Can produce a trial balance and summary profit and loss and balance sheet, including accruals and prepayments, and reasonably soon after the month end. Before they do, they make sure that they have reconciliations and explanations of every item in the trial balance. This is someone who is reaching into the next level up : management accountant/financial controller;
  10. Acts to resolve the issues they uncover e.g. things found when reconciling. Now you know you’ve found a true diamond.
Last modified on Friday, 01 November 2013 15:44
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