Farm bookkeeping – hints and tips

With businesses generally VAT registered, the vast majority of our farming clients have already adopted modern cloud based accounting software for their bookkeeping, and most are maintaining it to a good standard.  However, there is usually at least some room for improvement and we list below a number of suggestions to help you keep the records in better order, more easily:

• Little and often: Instead of making a big job every quarter, please update the records at least once a month (and ideally more often). 

• Use a bank feed: Linking the business bank and credit card accounts to the software enables the statement transactions to be entered automatically, reducing your work and helping to keep the accounts reconciled. 

• Reconcile the control accounts regularly and correct any errors immediately:

  • Each time you receive a bank statement, run a bank reconciliation report and make sure the balance matches. If it doesn’t, find and correct the error(s) straightaway – the task will only get more difficult if it is left until next time.

  • At least a few times a year (and certainly at the year end), run an aged payables (creditors) report and an aged receivables (debtors) report and check that each supplier’s and customer’s account balance are correct. Again, if error is identified, this should be investigated and corrected straight away.

  • Where debtor or creditor balances appear incorrect, run an account transaction report to help identify misposted or duplicated transactions. 

• Call for help when needed: If you are unable to resolve reconciliation errors, please contact us for assistance. Remember that a stitch in time saves nine!

• Keep the coding consistent: Please use the same nominal ledger code for all transactions of the same type.  Even if it will require adjustment in the annual accounts, it is much quicker and easier for us to deal with a block of similar misposted transactions in a single code, than to have to correct the same transactions scattered throughout the nominal ledger.

• Record good transaction descriptions: Clear informative descriptions are invaluable in minimising our need to raise queries and/or inspect invoices when preparing the annual accounts.  For example:

  • For transactions involving livestock movements (eg purchases and sales), always please record the number and category of animals.

  • For other sales, always please record the quantity and product (eg ‘101,366 litres milk’ or ’65 tonnes wheat’).

  • For building repairs and improvements, please identify the building and summarise what was done.

  • For contracting, please summarise what was done (eg ‘silaging’ or ‘slurrying’).

  • For fuel, please identify whether it was DERV, gas oil or heating oil. 

• Use bank rules (judiciously): Deliberately set up bank rules can save bookkeeping work by automatically coding transactions. This is particularly useful for (eg) HP payments (to ensure that each one is allocated to the correct HP account) and for costs that do not require detailed description (eg monthly bank charges, bank interest, loan interest, etc).  But please be wary of using rules proposed by the software (which are sometimes inappropriate) or of omitting necessary descriptions.  Please contact us if you require help with bank rules.

• Consider uploading pdfs of your bills and invoices into the software. This is great for future reference and is an acceptable alternative to paper for long term document storage.  Uploading documents manually is slow, but various apps can help – including Hubdoc (which is included free with Xero Standard), Dext, and Auto Entry.

If you require any assistance or have any bookkeeping questions, get in touch with a member of our team.