The Office, a US-based sitcom, saw a new accounting function created just so the TV show’s accountant, Kevin, could get home by seven.
Keleven is what he called it, a magic number that he created to balance the books so he could leave early.
While Kevin’s approach made for good comedy, this isn’t the right step to take to balance the books in your business and getting expert accounting support could help ensure your numbers are accurate.
How to avoid a Keleven situation
While Kevin got let go for his new approach to accountancy, there are some ways to avoid a Keleven situation entirely.
In order to efficiently balance the books, businesses should:
- Keep a record: Every sale, customer payment, vendor bill and bank fee should be logged into accounting systems or ledgers.
- Separate accounts: Business and personal bank accounts should be kept completely separate to avoid missed or mixed-up entries.
- Prepare statements: Every bank statement, credit card statement and supplier statement for the accounting period should be collected.
- Reconcile accounts: The process differs for both cash and credit accounts. For cash accounts, businesses need to check the bank statement balance against the book balance. They should be adjusted in accordance with deposits, outstanding checks and interest until both sides match. For credit accounts, businesses should check credit card statements against recorded expenses and match them to the accounts receivable and payable against the ledger.
- Review: If there are any uncategorised or mixed expenses, they should be fixed and entries should be adjusted.
- Create reports: The profit and loss statement and balance sheet should be run to ensure that your books are balanced.
Regularly ensuring that your books are balanced allows businesses to identify areas that are performing well, as well as those that may need more attention.
What is the importance of having balanced books?
While balancing the books may seem like quite a tricky task, it is one of the most important things a business owner needs to do.
Balancing the books allows businesses to detect errors. If there are any missing entries, data mistakes or errors, balancing the books efficiently allows errors to be spotted before they evolve into bigger issues.
Additionally, balanced books allow records to be ready for accurate reporting to HMRC and Companies House.
Should your business’s accounting records be inadequate, HMRC can impose civil penalties ranging from £250 to £3,000 depending on the failure and whether it is considered to be deliberate.
In some extreme fraudulent cases, directors can face prosecution, unlimited fines and a criminal record.
Having correctly balanced books allows businesses to have a clear overview of their financial health, allowing them to see true cash flow and debt capacity.
How can an accountant help?
A Keleven might be a quick (and illegal) fix to unbalanced books, but with the support of an accountant, a Keleven isn’t needed.
Getting support from a professional accountant means that you do not have to worry about the stress of balancing books. Instead, you can focus your efforts on what you do best: running a business.
Our team can support you with recoding transactions, logging in ledgers and reconciling accounts so that you can certainly be out of the office by seven.
Get in touch for support that helps you to get out of the office by seven without sacrificing the quality of your accounts.