Does An Accountant Actually Need My Bank Statements?

[CluelessBusiness]

Hi,

I started selling to make a profit in April 2020. I've yet to register as a business and don't really know where to begin. I've tried to submit my taxes myself several times, but have simply given up because I'm not sure what the "right" answers to the questions are.

My accounts are a mess, mixing personal and private transactions, making it extremely difficult to clear the accounts up using something like Quickbooks, as there are thousands of them.

However, I've kept an excel spreadsheet up to date with all of my purchases and sales, profit etc.

Would it be possible to simply give an accountant this excel information, or would I need to go through my entire bank statements and cross out personal transactions?

 

[UK Contractor Accountant]

I usually ask for bank download for the year in CSV or excel format.

Then I just check that the business income and expenses have all been recorded on the clients spreadsheets.

Sometimes clients miss income/expenses of their records!

 

[Assistant Advice]

I think you would need to identify on the spreadsheet what is business and what is personal - either stroke out personal or highlight business - whichever is easiest. Going forward you should really set yourself up with a separate bank account and use it only for business transactions.

I do agree with you that trying to do your own accounts means that you might miss out on some allowances. I always get my accounts done by an accountant.

 

[CluelessBusiness]

I think you would need to identify on the spreadsheet what is business and what is personal - either stroke out personal or highlight business - whichever is easiest. Going forward you should really set yourself up with a separate bank account and use it only for business transactions.

I do agree with you that trying to do your own accounts means that you might miss out on some allowances. I always get my accounts done by an accountant.

My excel spreadsheet is only business transactions. It seems like I have all the relevant information, it's just not in a format many accountants want e.g. A bank statement.

I was really hoping there was a better way to do this than to manually cross out 3,000+ transactions. I've spent a week on it so far and I've barely made a dent.

I know I need to be signed up for VAT and worry that in the amount of time it's going to take me manually go through my transactions my fine will only grow larger.

 

[NicoJ]

The accountant doesn't necessarily need to go through all the bank statements. You may have spent more time than you needed to, but if you are confident that the spreadsheet is correct and you have backup paperwork then this should be sufficient to prepare a set of sole trade account.

Engage an accountant sooner rather than later and they will advise you of the best way to get everything up to date and running more smoothly in the future.

 

[WaveJumper]

Out of interest I note you say “I started selling to make a profit in April 2020” and you have thousands of sales, are we just talking one year here or did you start this business much earlier and now you are making a profit have decided to register?

 

[bodgitt&scarperLTD]

Any accountant should be able to work from a spreadsheet. If not, and they are insisting on you using their white label accounting software, then find a new accountant.

When you give an accountant the authorisation to submit the agreed accounts to HMRC, you will also sign a disclaimer acknowledging them to be a true account of your business dealings.

 

[Lisa Thomas]

You need to open a business bank account and start using it for the separate business transactions asap so you won't have this issue in future.

 

[MyAccountantOnline]

Hi,

I started selling to make a profit in April 2020. I've yet to register as a business and don't really know where to begin. I've tried to submit my taxes myself several times, but have simply given up because I'm not sure what the "right" answers to the questions are.

My accounts are a mess, mixing personal and private transactions, making it extremely difficult to clear the accounts up using something like Quickbooks, as there are thousands of them.

However, I've kept an excel spreadsheet up to date with all of my purchases and sales, profit etc.

Would it be possible to simply give an accountant this excel information, or would I need to go through my entire bank statements and cross out personal transactions?

If I was doing your accounts I'd want to see your bank statements and your Excel sheets. I'd work from the bank statements using the Excel sheets for reference.

I've been an accountant for a very long time and with respect it is very rare for a spreadsheet to be accurate.

You may also find that your accountant will spot expenses on your bank statements which you weren't even aware could be claimed as business expenses.

My advice - get the mess sorted asap it'll only get worse.

Going forward you'll save yourself a lot of time, hassle and money by having a separate business bank account and using some decent bookkeeping software to record your income and expenses.

A good accountant can help you get it sorted and don't worry all accountants will have seen worse, and a few of us probably still remember the days of clients dumping off carrier bags with bank statements, cheque stubs and receipts!

 

[Ozzy]

If I was doing your accounts I'd want to see your bank statements and your Excel sheets. I'd work from the bank statements using the Excel sheets for reference.

I'm interpreting that the OP has used their personal bank account for their business which is why the reluctance to pass the bank statements to an accountant, so if you was working through their bank statement you would also need to distinguish from what is a personal transaction (such as fuel) and what is a business transaction (such as fuel).

You need to open a business bank account and start using it for the separate business transactions asap

@CluelessBusiness You need to do this ^^^ as soon as possible.

 

[MyAccountantOnline]

I'm interpreting that the OP has used their personal bank account for their business which is why the reluctance to pass the bank statements to an accountant, so if you was working through their bank statement you would also need to distinguish from what is a personal transaction (such as fuel) and what is a business transaction (such as fuel).

@CluelessBusiness You need to do this ^^^ as soon as possible.

Yes that's what I interpreted it to be too.

It's not unusual for people to do especially when they start a business.

It does create a lot of extra work for an accountant when people use bank accounts for business and private transactions, and don't use any software, but unless the accountant sees the bank statements they cant be certain the accounts will be correct, that all expenses have been claimed, and that no more in tax than is legally due is paid.

With expenses such as fuel (if you aren't claiming HMRC approved mileage rates) you'd record all fuel and motor expenses paid and then apportion the total for the year based on business mileage, you don't actually split each amount paid for fuel.

 

[Energise Accounting]

In a nutshell. Yes, they do to reconcile everything properly and accurately. Spreadsheets normally contain too many errors.

 

[Spur Support Services]

One of the first things that HMRC would want to look at would be your bank statements, so your accountant is naturally wanting to ensure they are looking at the same data. Therefore bank statement data is required, but you don't have to give hard copy statements. You should be able to download the data into ofx or csv format for the entire accounting period, that an accountant can then upload into their software.

Online accounting systems such as Xero are designed to automate the process for generating postings and with tools like Hubdoc, you can remove the need for paper files of invoices at no extra cost, plus with the addition of . Definitely worth looking at to allow you to have information on your business performance throughout the year. Ask you accountant on their preferred software.

As you indicated that this is the first year that you have made a profit, my mind immediately jumps to the question "does that mean you generated losses in previous years and have they been utilised effectively". Definitely a question to revisit with your accountant.

Finally, if you are still using your personal account for business banking, then perhaps have a look at the low cost Business Banking options such as Tide Banking, which has a simple set up, no monthly bank fees ever and, with partner code SPURSUPPORT, 12 months of free transfers (bank transaction fees). in todays world where you can transfer money instantly between banks using mobile apps, the need to have a single account is much less and being able to keep your private affairs separate is much more comforting.

 

[CluelessBusiness]

I'm interpreting that the OP has used their personal bank account for their business which is why the reluctance to pass the bank statements to an accountant, so if you was working through their bank statement you would also need to distinguish from what is a personal transaction (such as fuel) and what is a business transaction (such as fuel).

@CluelessBusiness You need to do this ^^^ as soon as possible.

This is basically the issue in a nut shell.

I buy a huge amount from Amazon, some of it business, some of it personal. Is that £5 on packaging tape or on tooth paste? There is no way for an accountant to know that, which leaves it up to me to cross off the statement.

I'm happy to give an accountant my bank statements - my concern would be that an accountant wouldn't gain an accurate image of the situation or, to be blunt, do a good job.

If I buy an item for £500, it's faulty, I return it for £500 1 month later then that looks like £500 in revenue and £500 in loss, which in fact it should be excluded. Will the accountant know this? No. This is a problem when I'm over the VAT threshold and would be expected to pay the 20%.

I was just hoping to avoid the hassle and leg work of crossing out all these personal transactions.

 

[Energise Accounting]

You are supposed also give your accountant all the other relevant documentation as well. Any good Accountant will not work off the bank statement alone. You have already been advised on the best way to proceed and that is to have a separate bank a/c ASAP for you business.

Now you have acted in this way if HMRC were to investigate you will have to show them your personal bank a/c statements.

 

[CluelessBusiness]

You are supposed also give your accountant all the other relevant documentation as well

Like what?

 

[Energise Accounting]

E.g., for every purchase made by the business there will an invoice or receipt except for maybe something like bank charges however, they will be obvious.

For every sale made there should be a record kept. e.g., invoice, till readings or sales reports off eBay etc.

There will be also records of returns for both sales and purchases. You should also let your accountant see details of any loan agreements and lease agreements you have signed.

Therefore, you should never mix business with personal it takes a lot longer for your accountant to sort and reconcile everything.

Although you don't see it your accountant will reconcile everything in the bank statement to what is known as a prime document. Then from there make a series of adjustments then calculate the various taxes due to HMRC and submit the various returns and produce the various reports.

Quite a bit of work goes into completing an accurate set of Accounts which many business owners are not aware of.

 

[bodgitt&scarperLTD]

This is basically the issue in a nut shell.

I buy a huge amount from Amazon, some of it business, some of it personal. Is that £5 on packaging tape or on tooth paste? There is no way for an accountant to know that, which leaves it up to me to cross off the statement.

I'm happy to give an accountant my bank statements - my concern would be that an accountant wouldn't gain an accurate image of the situation or, to be blunt, do a good job.

If I buy an item for £500, it's faulty, I return it for £500 1 month later then that looks like £500 in revenue and £500 in loss, which in fact it should be excluded. Will the accountant know this? No. This is a problem when I'm over the VAT threshold and would be expected to pay the 20%.

I was just hoping to avoid the hassle and leg work of crossing out all these personal transactions.

If you are buying for business and personal through ebay or Amazon, there's no way around it- you need to go through your Amazon or eBay history and enter the data manually into your spreadsheet. You don't pay your accountant to be the bloody bookkeeper- you pay them to deal with HMRC. Bookeeping is donkey work.

Spreadsheets are great. They allow you (if required) to drill down to much greater levels of detail than any 'small business accounting software' , and I personally find them far more user friendly. They are, for the main part, designed so that your average builder can 'do their own books'. The other benefit is that your accountant can have real time access.

The main caveat with a spreadsheet is to get your accountant on board, and file the data into the categories they require.

I turn over around £150k per year through a personal account. Totally legal as a sole trader.

 

[Energise Accounting]

We do take clients who do their own bookkeeping however, they must take responsibility for it that is made clear from the start. However, I would say 95% of them choose us to do it for them as it is pretty much all automated now, and they don't save an awful lot of money.


However, using spreadsheets and your personal account will certainly take more time for an accountant to do their work and will further complicate things if VAT is involved.


people often moan about Accountants fees but the more work you create the more it is going to cost. At the end of the day, you can keep your records using a pen and paper if you wish. The choice is ultimately your own.

 

[NicoJ]

Whilst I echo the advice about a separate business account and appointment of an accountant I, with the greatest respect, disagree about the bank statements issue.

If, as I suggested you have a spreadsheet with backup paperwork then the bank statements are largely irrelevant. HMRC don't automatically have the right to your bank statements (although the fact that you have used your personal bank makes it easier for them to request).

A good accountant will make you aware of the risks and advise you of better record keeping going forward but shouldn't insist on reconciling the bank if you told them it was mostly personal.

 

[Energise Accounting]

I have never came across a client who would not send me bank statements. I offer them the free advice with the initial consultation.

I can't for the life of me understand why you wouldn't share this info. You most certainly will if HMRC knock on the door.

But if a client was insistent on not providing the info we would have to go our separate ways.