Basic advice: Sage accounts

jimmo

OK, one last try and I promise to go away after this.
I totally agree with long forgotten that September is too long to wait for your book-keeping course. You really need to get a proper grip now. If you are talking about your Sage records when you say “I have the invoicing side of it under control, I've not got to grips with the outgoings side of it.” then I am afraid you are really out of your depth and are doing more harm than good.
In my “good old days“ it was not uncommon for someone to turn up at an accountant‘s office with half a dozen Tesco’s carrier bags full of receipts and expect the accountant to produce a set of accounts within a week. That was an impossible task but I always got the impression that the accountants preferred that to someone turning up with a half-baked set of accounts together with the carrier bags. Then they had to unravel the mess the client had created before they could really make any progress.
As computer systems became more widely available GIGO (Garbage in, Garbage out.) became a buzzword. Sage will do a job for you if you give it the full information.
At the moment you seem to be feeding it garbage and can only expect one result.
If you take the time to read other threads here and on other sites I think you will find that experienced businessmen will tell you that you really have to devote time every day to your financial records. That is an essential element in a successful business.
If your business started on 1 January 2007 (as suggested in your question to Elaine Wilson) you already have about 17 months of mess to be sorted out. How long will that take?
Sorry, but I feel compelled to ask this.
Is your business really a company or are you a sole trader?
If it is a company when did you register the company with Companies House and when are the company’s first accounts due to be lodged with Companies House?
Forums like this don’t really give the full picture so I could be way off the mark. I just get the feeling that whilst you could well be running a commercially successful business you really haven’t got a clue when it comes to red tape and taxation.

Debt_Free_Chick

danwednesday wrote: »

Say for example, I started my company from scratch on 1st January 2007 and I draw around £300 out of my business bank account every week to live on. (I know it shouldn't be drawn weekly as it's more admin, but this is just an example to help me understand.) I'm aiming to pay myself around £5000 in the year as a salary (the exact figure I'm not sure - it's basically the smallest amount possible to still get the pensions benefits) and the rest as dividends.

That salary figure equates to around £400 per month in wages. My total earnings from the company will therefore, hypothetically, be £20,600 (£5,000 salary, £15,600 dividends).

So, in Sage, I would enter the first withdrawal as a payment of £300 from the company to the director - with the nominal code for salary; then the second payment as two entries of £100 with nominal code for salary, and £200 with nominal code for dividend; then in the third payment as £300 with nominal code for dividend? So I'm marking the wage element and the dividend element with their appropriate nominal codes, yet transferring the money from my single business bank account in sage to my single directors account in sage?

Thanks again!

On day one, the bank account and the directors loan account were at zero. You then paid £x (call it £5k) into the current account. But this was actually a transfer from the DL ac to the current ac. I would have set up an opening balance of £5k in the DL ac and then processed a bank transfer to the current ac. Sage would then show that the business had an asset (cash) of £5k with a corresponding liability (loan) of £5k.

Did the business "own" anything else on day 1 - stock, equipment? Have you transferred any assets to the company e.g. PC, Car etc? If so, you need to enter those items as opening balances too. You'll also need an opening balance for the share capital too. As Sage uses double-entry bookeeping, each opening balance has a corresponding entry in the Mispostings/Suspens nominal ledger so you'll then need to do journal entries to cancel out them out.

To be honest, your accountant may well sort out the OBs for your accounts next year, but he won't put your Sage file right unless you ask him to and pay for it. The Sage file is a bookeeping tool and there's a difference between a bookeeper and an accountant Accountants generally expect to be provided with complete and accurate books.

Once you've sorted out the opening balances the salary you draw from the business is a simple transfer of money out of the current ac and in to the DL ac. This way, you will be able to reconcile the current ac to the statement. And you don't need to bother with the nominal codes for salary etc - it seems to me that what you're drawing is not salary, but repayment of the loan.

Pay attention to what Pennywise said in post #2 - you cannot simply call a payment to you a dividend. You can only pay dividends from distributable profits - so you need to be able to run your P&L from accurate Sage records - and you need a board meeting to authorise it. And you cannot go back, at the end of the year and say "oh, of that payment I had in June, we'll call that a dividend".

So .... everything you draw is salary. Unless you run the P&L, have the board meeting and authorise payment of a dividend.

And jimmo is spot on with this

As computer systems became more widely available GIGO (Garbage in, Garbage out.) became a buzzword. Sage will do a job for you if you give it the full information

At the moment, it rather looks as though there's a fair bit of garbage in Sage, as far as bookeeping is concerned.

If the business can afford it, I would be drawing a salary of £x (£400 seems to be the suggested monthly rate) AND odd repayments of the loan.

In this case, the amounts you draw as loan repayments are bank transfers from the current ac to the DL account. But the salary is a withdrawal from the current ac using the nominal code for salary.

Finally .... I suggest you find a local bookeeper ASAP (bookeeper, not accountant) and get them to help you set up Sage and perhaps give you a quick crash course in bookeeping.

Although the language is US this site covers bookeeping principles well. It's not specific to Sage, but it should help you understand the principles .... things like ...... what we would call a credit in a bank account (i.e. money in the account) is shown as a debit or Dr entry in the books

mustafa_say_ving

You've been given excellent advice here with regard to dividends.
Before you start issuing dividends you need to settle the company's debt to yourself( I'm trying to put this in the simplest way)

You've paid money into your company bank account from your own funds(Directors loan). So you need to set up an account in sage to deal with this.

This is a bank receipt (BR).( I use 1200 bank account current)

You need to set up a director's loan A/C and call it such. ( I use nominal code 2103 )

Example.

you loan your company £1k to start up and physically pay this amount into your business current account.

Now for sage!

click on bank receipt.

it should be imputted as.

Bank..1200
Date. whatever date you paid the funds into your business B/A
REF ( up to you what ref you use I suggest co.start )
N/C 2103
Details Directors loan for company start up ( Or whatever you choose to put)
Net 1000
T/C T9
Tax 00
press save.

That's it

See the little help button ( with the hand) I've found it invaluable, if you're doing say a bank payment and are unsure of how to do it press the little help button and it takes you through step by step!

mustafa_say_ving

Just to add.

Have a good look through your nominal ledger....I know when you first look at sage it looks like it's too confusing but really it's not, familiarise yourself with it.

When I chose my accountant it was important to my business that he had a Bookeeper ( I think most good accountants do.)

So now, if I need any help with sage I speak to the bookeeper.
Tax issues or anything else are directed to my accountant.

I know the sage instruction manual is daunting, but really it's not as bad as it looks!

jimmo

Debt Free Chick
I don’t normally register “Thanks” because I like to think I am giving advice rather than receiving it but I really struggled with my post at #12. Was it insulting to the OP or was it the truth?
I seriously believe that the original poster is way out of their depth but there also remained a nagging doubt that I was actually going off on one.
It was really reassuring to see your post.

inmypocketnottheirs

I agree exactly with what jimmo is trying to say.

To avoid costly and time consuming mistakes this needs to get sorted now.

Bookkeeping is not a subject one can just pick up and learn from forums, even ones as good as this. It is a precise science and a very worthy profession. Unfortunately a lot of people think they can do it. Bookkeeping for a sole trader is one thing, but for a limited company completely another.

Sage (in my 20 years experience of running businesses) does require some detailed accounting/bookkeeping knowledge. An initial mistake in setting the whole thing up can manifest its self in a huge and potentially expensive situation at year end.

A director of a limited company who has no accounting knowledge really should just keep detailed records and allow their accountant to do the Sage work, or recruit a part time bookkeeper (with Sage knowledge) and as a preliminary requirement detailed knowledge, experience and understanding of double entry bookkeeping. Without this your accounts will be totally worthless and completely wrong.

Anything else is a recipe for disaster.

Debt_Free_Chick

jimmo wrote: »

Debt Free Chick
I don’t normally register “Thanks” because I like to think I am giving advice rather than receiving it but I really struggled with my post at #12. Was it insulting to the OP or was it the truth?
I seriously believe that the original poster is way out of their depth but there also remained a nagging doubt that I was actually going off on one.
It was really reassuring to see your post.

Between us, inmypocketnottheirs and I are agreeing with you

I don't mind "plain speaking" - it's clear and avoids any misunderstanding

inmypocketnottheirs

Debt_Free_Chick wrote: »

I don't mind "plain speaking" - it's clear and avoids any misunderstanding

Me too, but doesn't it get you in to a lot of trouble!

danwednesday

Thanks everyone - I will seek assistance from a book-keeper - perhaps a morning of tuition as suggested above.

I have very good non-sage records of all of my incoming and outgoing transactions. The only thing I'm not 100% sure about is how to administer my outgoings in sage accounts. To say:

At the moment you seem to be feeding it garbage and can only expect one result.

isn't fair. I'm not inputting garbage, and am simply looking for advice on how to operate sage in such a way that I DONT input garbage. I wouldn't take such a cavalier attitude to my company accounts, hence asking for help now - before I get stuck in and make a hash of things.

I realise that I can only get so much practical help from forums and online documents, so will arrange to see a book-keeper asap to run through these things with me. I don't see any reason why this is beyond me - it's just a case of understanding the basic book-keeping principles and finding my way more thoroughly around sage. Once these things are understood it should be very simple to maintain.

Thanks again for all your pointers, it's been an interesting discussion.

longforgotten

Danwednesday, do not take the comments of 'garbage' to heart.

I have spoken to too many people that if you ask them 'do you know how to use Sage ?' they confidently answer yes . You then look at the Sage work they've done, and it is indeed garbage. The unfortunate thing is they do not realise that it is.

They balance their bank and think all is well. I look and find sales ledger receipts entered as bank receipts, suppliers payments entered as bank payments. New suppliers set up and they forget to change the default codes. The list goes on and on. The things you can slip up on are many...........

Now perhaps your work on Sage is not garbage and I wish you well, but just make sure you get help ASAP.