The point where spreadsheets stop working
Most small businesses begin with a spreadsheet, and for a while that is entirely reasonable. The failure point is rarely volume alone — it is the moment more than one person begins recording transactions, because there is no longer a single version of the truth.
Four controls
None of these require significant expenditure. All of them reduce the amount of reconstruction needed at year end.
- Monthly bank reconciliation, formally signed off, not simply reviewed
- Separation between the person who approves a payment and the person who records it
- A fixed monthly close date after which the period is not reopened without a note
- A defined chart of accounts, so the same transaction is coded the same way every time
Moving to software
Accounting software helps, but only once these habits exist. Migrating disorganised records into a new system produces an organised copy of the same problem. Set the chart of accounts and the close routine first, then migrate.
What good looks like
A useful test: within a week of month end, can you produce a trial balance that reconciles to the bank and a short explanation of the main movements? If so, the process is working, and tax and VAT obligations become straightforward reporting exercises rather than investigations.