With all the current hype of software companies promoting that a business owner can do their own bookkeeping or that accountants can do a business owner’s bookkeeping, engaging a well-qualified bookkeeper may seem like an unnecessary expense, but is that true?
Taking the risk on relying only on the skills learnt from a software course or bookkeeping prepared by an Accountant (who are more readily outsourcing their client’s bookkeeping to overseas bookkeepers), leaves you open to potential errors, the omission of entries and costing your business (you) money. With all due respect to Accountants, unfortunately, it is generally not appreciated that the Accountants and the Bookkeepers skills lie in totally different areas; a bit like the difference between a nurse and a surgeon. The surgeon is looking at the end results – a successful operation, where the nurse is making sure that the patient receives everything they need on a day to day basis.
Remember that starting up and running a business is one of the biggest decisions you’ll make in your life and if things go wrong, there can make an overwhelming impact on your business and family. Think about the level of expertise that you have that has enabled you to reach the point of starting your business. Your expertise is generally achieved as a result of not only the required qualifications but also the experience you have achieved over a period of time to be skilled at what you do. You may have had to prove that expertise to associates, clients, suppliers or business partners to ensure their confidence in you and your abilities to protect their interests. Engaging a good bookkeeper should be considered as a positive investment and like any investment, there are a number of key ways to ensure positive outcomes.
Qualifications and Experience
Find a qualified bookkeeper experienced in your type of business. A specialist will know what to look for, identify red flags and point you towards what you should be looking at. They’ll also help you with the early identification of issues e.g. Cashflow and make you aware of, and monitor your compliance obligations.
At a minimum, a good bookkeeper should carry out a health check on your existing database and review any loan agreements, lease documents, items on the Balance Sheet and identify items that may be missing from the Balance Sheet. You may be missing out on GST claims or claiming tax on items that do not contain tax or potential tax deductions if a bookkeeper without qualifications and an up to date level of knowledge has been processing your data. Understanding the correct allocation, coding and reconciliation of your data as a whole is vital to ensure that your records are kept accurately. You should always be fully transparent with your bookkeeper as it places them in the best position to be able to explain any specific recording requirements along with any specific obligations you need to be aware of.
Engaging a qualified bookkeeper
Engaging a qualified bookkeeper to review and maintain your accounting file can save you money in the long-term. Knowing your compliance obligations from the outset will help you avoid penalties, assist in planning to meet those obligations, and will provide information about things you may not have considered or realised will affect your profit margin.
A qualified bookkeeper will keep you informed about any upcoming obligations and be preparing for them. There are strict timeframes which require planning to avoid non-compliance penalties. Your BAS Agent can approach the ATO (with your authority) and arrange payment plans and negotiate possible refunds of penalties imposed where a legitimate submission is an option.
Make the most out of your qualified bookkeeper
Ensure your bookkeeper knows exactly what your expected scope of work is. They’ll tell you what is and isn’t included in their costs quote and will present you with a Letter of Engagement setting out those parameters so both you and your bookkeeper are on the same page.
A good bookkeeper will look out for your interests and partner with you to ensure your business is running smoothly. Take the time to speak with your bookkeeper and read and discuss reports presented to you by your bookkeeper. As you do this, highlight and make a list of questions about things you’d like clarified. Don’t dismiss these questions as “silly” – raising queries (however small) with your bookkeeper as they can often be a prompt for your bookkeeper to dig deeper about an item of which they may not have been aware and ensure that your best interests are being protected. Taking the time to do this will help to avoid entry errors or misallocation of data.
Your business partner
Finally, think of your qualified bookkeeper as a business partner, not just someone who does your books. They’ll be happy to have a chat about anything which may arise during the course of your day to day business. Whether you’re employing additional staff, selling or buying an asset, taking out a new loan, a qualified bookkeeper who knows your situation and history will be a valuable asset.
Following the implementation of GST in Australia, the ATO initiated research into bookkeeping in 2005 and an article was published in the Australian Financial Review in 2006 based on those findings which stated that it was estimated that ‘90% of bookkeepers in Australia were incompetent and unqualified’. This, of course, lead to the release of the first nationally recognised qualification requirements for bookkeepers and in 2010 the registration of BAS Agents. This should demonstrate why it is important to only use qualified bookkeepers in your business.
So again, think about the level of expertise that you have that enabled you to reach the point of starting your business and be successful at what you do. An unqualified bookkeeper is unlikely to have the skills needed to maintain your accounts correctly as was revealed in 2005-6 survey results. A qualified bookkeeper is far more likely have the knowledge, skill and expertise to do what they do best – good bookkeeping for your business.