Why an average bookkeeper is a liability (and costing you your sanity)

Bookkeeping mistakes
With end of financial year fast approaching, we see many clients come to us “for a quick and simple review” of their numbers. I mean, they currently use a bookkeeper and whilst the business owner doesn’t keep on top of things in great detail, it all must be perfect right?

In an ideal world yes, but I think we all know we live in anything but an ideal world. Most clients we speak to hardly ever run financial reports, wouldn’t understand what a Balance Sheet is if it bit them on the bum, and would have no idea how their BAS numbers are calculated.

“You could say that these business owners would be totally screwed should they face an ATO audit. Yep, up shit creek as we Aussies like to call it.”

So what is the point of my bookkeeper then I hear you ask?

Well great question and my question back to you would be, what qualifications does your bookkeeper actually have? You see if your bookkeeper is charging you $20 an hour as they are a friend of a friend, and they do not have a bookkeeping qualification I would want to know their experience levels (and being able to use a computer is not deemed bookkeeping experience).

If they are not a registered BAS agent, then they should not be lodging your BAS, they should not be running payroll and they may not have the skills and experience to understand GST legislation. If they are not an accountant, then I would question their ability to understand complex financial reporting. And if they are not a tax agent, they cannot advise on tax related matters.

The age old phrase of “you get what you pay for” is very true in the bookkeeping space. You see, anyone can wake up tomorrow and “say” they are a bookkeeper, but are they abiding by the strict legislation in Australia? Legislation which is put there to protect you as a business owner ensure your financial information is accurate and reliable.

Here are some bookkeeping errors we have seen just in the first 18 days of June alone, from business owners who “thought’ their bookkeeper was amazing:

  1. Bank accounts were not actually reconciled. You see, coding transactions from the bank feed in Xero is not reconciling the bank account. Nope. Not at all. You should still be running the required reports back to physical bank balances. This client had transactions dating back to 2015 which were still outstanding impacting 3 years of financial reports and tax returns (and yes, the tax agent is to blame here too, not just the bookkeeper).
  2. GST is not a blanket 10% on everything. Whilst we wish it were that easy, GST can be quite complex. Not every supplier is registered for GST, some overseas digital services now charge GST and some things are not reported on the BAS. Bookkeepers who just claim 10% GST on everything are opening you up to an ATO audit which will not be a pleasant experience if you have to backpay what you have incorrectly over claimed.
  3. Wages might not be wages. Say what? You see, wages need to be run via the payroll module of your software. Tax withholding needs to be considered and superannuation also needs to be considered. You can’t just hand over cash to someone who helped you, call it wages and wash your hands of the rest of your obligations. Sadly a business owner came to us and had reported wages from 2016 that was never reported to the ATO. This meant backdating payment summaries, issuing it to the employee, and the employee then had to amend her personal tax return leaving a sour taste in their mouth.
  4. Can anyone say suspense? And I am not talking about a viewing genre on Netflix. I am talking about an account in your Balance Sheet (you know the report you never read) which often acts like a dumping ground for things unqualified bookkeepers don’t know what to do with. But you see, if things are unknown, you either need to find out what the heck they are, or they are not business deductions. But suspense is not a free for all, it should clear to zero at the end of each month and certainly not be there at EOFY. Go on, run your Balance Sheet, see what other gremlins exist in there.
  5. Oh we will just claim it, nobody will know. If we had a dollar for every time a dodgy bookkeeper said this to a business owner, well we wouldn’t need to be running our own business, we would be sipping cocktails from some remote Jamaican island. You see, if someone unqualified to advise on tax deductions tells you something is claimable, chances are they are wrong. We have seen all kinds of things claimed, Thermomix’s claimed in a consulting business that then posted images on Instagram via their personal profile saying how they had made dinner for the kids, dresses bought to wear to a networking event, kids school fees put through as education expenses, and overseas holiday expenses where the business owner has clearly indicated it was a holiday via there 657 photos on their personal social media pages. The implication could be an amended tax return, amended BAS reports, looking like a fool not to mention the stress and financial implications.

“So, ask yourself this, is your business, brand and reputation worth hiring some shonky, unqualified bookkeeper to look after the finances of your business just to save a few bucks a month? “

The financial side of your business should tell you about your business growth, about performance (both good and bad), about your cash flow, when is the right time to hire staff, about your ATO obligations – it is the lifeline of your business.

In our minds, getting this right and having a qualified and experienced financial nerd on your team is worth its weight in gold.

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