Whether you have mountains of paperwork, don't have time to invoice or late in lodging your BAS, here are some signs that you might need a bookkeeper.
If you started your own business, it's likely that you're passionate about running your business and concentrating on the tasks you love doing. But, if you're like most business owners, you're not so interested in recording all the details of every financial transaction.
If you have a simple business in that you have a handful of clients that you contract to throughout the year, you may work at home, you have no employees and have minimal expenses – then you can easily manage your own bookkeeping needs either by using simple software packages like Xero or MYOB Essentials or even Microsoft Excel.
However, working as an accountant I see lots of small business people who are fantastic at what they do, but just don't understand the financial and compliance side of running a business, but they insist on doing it themselves in the effort to save money. In reality these are the people who:
- spend more money with their accountant at tax time because she/he will need to sort out any oversights or errors, correct what has or hasn't been done, or even worse still, reconstruct the business accounts so they are in a usable state.
- risk making mistakes, potentially breaking the law and in turn incur fines and penalties because they are genuinely unaware of regulations – for example the threshold at which they must register for GST, or the deadlines and requirements around paying their employee's superannuation.
- haven't had their accounting system setup properly or are repeatedly making the same mistakes – meaning their accounting system is not giving them an accurate picture of how their business is performing.
So when is it worth engaging a bookkeeper? This answer is different for every business. It is not solely about how much your business turnover is, but rather it's about your situation, your level of financial expertise and the complexity of the business. Some signs that indicate you need a bookkeeper include:-
- Are you too busy to invoice? When you get too busy to send out invoices then your cash flow will suffer and there is a risk you may completely miss an invoice altogether.
- Are your customers not paying or are they late to pay? Another sign is when your customers aren't paying their invoices on time or not at all. You may also not have the time or you don't want to chase them because you don't want to risk the relationship you have with them. Where possible it is a good idea to separate the face of the business with the debt collection process. It helps to maintain the client relationship you have, and keeps the cash coming in. Bookkeepers can assist you to keep on top of your collections process or set one up for you. Did you know software packages like Xero can automate some of this for you?
- Are you behind in your paperwork? In this case you are potentially missing claiming GST paid back from the ATO or deductions on your tax returns. Many people don't realise there are time limits on how long after the event you can actually claim. As well as missing claims, being behind in your bookkeeping can result in you making decisions based on figures that are incomplete or wrong, meaning you can't make educated decisions that you business depends on.
- Hiring staff? Regulations increase as soon as you take on staff. Some people believe that if you only hire contractors and not employees then the rules don't apply. In a lot of cases this is incorrect and every situation needs to be evaluated on a case by case basis – especially if your contractor only provides labour. Professional bookkeepers can advise you what your legal obligations are as they are required to be up to date with legislation.
- Are you lodging your BAS late? The ATO are getting serious about late lodgements, with fines of up to $850 for each late lodgement. If you are consistently late with your lodgements, then engaging a bookkeeper can pay for itself. Fines and penalties are not tax deductible – your professional bookkeeping / BAS or Tax agent fees are.