Bookkeeping, it is a chore that most family business owners have to submit to on a regular basis.
Tired, drained, worn out, after a busy day of “real” work. Is it BAS time again and you are a few months overdue with your bookkeeping? Sound like you? It might be time to consider hiring a bookkeeper.
What can a bookkeeper offer your business?
A professional bookkeeper can offer you more then just data entry to satisfy ATO requirements. They can keep you informed about what is happening in the wider business community. One of the most common mistakes when hiring a professional bookkeeper is not taking full advantage of their experience and knowledge. A bookkeeper talks to many business owners and accountants. Ask them for tips of how other clients do their advertising, source referrals or reduce their costs. You will be surprised by the answer.
Did you know there are different types of Bookkeepers?
Not all bookkeepers offer the same services. Good bookkeepers should be skilled in:
- Basic data entry into a computerised system such as MYOB or QuickBooks. (A good bookkeeper will be familiar with both systems).
- Keeping track of your sales invoices and customer payments. They should tell you when your customers are not paying on time. (By not paying you for 60 or 90 days your customers could be using your money to fund their holidays).
- Keeping track of your purchase invoices and tell you when to pay your bills. (If you have 30 days credit terms why pay sooner? Or make sure you get that prompt payment discount).
- Payroll, they should keep track of sick and annual leave accruals as well as superannuation and payroll tax. There will not be any excuses for your staff not to have a payslip.
- Budgeting, they should help you to set up a budget and every month run a report comparing your actual figures to budget. Remember to identify areas for improvement and act on them.
How do I know if my bookkeeper is going to do the job correctly?
This is one of the common asked questions and there are many ways to answer this dilemma. Some general rules are:
- Define what duties your bookkeeper must perform.
A good bookkeeper should provide you with a clearly defined scope. Ask them to give you an engagement letter outlining all their services. It will help you in deciding if your future bookkeeper really understands your business and your requirements.
If you do not have some set standards for your bookkeeper, you have nothing to measure them by. Remember, you can only manage what you can measure.
For example, some business owners require their bookkeeper to do bank reconciliations within 7 days of receiving the bank statements. They also want to see management reports soon after, to make crucial business decisions.
You should also have a complete copy of the bookkeeping file at the end of every accounting period (end of month).
After two months ask your accountant to have a look at the bookkeeping file. They can automatically tell you if there is a problem.
Gain more out of your Bookkeeper.
A good bookkeeper will help you in implementing business systems and procedures. If you have a problem with late payments get a formal system in place. (Write it down). When debtors are more then 30 days overdue the bookkeeper should call the customer and ask them if they misplaced their copy of the invoice. Follow up with a more formal phone call in 7 days. Once the debt reaches 60 days use the services of a debt collection agency. I know it sounds rough, but managing your cash flow is one of the most important aspects of running your business.
With a consistent person performing all the financial recording you will get reliable and accurate financial reports. You will be free to run your business, focus on delivering a high quality product, knowing that your financial health is taken care of.
What are the signs that your bookkeeper may be setting up a potentially business-life threatening situation?
The number of ways a bookkeeper can wreak havoc on a company and its financial life are many. The following check list are some of the more common danger signs that your bookkeeper or accounting department may be heading your company toward trouble. If you answer yes to any of these questions the time to act is NOW, before any (or more) harm is done.
- Are your financial statements always slow to be prepared?
- Are your financial statements more than two periods behind?
- Is your bookkeeper’s office and work area seldom organized so that no one could determine what the status of the work is?
- Are your bank reconciliation’s not in written form and not prepared for every bank statement period for every bank account?
- Are your bank reconciliation’s showing a balance different from those on your financial statements or general ledger?
- Do your accounts receivable or payable aging or listings reflect an amount different that those shown on your financial statements?
- Does your bookkeeper refuse to take any time off?
- Does your bookkeeper try to keep others from knowing what they do or how they do it?
- Does your bookkeeper continually cart files and company records home to work on them?
- Do your computerized accounting reports consistently contain hand written corrections and notations.
- Do your customers frequently complain about payments not properly posted to their accounts?
There are many other symptoms as well. And, for each of these questions, there are some very important potential problems that need to be addressed right away. So, if you’ve had a few, or even one yes answer, you should start to evaluate why. If needed, ask for help from your CPA.
Could your bookkeeper be “helping themselves” to your hard-earned money?
One of the most distressing situations in which we’re called on to consult is one where a trusted bookkeeper, “one of the family,” has been discovered stealing. It can happen at any time, to any company. Your best protection of course are proper controls and supervision. But, even with all the controls and supervision, a determined and dishonest bookkeeper can get away with some amazing schemes.
While these are very similar to the questions you ask yourself when evaluating how your bookkeeper is performing, they can be a real red flag of potential asset threatening problems.
- Has your bookkeeper asked for signature authority on your checks?
- Does your bookkeeper frequently make telephone transfers from your bank accounts or credit lines?
- Does your bookkeeper’s lifestyle seem consistent with their earnings?
- Does your bookkeeper frequently take records home to work on or work in the office when no one is around.
- Does your bookkeeper refuse to go on vacation?
- Does your bookkeeper seem to resent or get defensive when your CPA asks questions.
- Does your bookkeeper have access to your credit card information and receive mail-order packages at work?
- Are your accounting records in a mess?
- Do you receive frequent tax delinquency notices that the bookkeeper explains away as government error?
If you answer yes to any of these questions don’t panic. Chances are there is a perfectly reasonable and acceptable explanation. But, don’t ignore the symptom either. Talk with your CPA and carefully evaluate the situation. You may only need to put some additional controls in place for your company.
Let your bookkeeper help pay their own wages!
Now, we don’t mean they will actually cut you a check. But, if you set up your accounting properly and let your bookkeeper be a part of your team you should be able to eventually see your bookkeeper as a “profit-center.”
Here are a few tips that will help you do just that.
- On a regular basis take your bookkeeper to lunch and ask them what they would do differently in the company. Not just in the accounting area but other areas as well. This is the time to be a great listener, don’t take over the conversation.
- If you are not sure how an aspect of your business is doing, ask your bookkeeper if they can think of a way that it might be put into a financial report. Remember, you can manage what you can measure. Let them put their talents with numbers to work on your problems.
- Make sure your sales manager and bookkeeper meet periodically. This will let the bookkeeper understand what key information the sales manager needs and build a team bond.
- Have your bookkeeper meet with your CPA at least annually (although I prefer a minimum of twice each year) to discuss the bookkeeper’s view of your business challenges.
- Assign a few of your expense items to your bookkeeper to analyze and find out how they can be reduced. Offer a small incentive for a reduction.
- Send your bookkeeper to at least one professional education course each year.
- Let your bookkeeper participate in company incentive programs even if it is not accounting related. For example, they will have great incentive to make sure that management has the accounting information they need to succeed if they get a small part of the sales’ department bonus program.
There are dozens of ideas that you can add to this brief list. The key is to use your imagination.