Whether you are lodging BAS late or don’t have time to chase debts, here are five classic signs that you might need a bookkeeper. Do any sound familiar?
Most people start a business because they are good at something – be it plumbing, photography or designing – and not because they’re good at paperwork.
If you have a simple business – by that we mean you contract to a handful of clients throughout the year, work at home, have no employees and minimal expenses – you can absolutely manage your own bookkeeping either by using simple accounting packages such as MYOB Essentials or even Microsoft Excel.
However, as an accountant I meet lots of small business people who are fabulous at what they do, but just don’t “get” the compliance side of running a business. Yet they insist on doing it themselves to save money. The reality is that it is these are people who:
- end up spending more money with their tax accountant at tax time because he/she will need to sort out what has or hasn’t been done and fix their accounts, or worse still, reconstruct them so they are in a usable state.
- risk breaking the law and incurring fines and penalties because they are genuinely unaware of regulations – for example the threshold at which they must register for GST
- lack integrity within their accounting system because they either haven’t had it 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 actually performing.
So when exactly does it become worth hiring a bookkeeper? This is different for everyone and every business. The answer is not how much you turnover, but rather it’s about your situation, your level of financial expertise and the complexity of the business.
- You are too busy to do your invoicing – We’ve all heard the mantra ‘cash is king’. The minute you get too busy to send out invoices then cash flow will suffer and there is a risk invoices may be completely missed altogether.
- When customers aren’t being chased for money – Another key sign is when your customers aren’t paying and you don’t have time or you don’t want to chase them because you don’t want to risk the relationship. Where possible it is a good idea to separate the face of the business with the debt collection – the old good cop/bad cop. It helps keep the client relationship warm and fuzzy yet keeps the cash coming in the door.
- When things become more complex – When you hire employees or sub-contractors you are entering a whole new realm of business. The regulations increase exponentially as soon as you take on staff. A frequent misconception is that if you only hire contractors and not employees then the rules don’t apply. This is far from true and every situation must be assessed individually – especially if your contractor only provides labour. Professional bookkeepers will be up to date with the legislation and can advise you what your legal obligations are.
- If you are really behind in your bookkeeping – 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 stipulating 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. In this situation you can’t make educated, informed decisions – decisions that the future of your business may be depending on.
- If you are consistently late lodging BAS or tax returns – 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 – professional BAS agent’s fees are.
Originally published at Business IT