The Single Service Provider Concept – 8 Reasons Why Your Accountant Should Manage Your Business’s Bookkeeping

“I obsess about my bag. I keep it meticulously organised, and I make no apologies for this. The bag is my briefcase, suitcase, toolbox, lunchbox, and palette. I need it just right, always” – Andre Agassi

I thought it would be appropriate to start this blog with an insight from one of the sporting greats as it highlights a big idea that has relevance within an accounting context.

Similar to Andre Agassi’s tennis bag, your business’s accounting records are also a valuable tool which should be used to for smart tax planning, monitoring your business’s performance and setting financial goals.

To reap the greatest benefit from this tool it is essential that you keep it properly maintained and “meticulously organized”!

As an accountant and business owner I’m very passionate about this principle and I’ll give you a bit of a brief background as to why I feel so strongly about this.

I’ve worked as a tax accountant for 8 years now and before starting The Tax Desk in 2014 I worked in a number of public accounting firms.

While working in these firms I handled many client files, many of which were a complete mess from a record keeping point of view due to poor bookkeeping practices. This was frustrating because it meant that rather than providing the client with real value (i.e. the expertise of a tax accountant) I spent the majority of my budgeted hours doing a massive clean-up job on an untidy set of accounting records.

The large volume of messy files that I dealt with during these days could be largely attributed to the traditional arrangement that many businesses have of separately hiring a bookkeeper (who is not a qualified accountant) to manage the books and a tax accountant to review the business’s file after year end and prepare a tax return after making various adjustments to the file.

These experiences prompted me to start The Tax Desk because I believed that the clients deserved much more from their tax accountant.

My concept was simple and it flipped the traditional model on its head!

Why not have your tax accountant manage your bookkeeping so they can get it right the first time and not have to spend hours doing unnecessary work that adds no value to your business (and higher costs)?

i.e. The Single Service Provider Concept!

In this blog I’ll discuss the 8 reasons why you should have your tax accountant manage your bookkeeping.

1. The correct tax treatment of transactions and an awareness of the broader tax issues affecting you business

When completing the bookkeeping it is essential that all transactions are treated correctly for income tax purposes and that the bookkeeper has an awareness of the tax issues that may arise from certain types of transactions.

Some common transactions that need to be accounted for in a certain way and that also give rise to tax issues include the purchase of new equipment (e.g. depreciating assets), making prepayments (e.g. such as insurance), the provision of non-cash benefits to employees (e.g. fringe benefits), hire purchase payments (e.g. such as for a motor vehicle) and personal drawings made by the business owner from the business bank account.

The examples mentioned above are not exhaustive and the key point here is that if your bookkeeping is being managed by a knowledgeable tax accountant they will have the skills  to keep your accounts in order for tax purposes as well as advise you on how to best address any tax issues that may arise.

2. Accounting for GST correctly

For each transaction that gets processed through your business bank account consideration must be given to how to treat the transaction for GST purposes (if your business is registered for GST).

Not all expenses will include GST (e.g. some government payments, bank fees), some expenses may only include GST on part of the amount being charged (e.g. insurance premiums) and in some cases a cost that you incur may include GST but you will not be allowed to claim the GST credit (e.g. non-deductible entertainment costs).

When these issues are understood and the GST rules are applied correctly then the  reports produced by your accounting software will be accurate and you will be able to confidently rely on them when preparing your next BAS.

3. Get the figures on your BAS right – Prepare a Balance sheet to BAS reconciliation

Following on from the previous point another important practice that needs to be performed when preparing your BAS is that your bookkeeper should always prepare a balance sheet to BAS reconciliation for each BAS period. Doing so will ensure that you are reporting the correct figures on your BAS.

Many bookkeepers will generally not perform a reconciliation and will instead rely on the GST reports produced by the accounting software.

The GST reports are important (as mentioned in point 2) and should be referred to however it is also important to go one step further and perform a proper reconciliation as occasionally there may be some discrepancies between the BAS reports and the actual figure shown in the accounts due to manual adjustments or other processing errors.

Furthermore the reconciliation should also consider how your business accounts for GST (i.e. either on an accruals or cash basis).

The key point here is that it is imperative to get the figures right on your BAS to avoid future compliance issues such as having to go back and amend BASs and potentially pay avoidable and unnecessary costs to the ATO such as penalties and interest charges.

4. Getting the payroll right and staying on top of your super obligations

If your business has employees or is looking to hire employees in the future then it is important that the payroll is processed correctly through the accounting software and that you stay on top of your super obligations.

Some of the main payroll issues that should be carefully managed include ensuring the accuracy of the calculation of the net and tax withheld components of the gross salaries paid (9/10 times this will be right but it should always be verified with the ATO calculators), checking that the allowances paid to employees are treated correctly for tax purposes (e.g. travel allowances),  calculating the correct amount of super to be accrued in the accounts (including paying the correct % rate), understanding which employees are entitled to super and which aren’t and ensuring that annual leave is correctly calculated and accrued.

Payroll and super compliance are a very important responsibility for any employer and as with all compliance activities the ATO may impose penalties on business owners that don’t manage their compliance in an accurate and timely manner.

The moral of the story here is if you stay on top of your obligations then you will minimise your risk and have peace of mind!

5. Monitoring Cash Position, Trade Debtors & Trade Creditors

As briefly mentioned at the beginning of this blog, your accounting records serve as valuable tool giving you insights into how your business is performing and one of the most important (if not the most important) areas of your business that you should be constantly monitoring is cash flow.  Cash is the lifeblood of every business and if you don’t maintain it at an adequate level your business will struggle.

Although there are many external factors and conditions that may affect your cash flow, three areas which you can monitor to better understand and manage your cash flow include:

Monitoring your trade debtors: By reviewing an aged trade debtors report in your accounting software you can  see how much money you are owed by your customers at any given point in time and be able to determine  which customers are lagging behind with their payments (e.g. customers that at 30+ days overdue in paying).

Monitoring your trade creditors: Similarly by reviewing an aged trade creditors report you can see how much    money you owe to your suppliers and if you are lagging behind in paying them.

Monitoring you cash balance across all your bank accounts: This is by far the simplest way of monitoring your  cash position. By looking at the dashboard in your accounting software you can instantly see how much money   you have in each bank account as well the accumulated balances in your business credit card and overdraft  facilities.

By monitoring these three areas  you will be more informed and in a better to position to make important business decisions such as deciding on if you should continue selling to slow paying customers, fine tuning the payment terms  which you offer your customers if required, negotiating better payment terms with your suppliers and deciding on other strategies that can help you get the timing right between receiving payments and making payments.

As a business owner you will not always have these issues in the back of your mind because you may be focused on other aspects of your business such as operational activities, business development and other management issues.

Given this, having the support of a bookkeeper who is a qualified accountant with a commercial acumen will be advantageous as you’ll be able to rely on them to keep you constantly informed about your cash flow performance as well as provide you advice on how to best manage it.

6. Monitoring you business performance regularly

This point is as simple as it sounds. If you’re regularly monitoring your business’s performance you will be in a better position to respond to any performance issues such as poor profitability, wasteful spending and lower than expected revenue.

To do this all you need to do is produce a profit and loss report (P&L) and review the figures. A P&L will give you a quick snapshot of how much revenue you’ve generated, what your costs are and most importantly what you net profit is.  If the P&L has previous months comparatives you’ll also be able to tell how you business has performed in the current month compared to previous months.

Every business owner should be doing this regularly (whether it be monthly or quarterly) and it’s therefore important to have an accountant / bookkeeper that will be there to remind you to do this as well as provide you with insights.

7. Stay on top your due dates

I touched on the issue of compliance risk earlier and one aspect of compliance that your business should always be on top of is its lodgement due dates. Although this is not specifically a bookkeeping issue it does relate to bookkeeping as most small businesses use their bookkeeper to assist with the bulk of the compliance.

Apart from your business’s income tax return it is also important to stay on top of the due dates for lodging BAS’s, other activity statements (e.g. for PAYGW), superannuation payments, FBT returns and annual PAYGW reporting.

By having an awareness of the relevant due dates and you will be able to manage them on a timely basis, reduce your compliance risk and stay on the ATO’s good side!

8. Maximise Efficiency, Cost Effectiveness and More Value For Your Buck!

The last point I’d like to make ties in with the concept of hiring a single service provider.

If your business is supported by one service provider who has the skills to manage your business’s bookkeeping, accounting and tax requirements then you will be able to remove inefficiencies such as certain tasks being duplicated and unnecessary time lags in communications between yourself, the bookkeeper and tax accountant – The triangle of inefficiency I like to call it!.

On top of this you’ll also get more value for your buck because your accountant will be able to provide you with advice in a number of areas such as taxation, business performance and record keeping.

Lastly you will also save on costs because you won’t need to pay multiple service providers for their time (the majority of bookkeepers and accountants charge hourly rates).

Summing Up

I hope this blog had shed some light on the benefits of having a qualified accountant manage your bookkeeping.

Bookkeeping is one of those tasks that is often perceived as merely being admin related however it is a lot more than that and if managed with skill and care you will be in a better position to undertake smarter tax planning, manage your compliance obligations and monitor your business performance.

If you think your current bookkeeper is not addressing the issues which I’ve mentioned in this blog then you should make it your mission to find one who has the skills and knowledge to do so.

Having good business processes in place and receiving support from the right people will free up your energy to focus on what matters most. Running your business!

On that note, feel free book an appointment with us through our website or to contact us if you wish to discuss how we can assist your business.

Email: service@taxdesk.com.au

Phone: 0447 215 717