Bad Bookkeeping can be easily identified!
Around 70% of jobs that come my way are from business owners who have had a bad bookkeeping experience. This is great for my business because during my initial consultation I can have a look at a file and easily identify 3 key things that highlight that the previous bookkeeping process is not up to the Astute Administration Services standard – we will get to those three things shortly but first an overview of the effects of Bad Bookkeeping.
Why you cant afford to have a Bad Bookkeeper!
Most Business owners I meet are very conscious of spending their hard earnt cash on only those items that will;
- Benefit their business,
- Make it profitable,
- Help it grow and
- Provide the owner with a return on investments.
Bad bookkeeping will definitely have an impact on all these things, but not in a positive way
Many times I hear of and see business owners who believe that they are more than capable of doing their own bookkeeping or engaging the services of general administration staff to perform these all important tasks. With may online software packages conveying the idea that all a bookkeeper does is code bank statements and they they can do that by using bank feeds along with auto-coding rules, …. But is that really what a bookkeepers are all about?
The approach of simply coding the bank statements will inevitably end in a situation where many or all of the following error will occur
- Transactions allocated with the incorrect GST coding, which can result in
- GST being claimed as pad that was not paid
- GST being paid on non GST applicable items
- Incorrect BAS and IAS submissions
- GST being claimed that is not permitted to be claimed
- EXAMPLE: GST being claimed on goods and services that are GST free, the most common staff amenities
- Transactions being allocated to the wrong General Ledger accounts
- More tax being paid that should be
- Tax being avoided resulting in fines
- Missed opportunities for year end tax deductions
- The incorrect tax code being used
- EXAMPLE: The purchase of new equipment coded to an expense rather than an asset.
- Unreconciled accounts, example include
- Bank Accounts
- Credit Cards
- PAYG Withholding
- GST collected and paid
- Australian Tax Office Integrated Clients Account
- Loan Accounts, business loans and vehicle loans
- EXAMPLE: Payments of SUPER being taken up as a ‘Super expense’ rather than reducing the liability on the balance sheet.
As you can see this is quite an extensive list of example of how things can very often and quickly go very very wrong! Using inexperienced and unskilled people to keep your business accounts is false economy.
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3 quick things you can do to identify bad bookkeeping
If you suspect that your bookkeeping is not being done to a high standard that looking at these 3 things will help you identify bad bookkeeping traits.
1 – OLD OR UNUSUAL ITEMS ON COMMON REPORTS
Jump onto your software program and print out the following reports; Accounts Payable, Accounts Receivable and the balance sheet. Lets look at the Account Receivable, because lets face it everyone want to know what money is coming in! How does it look, are there items in 90 days Plus? Are these items TRUE, in other words are all these customer listed and the totals they owe up to date?
When I start with a new client and go over this reports I always here “oh no they have paid, thats paid, not they can’t still owe that!” and if this is true that you reports (which also effects your balance sheet) is not right.
Do the same with your account payable! If you are finding old items on here or credits then you know you have some bad bookkeeping going on! I would also then suggest to look at your balance sheet and this will identify again loans and liabilities that may not be projecting the correct balances
2 – INABILITY TO ANSWER QUESTIONS ABOUT THEIR WORK
I am going to use an example from one of the above reports. If you notice on the accounts payable that one of you major suppliers has a credit balance in 90 days plus (but you know that it not true) and you question your bookkeeper and they dance around that answer with a lot of talking but still can’t answer your questions – pretty sure they are aware that it is there but have no idea on how to ‘fix the problem’ this could be because they are under skilled or unaware of how to properly do this in your software program. For example the way to account for a credit note on a supplier account can be slightly different in Quickbooks Online to how to take it up in Xero.
At Astute Administration Services we dedicate 1 day a fortnight to training and education to ensure we offer our clients the latest and most efficient bookkeeping practices.
3 – INCONSISTENT TREATMENT OF SIMILAR TRANSACTIONS
This is when the same expense that occurs on a regular basis is being coded to a different expense account. Common ones that come to mind for me are Fuel expenses. Sounds simple right but can be easily taken up inconsistently one month its “Motor Vehicle Expenses” and the next its “Fuels and Oils”. May not seem like a bit deal but if you are a savvy business owner and using your reports to make business decisions inconsistent coding can mean poor decisions are made.
In the rush of ‘clearing’ the bank feed screen loan repayments and other tricky expenses can also be inconsistently coded. For the inexperienced bookkeeper its more of a ‘she’ll be right’ attitude to get the job done rather than get the job done right. Bad Bookkeeping can be done in a split second of clicking on a transactions but this can take many hours to rectify!
Don’t pay for Bad Bookkeeping
A Bookkeeper is a specialist!!They provide the skills and expertise to take care of the day to day running efficiency of the business, making sure everything is running as smoothly as it should and preventing problems that can prevent the business owner from performing at their peak. A good bookkeeping will have the ability to identify potential problems before they arise, like cash flow problems! And a Great bookkeeping will jump straight on the phone and chase up customers for payments.
Starting to feel that you need to Align yourself with an Astute Bookkeeper today!
Give us a call to book a consultation – 0437 227 441 or check out all of our services;
- Onsite Bookkeeping to the Gold Coast Region
- Business Reporting
- Payroll Services
- Catch-up Bookkeeping
- Start-up Business Bookkeeping
- Bookkeeping Services
Other Bookkeeping Articles you may find interesting;
- Hazards of Do It Yourself Bookkeeping
- Financial Reporting 101: Can you afford to be doing it wrong
- Top 5 Biggest mistakes employers make when it comes to an Employee or Contractor!
- Bookkeeping and Data Back-up 101: What we can learn from the drop-box hack