At Paris Financial we champion small businesses, the risks they take and the effort it requires can never be underestimated. One of the biggest risks a small business person takes is engaging a bookkeeper. Whether the bookkeeper is a family member, an employee or a contractor, they are vital to your business. As fables go I cannot think of a more important bookkeeper than Walter Payne for Al Capone in Brian De Palma’s awesome movie The Untouchables. This 1920’s Chicago set classic is in my top 5 movies of all time and the Bookkeeper was the key to bringing down one of the most infamous gangsters of the 20th Century. If you haven’t seen it, treat yourself. In the Untouchables Walter Payne was the God like figure the Feds wanted to capture. God like because he had all the illegal business details, was fiercely loyal to Capone and kept superb, methodical books balanced to the cent.
If you have made the plunge and found a bookkeeper with scrupulous loyalty and high attention to detail like Walter Payne then you’ve got the main key to the financial side of your business. As Small Business Tax Champions we are here to advise you on tax, structures, asset protection, lending and investments but your bookkeeping should be done by a bookkeeper not by us. In our tax and accounting industry there is an ongoing debate about who should be doing what for clients regarding preparing monthly/quarterly reports for management and the Business Activity Statement (BAS) for the ATO. Without a shadow of a doubt this should be performed by your bookkeeper, whether they are in house or external. There are 3 reasons for this:
- Bookkeepers charge about half the average hourly rate compared to a Junior/Backyard Tax Accountant.
- Bookkeepers have better attention to detail and client service at the transactional level of a small business.
- Your Tax Accountant must be competent and finding value for you in tax, which is a tough enough job with the tax law complexity. They should not be focussing on the day-to-day transactions of your business.
In addition, bookkeepers now need to be certified with a bookkeeping body like the Institute of Certified Bookkeepers which enables them to lodge as a BAS agent with the ATO. Their level of skill is now better than it has ever been and they are getting an enormous amount of help on the Accounting side. This Accounting help is coming via double entry cloud based software programs like MYOB/Quickbooks/Reckon/Sassu/Xero. The debits and credits get done in the background leaving the bookkeeper to concentrate on the setup and allocation of the client’s transactions.
Counter to engaging a God Like bookkeeper who you trust with all your business finances there is always the chance that you have employed the Devil Incarnate. I mean that’s a harsh term but I’m not sure how else to classify a person who gets inside your financial life, has access to the paying or receiving of money and then justifies their reason for helping themselves. An excellent way to see one of these types of characters in action is to watch that wacky Foxtel show Mystery Diners. The intrigue of the show is watching someone so guilty justify their actions. It is the main attraction of the show. If you haven’t seen it watch an episode and see the reactions.
Early in my life as a Tax practitioner I had a client running a reasonably sized house building company begin running into financial difficulties. The Owners, lets call them Billy and Jean (who was leaving her husband for another man), were going through a divorce at the time. Billy was still running the business and Jean was no longer managing the administration. A common scenario for a couple who unfortunately find themselves in the middle of a divorce. As Billy started to struggle with managing the business and dealing with his divorce the business kept losing money. As Billy’s external accountant I would catch up with Billy to discuss taxation matters and Penny would always be very accommodating with me, giving answers to all my questions. Finally the business went under and the authorities cleaning up the mess found that Penny had stolen over $200,000 from the business and spent most of it on gambling as she was going through her own divorce. I’m sure everyone has heard these stories about how people steal from the inside of a small business but if you haven’t just remind yourself of that classic 90’s advertising tag line by supermodel Rachel Hunter, “It may not happen straight away but it will happen”.
The only way to ward against this is to keep up your vigilance and your business intuition but don’t get paranoid. Yep, a real balancing act that one.
They say the devil will find work for idle hands to do, but the devil is also attracted to bookkeeping roles in small business where the owner is not vigilant. For Billy, this meant that Penny was able to take advantage of the fact he was distracted by his personal life, and Billy just didn’t realise until it was $200,000 too late.
So what should you do:
- Engage a bookkeeper for your small business – one that you can trust!
- Regularly check on the accounts of your business and also check on the bookkeeper as well.
- Electronically double sign on each payment until you have 100% trust in your bookkeeper – this is something that takes time. It also may never happen.
Pat Mannix, Partner, Paris Financial