Small Business owners in today's fast paced world either don't look at their financial situation often enough of they don't understand the consequences of what they are reading.
Two of the biggest causes of business failure are the lack of collection of debts resulting in poor cash flow. A Qualified Bookkeeper can provide you with information that will highlight any areas that require investigation and change and will ensure that those debts are collected on a regular basis.
There is a move in the bookkeeping industry to professionalise the field making bookkeepers accountable for the work they undertake for their clients.
Part of that move is linked to the changes to the legislation in regard to BAS agent registration.BAS agents are now required under the law to be part of a professional association, hold professional indemnity insurance and be a fit and proper person.
Your bookkeeper should be a member of an accredited professional association. This ensures that your bookkeeper abides by the code of ethics laid down by that association and disciplinary action is taken as a result of a breach. The professional associations also require their members to continue their education and keep up to date with the latest changes by providing continuing education courses and information.
Safeharbour provisions and your agent.
Safeharbour provisions relate to services provided to a client by a registered agent whether that is a tax agent or a bas agent.
Under the provisions a taxpayer is not penalised for acts carried out by a tax agent or bas agent where due care has not been taken to ensure the information provided to the Australian Taxation Office is correct and that lodgement dates are met. The provisions excludes act that disregard the tax law.
To put it in simple terms make sure that your bookkeeper has professional indemnity insurance, they are a member of a professional association and when preparing tax documents that they are registered with the Tax Practitioners Board.
Professional indemnity applies if there is an act that resulted from negligence or a breach of duty in any work carried out by your bookkeeper resulting in a financial loss for your business.
As a client you need to ensure that your bookkeeper has adequate professional indemnity insurance. Where you are undertaking the services of a contract bookkeeper it is important to keep these considerations in mind as they provide protection for you as a client that you would otherwise not have.
The answer is simple and the following is just a brief outline of what a reputable can and should be providing for your business.
With the global financial crisis still fresh in everyone's mind it is time to consider if you have the best information at hand to make informed business decisions. When the crisis hit a lot of small businesses suffered and were forced into closure. The statistics show that for the September quarter in 2008 over 4000 firms failed, the September quarter for 2010 shows nationally administrations in total across Australia were 8561, the largest portion on this was bankruptcies at 6260. The statistics of failed business can be quite alarming when you consider these are ongoing and increasing in number.
What does all this mean for your business? A large number of businesses fail for two reasons firstly they don't collect their debts when due and secondly a poor cash flow.
Cash is a vital resource in any business and without a good cash flow plan the business will struggle to meet its obligations resulting in possible closure. Monitoring your cash flow on a weekly basis will highlight areas of concern before they arise.
A healthy cash flow can be achieved through the use of a number of tools.
Providing regular cash flow reports.
Reviewing the Aged Receivables report (Debtors, people who owe you money).
Reviewing the Aged Payables report (Creditors, people who you owe money).
The cash flow report should also take into consideration other cash expenditure for example Payroll, Superannuation, GST, leases, bank loans and all other liabilities of the business. Timing of the inflows and outflows of cash is also an important part of the cash flow plan to ensure that you do not have all your liabilities arising at once.
Your bookkeeper should also follow up your debts with the niceties such as telephone calls and letters and ensure that your invoices and statements are sent out on a regular basis. It is outside the scope of a bookkeeper to provide legal advice.
It is not a good practice for the business owner to chase their own debts as it creates a difficult situation between the owner and the clients. The role of the business owner is to build and maintain a good working relationship with their client.
The Aged Receivable and Aged Payable should be reviewed on a weekly basis along with the cash flow report and the bank reconciliations to ensure the business owner has sufficient information to make decisions on future growth, current and future obligations and to correct any issues that may arise that will have a negative impact on your business.
Utilising a bookkeeper to process and prepare your financial information on a regular basis saves the business considerable time ensuring decisions are based on current data in accordance with all relevant changes to legislation.
Before you decided to hire an external bookkeeper make certain they have the required qualifications and experience to undertake this role. More information on these requirements can be found on the National Institute of Accountants or the Australian Taxation office websites.
For a free consultation to discuss your business needs go to our website for more information and contact details at www.aprbookkeeping.com.