What a Little System Error Actually Costs You
Small businesses survive on the strength of their systems. Many Australian SMEs apply bookkeeping, financial reporting and taxation payment systems as required by the ATO, ASIC and the Corporations Act. Often, a business owner who is not an expert in this field outsources these tasks to professionals in these fields.
Sadly, many professionals working in bookkeeping, accounting and taxation services fail to deliver the best possible outcomes for their small business clients. At Emergency and Preventative Accounting Specialists we spend our days undoing errors that are costing businesses profit and peace of mind. There are 3 key areas that are evident in 4 out of every 5 sets of End of Year Financial Reports we review.
Bookkeeping System Errors
Bookkeepers unsure of how to correctly allocate a non-taxable item
When unsure of how to enter an item which has a non-tax portion, many bookkeepers create their own way to deal with the problem to ensure the reports they produce balance. Monthly payments, such as insurance premiums with small non-tax portions quickly add up to large errors over a reporting season. Importing and exporting businesses operate in a highly complex field of GST and tax law, with many bookkeepers simply unable to navigate the spider’s web of taxable and non-taxable items.
Small errors which don’t “make that much difference”
When faced with the dilemma of completing a small businesses bookkeeping within the 2 hours allocated per week, it is easy for a bookkeeping professional to just “put to the side” items which they are unsure of how to enter them into their system. By the time they leave one businesses accounts, complete bookkeeping for 2 other firms, collect children from school or deal with another business matter; the item is quickly forgotten, lying dormant in a ‘General’ or ‘Unallocated’ account.
Facing the issue a week or month later, the same method of completing the data entry is applied; with or without paying attention to why it was allocated to the ‘Unallocated’ account. Accountants who receive reports, under the pressure of completing a client’s work in a specified amount of billable hours, slip into the same trap. If it is already addressed in some fashion, leave it be, don’t ask, “How should this be entered?”
“We, the unwilling, led by the unknowing, are doing the impossible for the ungrateful.
We have done so much, for so long, with so little, we are now qualified to do anything with nothing.”
Konstantin Josef Jireček
Out of date taxation amounts or bookkeeping software
Taxation law, Wages and Superannuation legislation are changed frequently. More often in fact than Prime Ministers! A simple budget measure has a roll-on effect. Whether it is a taxation decrease for wage earners or a hidden tax cost or benefit in an individual’s taxation within the insurance policy built into a superannuation fund!
A law or policy change has to be publicised after it is legally enacted. The MYOBs, Xeros, Cashflow Managers and Quickens of this world then have to change their systems to accommodate the changes. If they get it right first time (yes they do make software update errors!) bookkeepers then need to be updated and learn how to apply or enter data to meet the legislation requirements. Any data that has been incorrectly entered, must be reversed or updated. This may be the final straw for busy bookkeepers; leaving it to accountants who don’t know which entries are correct or when data began to be entered correctly.
Failure of Accounting and Taxation Professionals to Identify Errors
Accountants are under pressure to get EOFY Reports to the ATO, ASIC and business owners. Often they know little about their clients businesses and fail to look at reports on what this panel beater, IT professional or cleaning company actually does on a day to day basis. This vital step means the professional is not aware that different businesses, even those seemingly doing the same thing are totally unique.
Being able to identify errors is a Emergency Accountant’s speciality. It is not a course of study which you can undertake in a university degree. It is based on years of experience; getting a feel of what numbers and processes are telling you. Knowing the trends. Knowing the client type. Knowing the personality of the business and the business owner.
It is easy for you to determine if your accountant does this successfully. Get a 2nd Opinion on what they have done. If you are paying too much tax, or there are systemic errors, a new pair of eyes which are looking out for your interest, maximising your profit will in 80% of cases give you a better outcome.
Incorrect ATO Assumptions About Your Business
The ATO is the largest income earner in Australia. In corporate terms it is a monopoly which answers to very few people or ‘watch dogs’. It is so large, that it is the only legal way you and your business are ‘Guilty’ until proven innocent. With this club in its hand, the ATO can be a destructive force for small business. In many ways, the ATO has to generalise, grouping businesses into categories and applying a one-size-fits-all to the category, not the individual businesses within it.
Your business can and often does, receive automated letters of demand from the ATO. Yes, this is based on Industry Benchmarks, the complex analysis of ‘Big Data’, your social media profiles and past earning and taxation histories; but it often simply wrong! Recent investigations highlight the impact of the ATO club on small business owners, forced to close because of tax issues.
Challenging the ATO is no easy task, many accountants fear taking on the huge monopoly, its systems and bureaucracies’ endless queues and wasting time on phones and emails.
Why do we make this a priority at EPAS?
Because it can save you thousands.
Because the ATO get it wrong.
Because you deserve to make a profit.
Because your family deserves a stress-free home and private life.
Because we care.
But does it make a difference you may ask?
Let this week’s numbers tell their own story.
$298,759 reasons why you need a 2nd Opinion.