Category: Uncategorized

Is there anything scarier that the American election just now?

Well maybe there is if you are self employed, cause it’s that time of year again isn’t it?

While the Americans battle it out for the Presidency this year’s sole trader tax filing season is sure to produce its share of equally epic matches between accountants and business owners. This October 31st (or November 10th if you are filing online) will see many accountant’s offices ringing with, “You want a cheque for HOW much?” as business owners and accountants stare each other down in disbelief at the other’s unreasonableness.

 

I apoligies for this pic

What is the key area of dispute? Incomplete Records. The relationship usually starts off with an agreement like this: Business Owner: “If I do my own bookkeeping what will you charge me to do my taxes?” Accountant: “If you submit complete books and records the charge to file your taxes will be X” Unfortunately this almost never leads onto a thorough discussion about what constitutes a complete set of books. It’s like when your mom says ‘I thought you were going to clean your room!’ and you say indignantly ‘But I did clean my room!’ Both are feeling maligned and misunderstood.

Honesty and Transparency are key in most relationships, and the accountant / business owner relationship is no exception. You can have both with Cloud Accounting.

The business owner’s ‘I will do my own bookkeeping’ promise is easily monitored by a quick login by the accountant who never has to leave their desk. A simple phone call to the business owner, “You seem to be having trouble keeping up to date with your bookkeeping. Would you like me to recommend a bookkeeper to help you catch up?” combined with a gentle reminder that the fees agreed will change if the records are not complete by the year end.

It’s really not that complicated.

For those business owners willing to read through the list below outlining what constitutes a complete set of books, you will gain more insight into the mind of your accountant. And you may decide to engage a bookkeeper to ensure everything works out at the year end. 


Sales

How do I know its complete?

If you have a complete list of Sales Invoices showing Customer, Date, Gross, Net and Vat amounts, whether or not they were paid, how they were paid, and what account the money received went into. You must be able to show the exact bank transaction showing the money received. Also see the VAT headline.

Purchases

How do I know it’s complete?

If you have a complete list of Purchase Invoices showing Supplier, Date, Gross, Net and Vat amounts, whether or not they were paid, how they were paid, and what account the money was paid out from. You must be able to show the exact bank transaction showing the money paid out. Also see the VAT headline.

Common bone of contention: Money paid out to suppliers from owner’s pocket, leaving no record of payment.

Debtors
A list of each customer showing how much they each owed you at the year end.

How do I know it’s complete?

If every customer balance on the list is correct, and you can show the sales and payment transactions making up that balance.
Common bone of contention: Debtors showing negative balances due to messy bookkeeping.

Creditors

A list of each supplier showing how much you owed to each at year end. Best backed up with a statement from the supplier at year end verifying your claim.

How do I know it’s complete?

If every supplier balance on the list is correct, and you can show the purchase and payment transactions making up that balance.
Common bone of contention: Creditors lists showing balances outstanding when they have actually all been paid. Again, messy bookkeeping, or amounts paid out of the business owners pockets.

Bank Reconciliations

A process where each and every transaction showing in a bank account must be identified and matched with the bookkeeping records. This is a very important part of the final accounts process and takes alot of time if left to the year end.

How do I know it’s complete?

A full description of the procedure can be found here: How to do a Bank Reconciliation

Common bone of contention: Bank recs not done by business owner. Accountant’s office does them. Has to charge for time it takes. And it takes a long time.

Payroll details

If you use payroll software to print your payslips, you have to make sure the net payments, PAYE and PRSI are matching in your bookkeeping.

Here is how to record payroll information into your accounts software: Best practice for recording payroll

VAT

If you are filing your own bimonthly VAT, the sales and purchase details of these returns will need to match up with the list of Sales and Purchase Invoices shown above.

Common bone of contention: Actual VAT filings reported to the Revenue do not match what is shown in the bookkeeping. This costs time and money for the accountant’s office to investigate resulting in higher fees.

Here is the best way to do a VAT Return to avoid sticky situations at year end: Best practice VAT return

Trial Balance

This is a kind of summary of all the above items as they were at the year end. ie a list of Sales, Purchases by category (advertising, office costs, resale items etc), Fixed Assets, Debtors, Creditors, Bank Accounts Payroll. If this is correct and proveable, your tax filing will take less time and less money to prepare.

Common bone of contention: The Trial Balance is printed off an accounting system which has an incomplete set of books. Even if looks right to the business owner, it is not provable by the accountant due to having no bank reconcilations or having obvious problems in Debtors or Creditors.

NOTE: If you are unsure about how complete / correct your bookkeeping is, why not check out The Professional Bookkeepers Academy where you can find some highly skilled and experienced people to help ease your nightmares.

 

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This project has been co-funded under the European Agriculture Fund for Rural development administered in this area by the South Kerry Development Partnership Ltd.

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