Poor bookkeeping horror story: A bean counter’s tale
Morris Kaplan, one-time stockbroker and venture capitalist, brings his finance skills and recent experience as a business journalist and writer to IT, with a special interest in telecoms and how communications is being transformed by technology.
It’s a nightmare scenario for any contractor or business owner and when it comes, it leaves few options but to submit. Imagine you’re operating your busy, IT service business. Your business is competitive; it needs to be in this space where customer service is measured by the last service call. You open your email and there it is; the horror movie right there on your PC, the email from the ATO:
Due to non-payment of PAYG and GST obligations and repeated requests, the ATO will be garnishing the company’s bank account.
And it does not stop there. A letter had been forwarded to your bank by the ATO advising them. Your body responds before you have a chance to think - a sickening feeling, your body flushed with fear. A moment later you panic at the thought of your bank receiving the note. It won’t be long before the bank manager calls; demanding to know what is going on.
Debra Lewis CEO of the Bookkeeping Institute of Australia says: “This is a real story but with the type of business changed. When I was a bookkeeper I produced management reports - in fact report after report, for this company. The reports were unequivocal: they needed to reduce their wages bill; their operating expenses. They made repeated request to the ATO to defer payments. I told them ‘The tax office will catch up sometime’.”
The consequences of this scenario are manifold. If a business is in financial distress and has no clear way to paying debts, insolvency is a real threat and bankruptcy is a likely outcome.
Cash flow is a constant pressure point for any business and can happen to the best intentioned and hardest working people. Sometimes a key client falls over at a time of cash flow shortages and you start to push out creditors, leaving the dreaded bookkeeping to another time.
Too often contractors stubbornly drive their business without keeping an eye of the dashboard. They drive to fast, too hard and beyond the ability of the business to meet its financial obligations.
The nightmare scenario can be avoided by addressing the tough questions:
• If you are not able to meet the payroll or wages and sub contractor’s bills then alarm bells should be ringing
• If you’re GST and superannuation payments continue to fall behind, it is time to consider a review of your business case.
Debra Lewis believes that timely management reports prepared by a bookkeeper are a cost effective way for the contractor or business owner to keep watch on the dashboard. “A good bookkeeper can produce your dashboard. A bookkeeper can:
• Set up a system to ensure invoices go out promptly and to send effective reminder notices to get paid on time
• Have a system for highlight late payers as soon as they trigger due date and then to follow up next day
• Set up terms on invoice so that collection costs can be revered should a recovery service be called for
“It’s your job to adhere to these.” She adds “If the horror story emerges:
• Call bank manager before he calls you
• Call ATO
• Arrange payment plan
• Prepare budget
• Reduce head-count
• Have cup of tea
• Resume normal action stations
• Breath normally.”
You can find a bookkeeper at www.bookkeepershub.com.au.
Morris Kaplan, is a business journalist, business owner and Publisher Director of the BookkeepersHub.
- Everything You Need to Know About Cyber Threats But Were Too Afraid To Ask: Download Now
- Advanced endpoint protection test report : Download Now
- Emerging Cyber Threat Summit | Cybersecurity strategy for business leaders in the digital age | 6-8 June | Sydney | Get the agenda
- Translating Security Leadership into Board Value : Download Now
- Security Exhibition & Conference | Intelligent Strategies for Australia’s Security Industry 26-28 July 2017 | ICC Sydney, Darling Harbour | Find out more
- 22 Experts Share How to Communicate Security Program Effectiveness to Upper Management : Download Now
- CSO Webinar: Business Email Compromise | Head of Fraud Risk Strategy - ANZ Bank, Australian Centre for Cyber Security & more | Register now
- Network Professionals Survey with Computerworld Australia Enter this survey and you could WIN one (1) of two (2) Microsoft Surface Pro 4 128GB Tablet valued at AU$999 each. *Terms & Conditions Apply