Bad bookkeepers: Why do they occur and ways to avoid
Have you started a business and thought you would get organised and hire a bookkeeper? You have realised that the day-to-day finance function isn’t for you, so you find the cheapest part-time bookkeeper around and you walk away thinking you can sleep peacefully, only for your accountant to come back to you a year later with a million questions.
Well, you aren’t alone, and this is a very common occurrence. As an accountant I face this issue dozens of times a year and the problems generally stem from the client having no idea how to stress test their bookkeeper to find the most appropriate professional at the time of employment.
Why does the issue occur?
In my experience, there are a couple of major reasons why these issues tend to occur and occur repeatedly.
1) Are you the issue?
The first consideration starts with you as a business owner. I would advise you to read the accountant’s certificate next time you approve a set of financial statements to be submitted as the onus of all information and liability is on you, and that is also true of bookkeepers. At the end of the day, they may be preparing the information, but it is your job to understand it, and assume responsibility for it. Most accountants are happy to talk you through the inner workings of a set of financial statements.
2) Is your bookkeeper a part of an accredited body?
Although they do not need to be a part of an accredited body such as the AAT (association of Accounting Technicians) if they are not a member you should really consider if they have the underlying skills to do the job. I would also put in more thought if they are part qualified and why they are not fully qualified.
Problems with finding out too late
1) Costs to fix
The biggest issue you are likely to face is your accountant’s costs. Not only will they charge a higher fee than a generic bookkeeper, but they are also going to need to spend extensive time working out where the issues lie. Unlike most bookkeepers, accountant’s duty is to their accounting body first and foremost and they will likely not submit any work that they deem materially wrong, or if there are potential money laundering considerations.
2) Companies House and HMRC penalties and fines
If the bookkeeping is not correct, a good accountant will not file the financial statements until it is. On that basis, penalties and fines for late submission of the financial statements and corporation tax return and late payment of any tax due can rack up quickly.
3) Are there fraudulent activities in your business?
The most serious issue that you may face as a business owner is an internal threat that you are unaware of. If the bookkeeping is not being kept to a high standard, then the risk of fraud in any capacity is greater. The worst answer you can give to “where did this money come from/go to?” is “I don’t know”.
Ways to avoid bad bookkeepers
The easiest way to solve a problem is to identify it before it gets out of hand.
1) Educate yourself
The best way to acknowledge an accounting-related issue is to understand it yourself. It is highly advised to pay for a couple of hours of your accountant’s time to understand how financial statements and bookkeeping software work and link together.
2) If in doubt, ask a qualified accountant
Following on from the point above, if you start to feel a bit uneasy trust your instincts and ask your accountant to weigh in and do a review of the bookkeeping work done.
3) Make sure the bookkeeper comes recommended
Do not just go for the cheapest bookkeeper as they are cheapest for a reason. Hire a recommended bookkeeper by checking references or choosing a recommended bookkeeper.
4) Make sure the bookkeeper can handle the level of work that your business requires
Make sure that the bookkeeper chosen aligns with your business needs. A bookkeeper may be suitable for one type or size of company, but not another.
5) Is your bookkeeper a member of a professional body?
Although this is not a definitive indicator, a good bookkeeper will often be accredited with the AAT for example. If not, you may want to question why not and how they entered the field.
Final Thoughts
This article is not meant as a scare-mongering tactic, nor is it to warn you off bookkeepers. The right bookkeeper will aid the accounting function and be an asset to your business, however, too many times have I seen an unqualified bookkeeper stress out a business owner and distract them from their main goal of managing their business.
If you are looking for a high-quality ACCA practising accounting firm that is certain to advise you in all business capacities, please get in touch.