Why Outsource your Bookkeeping

Time for change

Happy New Year to all our readers. We will look at the reasons why you should outsource your bookkeeping.

The plan is to compare what your bookkeeping looks like now to what it could look like.

Some people are not into the numbers. Our client once told us that he’d rather pick potatoes for a week in Jersey than call into us! Not being into the numbers is fine. After all, there aren’t many that can’t wait to do the Vat after a hard day’s work. But knowing your numbers is important as that is your profit or loss and impacts the money in your pocket.

The focus of this blog will be

  • Current bookkeeping system
  • What’s wrong with it
  • Bookkeeper leaves
  • Outsource your bookkeeping
  • Why outsource?
  • Hiring a team

 

Current Bookkeeping System

Bill and Mary own Jumanji Ltd which is a chocolate manufacturing business. Freda has been their bookkeeper for many years, works hard for them, and does a good job.

Freda calls in every Tuesday and does the payroll. She collects the invoices from the previous week and any available bank statements. They decide on the invoices that need to go out based on work done and she will issue those in the coming days.

A letter has come in from Revenue about a Vat return in 2020 and she isn’t sure where to go with this. Mary suggests she ring their accountant, Pat Mustard. [Pat has a fondness for mustard-coloured trousers] Pat is on holiday and will be back on Monday week. Not ideal seeing as Revenue is looking for a reply next Wednesday.

Jumanji Ltd has a 31 December year-end. Freda gets the books ready the following May so the accountant will have them in June. Pat will meet Bill and Mary in July to review and sign off the accounts, co sec and corporation tax return.

Freda needs the lads to update the payroll software and pay the annual fee. She also needs the latest version of the accounting software and must take backups of the work to date. There’s a bill there from the accounting crowd that they need to pay too.

What’s wrong with the current system?

It works and it’s fine but just about. Fine is ok and if you ask your better half if he or she is ok, and the answer is “I’m fine” you know you are in trouble!

Some of the issues that are “fine” but are not really are

  1. Over dependence on Freda, so what happens when she’s sick, kids are sick, on holidays, or busy with other work
  2. Freda is good but can’t solve the Revenue issue
  3. Could they go to customers sooner?
  4. Updating payroll and accounting software, taking backups, and ensuring they get paid.
  5. Paper everywhere, bank statements, invoices, and statements
  6. A disconnect between the client, Freda, and the accountant
  7. Accounts for compliance purposes only. Accounts in July for the previous year are historic numbers at that stage. Too late to backdate a bonus into the prior year
  8. No business monitoring during the year
  9. Mary meets Freda for an hour every week

On a scorecard, you’d give this a 5 out of 10. If it was a school report it would read “you could do better”. Many will be happy with this system as it works for them. They’ll be of the view that if it works then why change it? Sure, it’s fine.

Going back to our client that would rather pick potatoes that come into us. It wasn’t that he hated us as we got on very well it was just he was allergic to numbers. That’s not good for any serious business owner that wants to make a profit. We are all in business to be as profitable as we can. Profit pays the bills and can be the difference between a week at Centreparcs or a day out in Tramore.

Bookkeeper leaves

Fine won’t be good enough for many business owners. They may not like numbers, but they are well clued in. Knowing their numbers is a vital part of their business.

Bill and Mary were at a recent seminar called “Adding Value to your Business”. They hope to sell their business in the next 5 years and want to make sure that they can get the best price for it. One of the key messages from that was having management accounts. Any potential purchaser will look for them. Because they want to know the current position of the business. Not how it looked 16 months ago.

Freda tells the lads she’s getting out of bookkeeping. She’s after meeting a Greek hunk on holiday called Stefanos and she’s off to Corfu for the year. Delighted for her but now they don’t know what they’ll do when she’s gone. Bill asks his new Christmas present. “Alexa find bookkeepers near me”. The closest is 400 kilometres away and that’s in a different country. Bloody Alexa! His next stop is Google. Pat Mustard doesn’t do it, so they look elsewhere.

Bill and Mary do their research but don’t know what to expect. What could a different bookkeeping system look like?

Outsource your bookkeeping

Comerford Foley gets a mention and Mary calls Deirdre [Dee] to make an appointment. Dee finds out a bit about them and we check them out. Likewise, Bill and Mary go onto our site and see what they can find out about us too.

We meet. They tell us a bit about their business and where they want to get to. Their most pressing concern is to find a bookkeeping solution to replace Freda. We discuss changing things around and to view bookkeeping as a resource. Their main priority is to get the basics right and to get the Revenue letter sorted out. Some of the issues on our agenda for discussion are

First Meeting

  • What package do they use and are they weekly or monthly? Our preference is monthly
  • Vat – are they every two months or every quarter
  • Cloud accounting on Xero. We show them how efficient this can be for issuing quotes, invoices, statements, bank recs and so much more
  • Dext and how they can input their invoices into it
  • The team here and who the experts are when it comes to payroll, Vat, Accounts, Taxes, and Corporate Finance.
  • Dedicated Manager. The person that looks after them and is their first port of call in the office.

Before the meeting ends, we confirm that we will get a proposal and video to go through the proposal within 24 hours. We propose for all the services they need including personal tax returns. The fee is a monthly fee, and they can see all the services we offer for that fee.

Bill calls us to confirm that he knows it is an investment in their finance function. He’s a bit nervous about getting tied into something and “what if it all goes pear-shaped?” We say to him to give it 3 months and he will see the benefits

Why Outsource?

It would be incorrect to give the impression that with the flick of a switch, everything is amazing. That’s not the case as there’s work needed to get it to an amazing level. There will be an initial few weeks where we get them onboarded.

Initial Onboarding

  1. Write to Pat to get clearance and the prior year’s accounts and taxes backup
  2. Get the payroll set up and files moved over to our system
  3. Set up on Xero and Dext
  4. Meet with their dedicated manager to outline what they will do and when
  5. Some initial training on Xero and Dext so they know what to do
  6. Get bank feeds set up so bank statements will come in automatically to Xero. This works for AIB now and BOI is on the way

This is the time to get a system in place, so everyone knows who’s doing what and when. Three months later we check in with Bill and Mary. They are very happy with the new set up and the main reasons for that are.

Early Wins

  • Bookkeeping and the accountant are on the same team
  • No more weekly meetings with a bookkeeper so that time is more useful elsewhere
  • All payroll and Vat are up to date and staff are happy that they have someone to answer payroll queries
  • No need for payroll and accounting packages and backups in their office and need to engage IT people
  • Got their first ever set of management accounts and key numbers for their business
  • They use Xero to issue invoices so are getting paid earlier
  • Fixed the Vat issue with Revenue with no extra tax owing
  • Amount of paper reducing a lot. Bank statements feed into Xero. And suppliers now issuing invoices electronically that go into Dext

Freda’s back from Greece they tell us. Stefanos fell for another lady called Shirley. There was an unholy row with plates smashed all over the place!

Hiring a Team

There’s an African proverb that says “If you want to go fast go alone. If you want to go far go together”

Like the Jumanji lads, you will see the benefits if you have a team behind you rather than one bookkeeper. There are many super bookkeepers out there doing brilliant work. Despite that having a team of experts behind you is better for your business. If it’s better for your business, then it’s better for you.

More profits mean more money in the bank and greater choices. Plus, the team can do so much more for you down the line to help you sell the business. And keep more of the profits by minimising the taxes you pay.

Are you happy with fine, or do you want your bookkeeping system to be a 9 out of 10? If so, Start here

 

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