SMEs are usually faced with a conundrum when it comes to the business of number-crunching. Are the services of a bookkeeper or an accountant better for your fast-growing business? LUCINDA SCHMIDT unravels the options.
By Lucinda Schmidt
It’s one of the biggest headaches for fast-growing businesses. You don’t want to pay your accountant’s hourly charge-out rate for basic data entry, but you can’t find a good bookkeeper to do the legwork for your business activity statements — without stuffing it up and costing a fortune to fix the mess.
The good news is that the tax office is trying – slowly – to sort out the bookkeeper vs accountant dilemma. Draft legislation is expected to be released soon, which will allow bookkeepers who meet certain standards to register to lodge BAS.
The bad news is that nothing much will change before next year – and some accountants are fighting tooth and nail to protect their territory from what they see as underqualified bookkeeper upstarts.
Here’s how it works at present: when the Federal Government brought in the GST in 2000, it realised that the accompanying BAS requirements would overstretch the existing number of tax agents (mostly accountants).
So it allowed external bookkeepers to also help prepare BAS statements, as long as they worked under the supervision of a tax agent or were a member of a specified professional body (mainly the big accounting ones).
In practice, the rules (known as section 251L) have not worked well. There has been an explosion in the number of bookkeepers, but many of them do not pass the test to be legally allowed to lodge BAS statements (although some do it anyway).
Many are sole contractors, with no professional indemnity insurance or ongoing professional development. Because anyone can call themselves a bookkeeper, qualifications range from someone who has done a two-week course with software providers such as MYOB or Quicken, to someone with a full accounting degree.
Others are part of the burgeoning franchised bookkeeping industry, where groups such as Jim’s Bookkeeping and Busy Bookkeeping employ some of the 120,000 individuals that the tax office estimates now work as bookkeepers.
Meanwhile, businesses that are too small to hire an in-house finance person, but too big to do it themselves, are increasingly relying on bookkeepers to cope with the huge compliance burden. Bookkeepers charge around one-third to two-thirds of the tax agent rate, but many businesses have trouble finding a good one.
Enter the tax office. Over the past three years it has held symposiums, undertaken research and formed a Bookkeepers Action Group (yes, BAG) to try and nut out the complex relationship between small business, bookkeepers and tax agents.
The general thrust has been that bookkeepers want more recognition and they think it’s time for tax agents to embrace their help. But the tax agents are sick of fixing up bookkeepers’ stuff-ups, and they’re worried that the lack of uniform standards and quality assurance for bookkeepers means the whole tax industry will be seen as less professional.
“From the tax office’s perspective, bookkeepers are an emerging intermediary profession,” says tax office spokeswoman Lisa Harris. “The research conducted in 2005 has indicated the need for the bookkeeping industry to develop professional standards and an education and information regime to support this.”
In response, bookkeeping industry associations are springing up, promising to exercise quality control over their members and provide on-going professional development.
In last year’s federal budget, the Government allocated $57.5 million over four years to establish a new regulatory framework for tax practitioners. Part of the framework includes the proposed new rules to register bookkeepers who prepare BAS for a fee.
Another proposal is a tax office internet portal for bookkeepers, as well as a dedicated help-line, allowing them better and faster access to the tax office.
What this should mean for you, the client in the middle of the mess, is that it will be easier to find bookkeepers who are qualified to do BAS, and it will also cost less because the bookkeeper’s dealings with the tax office are fast-tracked.
Some accountants/tax agents think it’s a great idea, because they are happy to focus on financial analysis and end-of-year tax work, and leave the bookkeepers to do BAS, accounts payable/receivable, payroll and other data entry. But others are fighting the changes, fearing they will lose work and that the tax office will favour bookkeepers over tax agents.
“There is some tension,” says Roger Booker, owner of the Busy Bookkeeping franchise group. “By and large the better tax agents don’t want to do data entry, but the poorer quality tax agents are scared of losing work.”
Garry Addison, the senior tax counsel for CPA Australia, also acknowledges concerns from some tax agents. “They struggle to get service from the ATO, and this may take some resources away from tax agents,” he says. “Also, there’s a perception that somehow bookkeepers will be on the same level as tax agents, even though they don’t have the same qualifications.”
Still, he thinks the proposed changes will be good for clients. “Hopefully the new framework will make it easier for micro businesses to choose someone with the right skills to lodge their BAS,” he says. Haven’t we heard that before? “Well, it’s going in the right direction at least,” Addison says.
Questions to ask your bookkeeper
Roger Booker from Busy Bookkeeping suggests asking the following:
- Do they understand section 251L and are they compliant? If they claim to be, ask for proof.
- Do they have professional indemnity insurance?
- Do they have on-going training?
- Are they a sole trader or do they have employees or other support?
- Do they offer a quality guarantee?
- Are they professional partners of QuickBooks and/or MYOB?
- Can they establish procedures to minimise problems for the tax agent and client at year-end?
- Are they willing to proactively work with the tax agent or do they seek to avoid them?