Hi, Im keen to hear all your views on this. I have read so many threads and Im trying to get clarity in setting my boundaries and handling customers being a newbie in practice. My ultimate goal is providing customers with an efficient accurate solution at the same time earn a good living.
Background: Customer is a sole trader providing services from April 2011, financial year April 2011 to March 2012, not VAT registered. Has bookkeeping experience which was part of another type of college course. Was recording transactions in a spreadsheet. Went on course and started using online software January 2012. Had 3rd party input historical data into online software without checking transactions or doing any reconciliations. Balancing figures posted to suspense account.
Background result: The bank doesnt reconcile and there appears to be strange looking transactions. So customer has no faith in their online financial reports. Bookkeeper approached for help September 2012.
Requirement: Have 2011/2012 final accounts asap and then get online software to reflect same.
Assurances given: All back up original documents in file, all transactions for first 9 months in spreadsheet.
Sounds simple enough, right? Should be a straight forward ticking exercise & include last 3 months.
But then you get started and find that youve been provided with:
-incomplete file of backup documents
-spreadsheet with first 9 months of transactions that doesnt balance, has duplications and omissions
-Business Bank account statements, not all transactions are put through the business bank account
-access to online software.
Being resourceful you look at the transactions on the online software and find that there are also duplications and omissions between the software and the spreadsheet. Some duplications are also processed differently.
You also discover that there are inconsistencies in the way expenses are categorised and processed, that capital introduced and drawings are also processed in the P&L. This indicating that every transaction should be reviewed.
Now you really wonder what other errors there are, the implications, how long will it take. The fixed fee quoted has already been totally blown out of the water.
At this point what would you do?
Immediate questions that come to mind are:
When you do accounts for a sole trader where they want their final accounts for the year, do you check all their entries and original documents to ensure they've entered them correctly and youve captured everything?
Do you do a complete multi-dimensional reconciliation? In my mind Im thinking Id have to in order to come up with reliable accurate accounts that captures everything.
Not sure how much help this will be, but it might, at least, get the ball rolling.
What the sole trader is buying from you is his accounts in acceptable condition to file with HMRC. To get his online bookkeeping to reflect this, I would regard as an additional service and I don't see why it should be absolutely necessary.
The customer has no faith in his own reports. He's broken the agreement by not, in fact, providing the backups. Can he now make the backups easily available. If not, then this gives you a little window to delicately revisit the terms of your agreement.*
I don't think sending him elsewhere is an option as your reputation may suffer if you don't fulfil your side of the bargain.
We're in an unenviable position in this three way business. The trader is buying from us, but it is a third party who, primarily, gets to say, if the product is acceptable.
The presumption when taking on a non-bookkeeper is that everything will need to be re-done. I'd seriously consider banging it through the system you're most comfortable with to produce a good set of accounts. With a bit of luck, your customer will understand that you've promised too much to begin with, but you could start off the next year properly for him on that online software.*
With a bit of luck, this won't take as long as you may fear, depending on what type of business it is.
I think this is probably bread and butter bookkeeping for most of us. The situation you present is typical of many small businesses. It normal starts with the owner trying to save a few pounds (and who can blame them) and ends with this.
If the spreadsheet and accounting package don't match the source documents I would disregard them. I would sit down with all the invoices, receipts and bank statements and start again.
The important bit here is making sure the owner has supplied you with everything you need. If there is not a bit of paper to back up a purchase then it never happened.
I always make it clear if the client is providing the records on spreadsheet etc. that the price is based on them providing accurate records, if I find they are not accurate then I would tell them and the price to redo them and let the client decide. The value to the client is ensuring that the tax man has accurate documents and the tax paid is as little as it can be without breaking the law or getting an investigation that throws up issues.
If the client doesn't want to pay for the service they need then wave them on, it's not worth cutting corners with a job like this, it WILL come back to bite you on the bum.
Many thanks Tim and Kris for your feedback. It really helps to know how others would treat the same or similar scenario. I welcome all guidance and thoughts so I can clear the fog in my mind.
I suppose I struggled with understanding what is included (how far to go) in the bookkeeping fee before it becomes an additional service, as I dont like to cut corners or leave something out. And yes Kris (I love it) I dont want it to come back to bite me on the bum!
When provided with a spreadsheet or software holding the processed transactions on the understanding that it is accurate should we still check all transactions for accuracy and backup documentation before proceeding? Or do we only question if something jumps out to say otherwise at which point fees and options can be revisited with the customer?
In the above scenario the owner believed that everything was there and if I hadnt compared the different elements and just gone with the file there would have been many missing transactions and the outcome different again.
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PS. I don't understand why my apostrophes are not coming through.
-- Edited by Just Fascinating on Monday 29th of October 2012 12:18:49 PM
Thanks MarkS and Tim, all wonderful food for thought.
Yes customers I believe are mainly looking for the lowest possible fees (totally understandable), so making checking everything too costly.
So this is what I'm getting from this thread.
That I don't need to check every transaction and back up, just do 'sanity' checks & the examples you've both given, that the onus is on the customer and make it clear to them. That I mustn't worry if it turns out they hadn't given me everything.
For final accounts I don't have to use their software? I can just start from scratch in my own if need be.
That should they want everything checked for accuracy, that they haven't missed or duplicated anything, etc.. that's another service - explaining the difference between the services and that they could have different outcomes, the onus still being on them but the benefit being confidence in that how they're processing is right for their needs and/or guidance on how to improve.
I think I'm seeing my boundary line ... Although stopping myself from going to the nth degree will be hard.
I'm also curious to know if anyone else has found this discussion useful.
Any other ideas and thoughts?
Many Thanks
Brigitte
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Figured out that when I paste from Word I lose most of my punctuations - must remember that!
-- Edited by Just Fascinating on Monday 29th of October 2012 06:23:16 PM
I check all transactions as to my mind the client is paying me to protect them from themselves and to do any less than that would not be fulfilling my professional duty to the client.
I appreciate that will be at odds with some peoples approaches that adopt the materiality threshold approach of auditors but that misses the difference between accounts prep and audit.
An audit is an exercise to provide independent confirmation that nothing has come to the auditors attentions to make them believe that the figures in the financial statements are materially misstated either individually or in aggregate.
The preparation of financial statements should never create a situation where the auditor needs to qualify their report no matter what data sub populations are chosen in their substantive and analytical procedures which will be based upon a cross section of data which will include a random element. The results then being extrapolated across the whole population.
Certain larger transactions will always jump out as requiring further investigation but it always has to be remembered that a one thousand pound misposting is no different to 100 £10 mispostings or a thousand £1 ones. Even though the first could immediately be above the materiality threshold whereas the others might only be above the threshold in aggregate.
In addition to checking all postings I also demand to see all original documentation.
I will also only accept internet printed bank statements if I actually saw them printed but that's just something that was beaten into me by an auditor friend of mine who will only accept original documents and if not available they must be sent to her by the bank, not by the client.
No matter what you do always put yourself in the shoes of the HMRC inspector coming in to look at the books. Seeing things through their eyes will make you review how you look at them yourself (which from the sound of your last post is similar to my approach anyway).
HTH,
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
At the end of the day you are preparing the accounts based on the information the client has supplied. If they say there sales are £20k then the sales are £20k. I wouldnt go demanding to see all the invoices supporting this and checking they add to £20k.
I would do things like reconcile the bank, confirm fixed asset register, get a list of debtors and creditors. But i would verify the the P&L mainly by analytical review and confirmation by client of unusual variances. Would always analyse tax sensitive accounts such as repairs, professional fees, entertainment etc. But that about it.
If i was to do 100% verification then my costing would be double the fees.
Though each to their own. At end of the day it is self assessment and the client is ulitmately responsible for what they sign.
Thanks Shaun. Your statement of I check all transactions as to my mind the client is paying me to protect them from themselves and to do any less than that would not be fulfilling my professional duty to the client. Sums up my feelings too and brought on the dilemmas (fog).
It never occurred to me that this transition of being employed to being in practice would raise so many questions.Reading pricing threads have been great but also raised questions once real life set in, for example with the above scenario.
In employment I always insisted on accuracy (putting in controls and processes to aid it) from grass root level be it £1 or £100k as in my mind it instils trust in what youre looking at and saves money in the long term. The final accounts and management accounts are then more meaningful and valuable to the business owners and management team. Otherwise it can very easily and quickly become just an estimate. As you mention all the £1 do add up and can become substantial depending on the type of business.
With dealing with new customers that trust in what youre working with is not there yet.In my mind the only way to establish it is by checking everything.But having to check everything is very time consuming, far more than starting from scratch and will be different from customer to customer.So knowing that customers generally shop around
Most pricing threads appear to have the consensus of not charging a set up fee, which to me checking everything would be part of the set up, and that it is included in your normal fees.
Im having a hard time seeing that cost incorporated in transaction fees Ive seen quoted. Hence my question of how much do we check.
If charging by the hour, generally how many hours do small business owners / self-employed find acceptable for checking their data if at all?
If trying to charge on value, how do you determine that charge when you have no idea on what youll be given to work with? & how would you put it to the customer?
Personally I would prefer to work with fixed fees (as Kris says it is fairer for the customer) or value based but at the same time ensure I am making a living.
What they paid for accountancy last time will give you a good idea on how much time you ought to be spending and how much checking this will include. As you can imagine, client's are often looking for low tax and low fees.
Obviously, this particular client's books are in a pickle but even in a good year, I doubt you'll find many similarities with your employment. For instance, you might check every document to every transaction and ask them a hundred questions on margins, procedures and daily takings only to find out from HMRC, they've got a completely different cash business on the side.
Suggestions :-
Balancing the cash account by analysing that received, that withdrawn from bank, and that paid out. Cash overdrawn is impossible so you have to consider private monies introduced or insufficient cash received. The bank analysis may be the graft but you have something to balance to!
Income to sustain the lifestyle (including tax credits and household income)
Until you're confident enough to argue the hind leg off a donkey to defend them.
I don't need to check every transaction and back up, just do 'sanity' checks & the examples you've both given, that the onus is on the customer and make it clear to them. That I mustn't worry if it turns out they hadn't given me everything.
I think I'm seeing my boundary line ... Although stopping myself from going to the nth degree will be hard.
Whole idea of the "there or there abouts" (Robh's trademark) approach is a totally alien cocept to me as I come from a background of major zero error tollerent financial systems.
I can appreciate Mark and Tims arguement and I can see the time advantage of not crossing every t and dotting every i but unfortunately thats not the way that I'm wired.
The final responsibility is however always the clients. It is their responsibility to prepare financial statements and it is their signature on the financial statements so there is nothing amiss with other, faster approaches. Its just not my approach and from the sound of it, not naturally yours either!
We've actually had this debate on the site before with Bill (Wella) and myself taking one corner and Rob (Robh) in the other. Tim and Mark would fall in Robs camp and as I say there is absolutely nothing wrong with that and it's probably a damn site more cost effective than my apploach lol.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Brigitte, I find this discussion very interesting and useful. It is something I have come across. Even if you charge per hour there is a limit to how much time you can reasonably expect the client to pay. I am definitely in Shaun's corner on this one, I like to cross the t and dot the i. We don't only have to satisfy HMRC and the client but also the clients accountants, they need to have confidence in our work. Client will not be pleased if their accountants charge them to check our work.
Shaun and Sylvia, apologies for delay in getting back (family emergency!).
Shaun I can totally relate to where you're coming from and you're right it's not my natural approach to work "there or there abouts". Now understanding the other approaches has helped me tremendously in getting some clarity.
Sylvia thanks for your post. It's nice to know that this discussion is useful to others too and that I'm not the only one. Finding that balance without becoming a total charity for me is hard.
Thank you all for your thoughts and guidance on this topic.
It really helped me have a positive and helpful meeting with my customer, instead of one that could have gone horribly wrong.
It turns out that their belief of being a qualified bookkeeper is having a Sage certification!
