I am involved in a new venture in the "security personnel" (not employees but 'contractors') world and, to be honest, haven't a clue about how the accounts should be done and am looking for any pointers/links on the subject. I'm used to dealing with 'goods' and not people (who aren't on a payroll).
I had originally anticipated posting a BILL to the P/L for each contractor but that will be almost impossible to do. For example, there could be 400 people at a single event and the majority may only ever work for us on the one job. Not to mention the fact the almost none of them will submit a recognisable bill for me to post.
The individual record keeping will be done outside of the accounts (accounts software is Quick Books) and, I imagine, that I will be given a summary sheet with job totals as my 'bill' to post and will offsetting individual payments to the contractors via the bank account against that bill.
As you can probably tell, I'm still a bit hazy about the questions I really need to be asking.
Anyway, any pointers to info I can read up on would be gratefully received.
Thanks, in advance, for any replies.
-- Edited by Finless on Friday 8th of August 2014 05:02:47 PM
-- Edited by Finless on Friday 8th of August 2014 05:09:58 PM
Taking that example, the business is dealing with 400 other businesses (each contractor being a business in their own right... Think of each contractor as a supplier).
Their motivation to produce proper invoices for their business is that if they do not bill you then they do not get paid. Simples.
If you do not keep proper records of who you are paying then there are MLR implications and the tax authorities will go to town on you. Just keeping undetailed summary information is a non starter.
Inputting 400 invoices into the system is not so bad. Taking your time its still less than a mornings work.
The key to remember is that the information that you are able to gather is only as good as the underlying data. If you don't fancy the job of entering all of those invoices into your system then a good quality bookkeeper should only set you back about £20 an hour.
Once in the system you can organise the payments against the outstanding invoices, reconcile them as they are paid and always be on top of where the business is financially.
Your bookkeeping system should always be able to tell you who you owe money to and who owes you money. If you try to circumvent entering all of the information that you need to it will end up as next to useless for running your business.
kind regards,
Shaun.
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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.
We'll of course I would go about this differently from Shaun, to suggest anything else would give my friend a coronary! So I agree that proper records need to be kept, I should hope that the company you are working for have that in hand and assuming it is agreed that these subbies should not be paid under PAYE then posting a summary is perfectly fine so long as proper back up paperwork has been kept to substantiate it. I also think that setting up and entering 400 individual supplier accounts will take much longer than a morning but then allocating the correct payment to the invoice could be troublesome. Let us know which way you go.
The feedback/information I have had so far is that the summary info route is they way to go (and it makes some sense). The '400 job' I mentioned will be one of many (we hope) and entering individual bills for each person is not an option that appeals.
I was hoping that there might be an industry 'standard model' that I might follow.
More research, methinks. :)
If an event if large enough to employ 400 security staff isn't it large enough to emply a bookkeeper to enter the data in a manner that won't end up with the business owner paying a substantial fine for keeping inadequate records and potentially facilitating MLR (#1) which would be much larger than a bookkeepers fee's would have been?
The industry standard model is to do it right and to be able to tell the client (and HMRC if necessary) how much money was paid out to who and when.
Bundling everything into one big bucket doesn't give you the breakdown of information that you need.
Shaun.
#1 facilitation of tax evasion on the part of the contractors comes under money laundering legislation.
p.s. Rob, 400 in a morning is possible with VT, I've done something similar before where an annual client who is a tutor had several hundred students. As you hit inputting invoices for a student that you have not encountered before you enter their base details on the fly. Next time that you are inputting invoices for that client the details will already be there. You should try it Rob. Much (much, much, much) faster than Sage once you get used to it. That said, some like it and some don't. Like Bill I've become a bit of a VT evangalist but then it's software that suits my client base. If I looked after box stackers and shifters who needed stock control it wouldn't be my software of choice.
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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.
Entering one transaction on Sage isn't inadequate record keeping though, so long as the records are held in another place, the financial data can be entered into whatever bookkeeping system you choose in whatever way you choose, so long as the information is correct. You wouldn't enter every sale made by a shop individually into a bookkeeping system, you enter the total for the day/week and if ever required to produce evidence you would refer back to the takings listings/till reports or whatever you use. It's the same principle here - records are held, but only the summary of those records needs to go on to Sage.
I'd suggest a journal dr Subcontractors (expense) cr Subcontractors' fees payable (liability) then post the payments made from the bank account to the liability account. When it's done, you will need to check the liability account has a nil balance and find the error and correct it if not. Even better, I'd switch from Sage to Xero, ensure each payment made to a subcontractor has a specific reference on it and set up a bank rule on Xero to ensure all those payments get allocated to the correct account, so that all that was left was to check the total was correct.
The subcontractors don't have any legal compulsion to produce invoices (unless they are VAT registered, which I'm guessing they aren't) and it would be quite normal for there not to be an invoice in this situation, for the contract or engagement letter or whatever you have to state the pay rate and then everyone to just be paid in accordance with that once the job was done. There is nothing wrong with that, it's perfectly legal and I disagree that there is any MLR issue, for money laundering to be a concern there has to be a dishonesty, an intention to defraud. That isn't the case. It's perfectly legal to pay someone for services rendered without an invoice, or in cash....and if that person doesn't declare the money, that's their issue, there is no legal blame laid at the person who paid them, no MLR implication unless there was some sort of deceit or or collusion to defraud on their part.
Whether in the form of an invoice or a timesheet signed by a supervisor on the day of the event I would expect to see a paper trail for each service provider.
re MLR
I'm not even going to touch on the whole responsibilities related to cash in hand bag of worms (but there in lies a free PAYE investigation).
as you've spotted, part of the posters reasoning was that the contractors were not producing (or not likely to produce) invoices.
Match that to making payments with incomplete details and you have a perfect recipe for ghosts (#1).
An HMRC inspector see's that mix and their assumption will be fraud with the intention to evade tax (so money laundering (#2)) until proven otherwise
I do not feel that the proposed level of record keeping here is sufficient to convince that inspector easily that no fraud has occured.
I'm really not seeing the big issue over doing this properly as opposed to trying to simplify something that already pretty simple at a cost of verifiable detail for short term increased speed.
Shaun.
#1 Ruth and Rob will understand what I'm talking about but for anyone else reading this ghosts refers to payments to suppliers or employee's that do not really exist. Or more commonly exist but have no knowledge of the transaction.
#2 It still seems wrong to me that tax evasion got bundled in with anti terrorism legislation.
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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.
I think if I still did any bookkeeping I might look at VT as an alternative but I do so little of it nowadays that I'm happy to swerve that. Having said that I am going to go down the 'cloud accounting route' soon as clients seem to want it.
I have to agree with everything Ruth says too, which isn't to say doing it Shaun's way is wrong just for my way of thinking overkill. In both mine and Ruth's answer it is clear that all the supporting evidence is available and clearly documented (and therefore not incomplete), duplicating this by setting up individual supplier ledger records in no part makes the bookkeeping more robust...ghosts can walk through walls and be put onto supplier ledgers! I think an inspector would think as this is an 'event' business I would expect to see a high number of casual/transient workers. The inspector would very likely want to see the records but so long as they can be matched easily with the summarised entry and the payments then there should be no problem.
Just to clarify my understanding of the record keeping.
There is an external register of the the 400 contractors, which has sufficient contact details (presumably addresses to send payment to etc), amounts owed, and amounts paid.
If this is the case, I would have no problem making a batch entry into the bookkeeping software.
I think my main concern, would be an indirect bookkeeping one. The security sector, is regulated, each security personnel is required to be licenced. I can see a logistical nightmare verifying 400 licences.
There is also the standard problems of engaging someone, that does not have a right to work in the UK. I can imagine that this type of business encourages non UK nationals to apply.
Having said that. If all the licences are in order (perhaps scanned, or number recorded), and the normal checks are done for engaging a person, I would say that there is sufficient prima facie evidence to say that the entry is legitimate.
