Eco Solutions Provider Frees Up Time and Energy
Although bank account reconciliation was largely up to date when we started with this client, there were numerous misallocated transactions in the current financial year and also in prior years. These were corrected either in the period when they occurred or in the current period, as necessary. We assisted the tax agent in correcting numerous transactions in the previous financial year, as the tax return had not yet been completed. The previous bookkeeper did not seem to have a very good understanding of bookkeeping principles or the balance sheet, which lead to the decline in the accuracy of the client’s financial records. It took approximately two years for this to become apparent, by which time a lot of damage had been done.
Initially we concentrated on managing their payroll for several dozen employees, using an external project management tool. This project management tool also manages their sales process and integrates staff allocations with sales by location. In addition to processing the complex payroll on a weekly basis, we also now manage superannuation obligations, payroll tax and workers compensation insurance.
We then implemented Dext and improved their accounts payable processes, which has reduced the time taken to manage supplier payments. We assist in controlling the accounts payable by checking supplier statements and reconciling the supplier bills in Xero to the statements. We have also assisted sales managers in streamlining their sales invoice processes.
We cleaned up errors in payroll transactions in the current financial year, including the payroll clearing account and pay item settings as well as termination pays (RDOs had not been paid as Employment Termination Payments).
The GST account required reconciliation, as this was out of balance by many thousands at the end of the financial year before our involvement. This amount was the sum total of errors that occurred over many years, as the Xero file had not been locked after each BAS had been lodged; the figures had changed and the client had not noticed that they had not paid enough GST. There was also significant starting discrepancy of the GST account balance in the conversion balance when they started using Xero three years prior.
Concurrently with correcting the GST account, we reconciled the ATO integrated client account (which was out of balance) and income tax account on the balance sheet (which also did not balance). The client had numerous income tax liability accounts that didn’t make any sense and didn’t balance when added together. Balances were separated into income tax liability accounts for each financial year to clarify reporting.
This client had multiple chattel mortgages for motor vehicles and other assets on the balance sheet; we corrected these accounts, taking up interest and also correctly entering interest on each repayment going forward. This made a significant difference to the amount of profit the company was making on a monthly basis. The absence of these interest charges meant that the business owners got the impression that they were making more profit than they really were, as interest was normally not taken into account until the tax agent prepared the tax return some time after the end of the financial year.
Bank accounts had not balanced for some years and errors totalled in the thousands. We corrected and reconciled the bank accounts.
Accounts payable had become out of balance since they had started using Xero three years earlier. Someone had edited the accounts payable invoices in Xero by unlocking the Xero file and adding invoices prior to the conversion date; these were rectified so that accounts payable returned to an accurate figure.
We streamlined the payroll process, initially by reviewing payroll settings and payments to employees relative to the modern award. We had discussions with the HR consultant to improve areas of non-compliance, such as showing employee classifications on pay slips.
As a result of further recommendations, the client is moving all staff from a complex hourly system, including RDOs and different hourly rates of pay, to salaries in conjunction with advice from their HR consultant. Actual hours worked will be monitored to ensure that staff performance is maintained and that staff who are suspected of improper behaviour are caught and disciplined. Significant administrative and payroll processing efficiencies have resulted from this move.
As requested by the tax agent, we set up the Xero Fixed Asset Register so that accurate depreciation can be posted on a monthly basis rather than being calculated at year-end.
We now post a provision for the income tax expense on a monthly basis to give a better indication to the business owners of the monthly net profit.
We are reviewing their job management software, which has features they don’t need but are paying for. This is currently costing them around $20K per annum, yet a competing software package that meets all of their needs will yield a cost reduction of around 85% after one-off implementation costs.
The owners like to put their books in order on a weekly basis; we carry out bank allocations and reconciliations throughout each week to maintain the accuracy of figures so they can run reliable reports as needed.
In addition to the weekly bookkeeping, we manage all lodgments for the business, including monthly BAS and monthly payroll tax.
Since starting with this client, we have taken over the handling of many tasks from the owners and now manage the business accounts for them on a weekly basis. We have reduced their labour costs and also the owners’ administration time significantly by managing all the accounts and lodgements. This has freed up their time considerably so they are able to dedicate themselves more fully to their business passion. By giving us increased responsibility for their accounts management, they have gained greater flexibility with how they use their time in the business.
We work closely with the owners; they are very open to implementing better business processes, and it’s been pleasing to see the business owners and their managers benefiting from greater efficiency and effectiveness in their operations.
They are very involved and organised and they enjoy having their accounts managed really well; our job is made easier as they are committed to their compliance obligations and are always keen to do things well.
We are making a difference to their peace of mind by being proactive in their accounts management, by taking care of all lodgements, and by being able to advise confidently on their financial position. They have entrusted us to work on their behalf and to work directly with them in taking their business to the next level of success.