Is your small business accounting system in a a bit of a mess? Have you fallen behind on bank reconciliation, mixed up your personal and business expenses, or perhaps haven’t looked at your accounts in months? Now suddenly, the Inland Revenue wants its income tax, GST, or provisional tax due, and you’re stressing out.
Don’t panic. It happens! Here’s what to do next.
Option 1: Fix It Yourself
You could choose to tackle your accounts even when things are a bit of a mess. Often this is driven by a desire to save money, a sense of responsibility, or simply not knowing who to turn to. Hopefully, it just takes a couple of days or a weekend and it's sorted.
But for some, what might start as a well-meaning attempt to get back on track can quickly become overwhelming, especially when the numbers don’t line up or an IRD tax deadline is looming.
The pros of doing it yourself are that you can look back on your books, identify any issues, and fix them. It will also give you a good idea of how you are spending your money, and if you don’t quite understand something you can always refer to the IRD website for information. However, there is always the option to get help from a professional if things just aren’t adding up.
Option 2: Get Help From a Professional
The second option is to get help from a professional bookkeeper or accountant. I don’t know who said this, but they were right, “You pay for good bookkeeping, one way or another.” Whether that be in time or money.
The easiest way to work out if it’s worth hiring a bookkeeper is to look at how much time you’re spending doing your own books, then compare that to what you could earn if you spent that time on your business instead.
For example: If you’re a self-employed plumber in Tauranga charging $120 an hour and you’re spending 6 hours a month wrestling with invoices, chasing payments, and reconciling accounts, that’s $720 worth of billable time gone.
Now compare that to hiring a local bookkeeper who could manage your GST, income tax, bank reconciliation, etc for $75 per hour depending on your needs.
You’re trading $720 of potential earnings for maybe $600 - $1000 in bookkeeping per year*, and getting back your evenings and your sanity. Isn’t it better to focus your energy on the activities that are making money for your business and find experts in other fields?
*Prices are an estimate for end-of-year accounts and tax returns for a small business; please contact me to discuss your specific bookkeeping needs.
Struggling With Outstanding Debt?
The number one reason a business owner contacts a bookkeeper or accountant when the books are getting out of control is a looming tax deadline or overdue debt.
By law, you must file your tax returns on time, unless you have applied for an extension, and the Inland Revenue do charge penalties for late filing. To find out when each return is due, click here.
If you have overdue tax debt, it isn’t going to go away. The Inland Revenue offers flexible payment plans, and contrary to popular belief is willing to work with businesses facing financial difficulties. They understand that sometimes circumstances can be challenging and are more likely to assist if they understand your circumstances.
If you’re struggling with outstanding debt, there is support available.
Get Help Before It Escalates
Often, the biggest barrier to hiring a bookkeeper or accountant is cost. If you’re a small business, sole trader, self-employed and/or just starting out, you may not be earning much. But it’s helpful to remember that your bookkeeper or accountant is actually a business expense, so this can help lower the amount of tax you pay—essentially saving your money in the long run.Where it starts to get costly is when you leave it too long to reach out for help.
If a business owner has kept up with their annual books, the annual cost of bookkeeping with me would be roughly $600 - $1000**. But when you let your books become a mess, it takes time to sort this out, which pushes up the fees.
Not to mention the likely tax bill you owe, plus IRD penalties and interest. The moral of the story is… don’t be that guy. Keep your books straight, and work with a professional early on, to save costs down the road.
**Prices are an estimate.
You Don’t Have to Do It Alone
I get it. Running your own business is a lot of work. And, if you’re a sole trader or self-employed you’re the director, customer service, administrator, marketing, and bookkeeper. It’s easy to fall behind on bookkeeping until it becomes urgent. But it doesn’t have to be that way. With the right support, your finances can feel less like a last-minute panic and something that drives the sustainable growth of your business.
So, if your books are a mess, don’t panic. Get in touch. I can help you clean them up, and keep them that way.
Need help untangling your accounts?
Let’s have a no-pressure chat and figure out what your business needs to get back on track.
Phone me on 027 212 9569 or email danny@balanceledgers.co.nz
