Who is Responsible For A Business’s Bookkeeping?
In most business processes, a crucial and sensitive issue is pinpointing the responsibility for specific duties or functions onto one clearly defined individual within (or without) an organisation. In layman’s terms, “where does the buck stop” when things are going or have gone wrong?
Bookkeeping and accountancy are no different from any other business process, although new technologies and shared functions have unfortunately blurred the issue in the minds of some.
Legally speaking, in the UK, the answer is quite clear. If you are a Director of a Limited Company, you are responsible for the company’s accounts. If you are a Sole Trader, you too have an equal responsibility to record and account for your financial affairs for Self Assessment and Income Tax purposes.
However, many Directors and Sole Traders make the wrong assumption that the moment they hire a bookkeeper or an accountant, they have somehow absolved themselves of these responsibilities. Why is this?
This is partially down to a misunderstanding or a miscommunication about what actual service level agreement has been put in place between a businessperson and their accountant or bookkeeper. Because the businessperson is paying a fee for accountancy or bookkeeping services, they assume that such services are all encompassing when they may not be.
Who is to blame for such misunderstandings? Obviously the circumstances change from accountant to accountant, bookkeeper to bookkeeper, and client to client. However, there are some tips which might prevent confusions and problems down the line:
- An accountant or bookkeeper should talk through the businessperson’s financial obligations from the outset of their relationship with a client.
While this may be covered in detail in any associated contract, it is important that the client is fully appraised as to what is expected from them and that the accountant or bookkeeper in question is confident that the client has understood this.
- The client should be explicit about what aspects of accountancy and bookkeeping they expect an accountant or bookkeeper would do on their behalf.
Both disciplines have many different facets and have different scales (depending on the size of the enterprise in question), and therefore the costs and coverage of an accountant’s services would change accordingly.
Don’t assume that your accountant or bookkeeper will do everything for you as it is likely that they won’t, and if you need high level support for your business’s financial affairs, explain exactly what you need so that they can explain to you where you can get such services if they themselves do not offer them.
- Both accountant/bookkeeper and client should establish when and to what depth their accounts are going to be reviewed.
Just because an accountant and a client may be in constant contact does not necessarily mean that the books or accounts are also constantly under review.
If a client needs periodic reviews of their accounts, they should stipulate this when they employ the bookkeeper or the accountant. If an accountant, quite reasonably, cannot offer weekly or monthly supervision of their books, they too should be upfront on what they arenot prepared to do, while suggesting solutions or alternative approaches for their clients.
It is this last point which is the most interesting of all, because new technology such as Prelude Accounts allows for a greater degree of information sharing between accountant and client than ever before. With online accounting software, a client and accountant can input and review information in real-time and from any location, something that would have been unimaginable 20 years ago.
With a greater connectivity comes the risk of greater assumptions. Just because someone is able to manage their own bookkeeping in real-time does not mean that they are actually doing so. Similarly, just because an accountant is able to review their clients’ accounts on a daily or weekly basis, does not mean that they are actually doing so, even if it can be done as simply as with the click of a button.
Technology can enable all sorts of collaboration between interested parties, sharing of information and processes, both manually and automatically, but it is wrong to make assumptions about any of these. Instead it would be wise to ensure an explicit understanding between the two or more human beings involved as to who is doing what and by when and, specifically in the case of accountants and their clients, that this is embodied in a contract (for example, a Service Level Agreement). It would also be wise to review these arrangements periodically to ensure that they continue to meet the clients’ requirements and to ensure that they are still being carried out as they were specified.
All of this is not to suggest that you should forsake technology such as Prelude Accounts; far from it. What I hope it does show is that technology tools can help improve accountancy processes as long as the people who use them know how to use them properly and the parties involved know what their contractual involvements, commitments and responsibilities are.
As I stated clearly at the top of this article, it is always the business owner who is ultimately responsible for the bookkeeping of their business, but this does not mean that they cannot get high-level support in order to meet their responsibilities. However, the business owner must understand the extent of their responsibilities and of their competences in order to determine the nature and extent of the support that is actually needed. Having done this they should then ensure that the support taken is documented by a contract that clearly identifies the parties’ contractual obligations.
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(by Ian Vickers, Friday 1st August 2014) 0 comments
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