What is Bookkeeping?
Bookkeeping is a growing profession - it is demanding, exciting, challenging and above all, rewarding. It is about understanding how a business works and then providing accurate figures that enable the business to know exactly how well it is doing. For men and women of all ages and from all backgrounds it provides outstanding career opportunities.
The basic system of double entry bookkeeping was invented more than five hundred years ago by a Cistercian monk called Luca Pacioli. His system still endures today and is used throughout the world, making bookkeeping a truly international profession. The ICB website will give an understanding of how to train to become a bookkeeper and how to become a member of the Institute. It will also help those who already have a qualification or have been working as a bookkeeper for many years but now want the support of a professional association to enhance career prospects.
Bookkeeping today is far more than entering data and reconciling the bank. Bookkeeping is thinking about the needs of the business, thinking about the processes to get a result.
Firstly, what is expected for standard bookkeeping?
- Processing purchases, sales, receipts, payments
- Processing payroll and maintaining entitlements and employee records
- Bank reconciliation
- Providing reporting for preparation of a BAS
- Producing reports for both management and accountant
- Record keeping
Good bookkeeping now includes above and beyond this standard process to ‘think’ more about each stage and ask the questions ‘can we do this better’ and ‘is bookkeeping part of the natural business system?’ Have I captured all the relevant information required to produce an accurate result?
Also note that a required standard should be that any other person, being a bookkeeper or accountant should be able to step in and work on the file for the business without needing to reinvent or research too significantly.
What is a Bookkeeper?
A bookkeeper is a 'keeper of the books'. Bookkeeping isn’t just historical processing. Bookkeeping is “integrated business system management”.
What is a Certified Bookkeeper?
ICB Members (Certified Bookkeeper) have proven that they have performed bookkeeping services at a significant level for a period exceeding 2 years and have a proven level of bookkeeping knowledge.
A Certified Bookkeeper (or “MICB” or “Member”) of the ICB attains that certification having proven that the bookkeeper has performed bookkeeping services at a significant level for a period exceeding 2 years and has a proven level of bookkeeping knowledge.
Increasingly, Members will have achieved the Certificate IV in Bookkeeping.
This qualification is a relatively recent development in the ability for bookkeepers to have their skills and competence formally, but more importantly “relevantly” recognised within the education system.
Clients of ICB Certified Bookkeepers benefit in engaging with a bookkeeper who strives to maintain and enhance their professionalism:
- ICB provide current guidance on matters affecting the clients business. Be that GST or BAS related, be that payroll or general matters related to running a small business.
- ICB provide, require and monitor that their members undertake relevant training and update their knowledge.
- ICB source and refer up-to-date information on software solutions and banking techniques to assist the bookkeeper in not only being professional but also using current technology to be as efficient as possible.
- By networking with other ICB members your bookkeeper has access to their own personal development and troubleshooting of any problems that arise.
- Technical support provided by ICB registered BAS Agents, Registered Tax Agents, qualified and experienced bookkeepers and accountants provide the next level of assistance to your bookkeeper.
- Periodic re-assessment of skills and knowledge combined with the related resources ensure your bookkeeper remains competent to perform professional bookkeeping services.
- The ICB professional Code of Conduct requires and regulates that your bookkeeper meets the standards expected of a real professional service provider
You should expect an ICB Certified Bookkeeper to:
- Communicate regularly and effectively with you. Problems and different expectations arise between the client and the bookkeeper when each goes about their duties without required communication. By reporting to you after each visit, each of you understand where the job is at, the time being taken to process, the expansion of areas requiring attention and what can be expected for the next appointment.
- Provide the output of the bookkeeping work: be that operational reports or simply proof that the Bank reconciles (the type of reports should be agreed between you). This ensures that you see value for the time being spent with you and paid for by you.
- A Member in Practice with ICB must be insured. The ICB has stipulated minimum Professional Indemnity Requirements and enabled its members to source respectable PII cover. PII means that clients have a level of security that should the Member err in some respect, which has financial consequence for you the client, the PII policy will assist in meeting those consequences.
Bookkeeping duties include:
- Recognising what the business does and making sure the customer gets billed
- Issuing and then recording that invoice
- Then making sure the customer pays
Alternatively, how did they record the sale/take that cash for what (Point of sale systems. Registers, the till). Receiving, banking and recording that money.
What is the business process for making money and how should it be recorded?
Bookkeepers are responsible for:
- Tracking down all the ways the business spends money
- Cash payments – trying to get the documents, working out what it is for, recording it
- Is there an ordering system? Does there need to be one? How to record and reconcile the systems
- Supplier invoices to be received, checked for validity, scheduled/noted for payment
- Paying suppliers and recording the payment
- Paying employees and recording the payment and the payroll obligations
- Paying employees and recording the payment and the payroll obligations
- What is the business process for spending money and how should it be recorded?
Bookkeeping isn’t just historical processing. Bookkeeping is “integrated business system management”. Noting that bookkeeping remains subject to what the business requires.
What is a BAS Agent?
The term “BAS Agent” typically applies to a business that contract to a client to provide services to that client to do with their BAS obligations.
The legislation was implemented with a view to providing business with protection and security. It is about the qualifications, experience, competence, professionalism of us as an external person being relied on to assist you with the obligations of GST, PAYG Withholding (payroll), PAYG Instalment Payments, FBT Payments, WET, Fuel Tax and LCT.
Registration of a BAS Agent can be checked here.
Only registered BAS Agents (and Tax Agents) are permitted to advise or help you “ascertain” (determine, establish, discover, make certain) your liabilities, obligations or entitlements of the areas of the BAS. Only registered Agents (other than the business owner or their employees) are permitted to represent the business in dealing with the ATO.
By being a BAS Agent you must:
- Be fit and proper
- Have minimum formal qualifications (eg Certificate IV in Bookkeeping)
- Continue to have sufficient, ongoing, continual relevant experience
- Have an appropriate level of Professional Indemnity Insurance
- Undergo continuing professional education
- Maintain professionalism in accordance with at least the statutory code of conduct
Adherence with the code of conduct reinforces the concepts of:
- Honesty and Integrity
A BAS Agent provides service competently using knowledge and skills to take “reasonable care” to ensure that tax law is applied correctly for the business.
A BAS Agent does not advise nor liaise with the tax office on Income Tax Matters. This is the role of a Registered Tax Agent. Such things as; reportable Fringe Benefits Tax Amounts or Reportable Superannuation Contributions on your end of year Payroll Payment Summaries. Such things as; the Tax deductibility of entertainment or other items, where your ability to claim back GST depends on the tax agents treatment of those items for your tax return.
A BAS Agent is committed to providing expert service and expert advice.
How to Compare and Evaluate Bookkeeping Services
When comparing and evaluating bookkeeping services, we believe that it’s important to consider more than just the hourly rate or fixed fee that you’re paying. I believe that there are at least two considerations. One is the total cost of the service(s) that you’re receiving and the other is the quality of the service that you’re receiving. I’m going to look at each of these aspects. Many people make decisions about their bookkeeping quite blindly, not really knowing what they’re getting and whether it’s good value. Near the end of this article we’ve included a free download of twelve questions that you can ask your prospective bookkeeper and why these questions are important, in case you really want to investigate your options thoroughly.
For more information, click here.
Future of the Tax Profession
We believe that the Tax Economy comprises:
- The ATO as the regulator
- The Taxpayer as the tax paying participant (Consumer/Client)
- The Tax Intermediary as the middleman providing tax expertise and knowledge to the taxpayer (for the purpose of this paper referred to as the Tax Professional (TP)).
The role of the tax intermediary is to provide the expertise and competent application of the tax laws and requirements to the circumstances of the taxpayer. They are not, like a lawyer, an officer of the court, but they are a representative and advisor to the taxpayer in their interactions with the ATO as regulator.
The role of the ATO should be primarily as regulator. To be the government agency responsible for application and enforcement of the tax laws. Part of this role includes the provision of information and understanding about the tax laws so that tax intermediaries can better understand the ATO view and assist taxpayers to meet their obligations.
The TP and the ATO should not consider themselves typically on opposite sides of a fight but each have a role in the tax ecosphere, with different perspectives in ensuring that the tax economy is performing appropriately. The perspective of the ATO is enhanced when working with, co-designing and collaborating on the application of the tax law to the economy. The perspective of the TP is enhanced when working with the ATO to be able to collaborate and be informed by the ATO. (This is not to imply that either side is necessarily always right or always wrong)
The tax economy continues to be serviced by an increasing range of technical solutions, software or computer provided solutions. The ATO has now coined the term “Digital Service Providers” (DSPs) to define these entities. The role of Software Providers, be it commercial accounting products, tax preparation software or similar is not new but with the advancement of technology (some applying the term of Artificial Intelligence) their role needs to be included as a component of, or a service to, the Tax Profession.
The ATO also has adopted the term “Tax Intermediary” to include:
- Tax Agents
- BAS Agents
- Tax Financial Advisors
- DSPs who provide a service in the tax economy
- Tax Professionals
A complete PDF of ‘The Future of the Tax Profession’ is available for download
Artificial Intelligence is Affecting Our World
The advice to accountants about bookkeeping is not correct.
Advisors to accountants are telling them that the developments of AI mean they can take over the bookkeeping. Commentators continue to say that AI will replace bookkeepers and that our jobs are over.
So what are they talking about? They are talking about the type of basic bookkeeping that accountants have been doing for hundreds of years, and that some accountants continue to do. They are taking about processing bank statements… which is about transactions that have already happened – it is simply about creating the records for tax. Mechanical, repetitive processes should be enhanced by the use of the best technology. Data entry is not the extent of ‘true bookkeeping’. In today's world, data entry is such a minimal part of the services a bookkeeper provides to a business owner.
What is ‘True Bookkeeping’?
What does the modern day bookkeeper do?
It is about:
- helping business.
- improving business systems.
- integrating the best technology that is appropriate for a business – to automate as much of what they do as possible.
- managing the technology, and the business systems, to ensure they are performing as intended.
- reporting, validating, and providing certainty to the business about what they are doing.
- utilising all of the above to assist in meeting all of the compliance requirements.
A recent proposal – by other commentators to accountants – includes; “How to ensure your bookkeeping services are low-touch, high-profit.”
It is simply wrong.
– True Bookkeeping is not “low-touch”.
Bookkeeping is integrated business system management: It is working with the business – and the best technology based solutions that apply to the business – to improve their business efficiency, which leads to achieving the other purposes of bookkeeping; effective business process, technology based efficient solutions, efficient and streamlined record keeping, efficient and streamlined invoice generation, and purchase processing. True bookkeeping includes the personal relationship between the business systems expert (the bookkeeper) and the business.
The message to accountants should be:
- The best integration of bookkeeping into their service offering is first to understand what bookkeeping is today and tomorrow.
- That bookkeeping is intensely working with the business, to allow the business to dedicate their time, and utilise their expertise performing the skills of the business, and concentrating on providing the goods and services of the business, while the bookkeeper empowers the business through efficiently providing business systems, recording, reporting and compliance.
- That effective bookkeeping services range from training and equipping the business to do the day-to-day themselves (and then the Bookkeeper manages and reports on the results of the business processes), through to being involved on a daily basis with some businesses.
Accountants Doing Bookkeeping
Irrespective of the relationship that may exist between the accounting service provision of the ‘firm’ and the bookkeeping service provision, our belief is that accountants and bookkeepers should be working together – recognising the strengths of their different skill sets, and having significant communication.
It is working together from the different perspectives that allow the:
Business ↔ Systems/Bookkeeping ↔ Accounting segments
to provide effective and compliant business outcomes, achievable in an efficient manner.
Accountants wishing to take bookkeeping in-house need to be prepared to work hand-in-hand with the businesses in a manner that is far more intense than the traditional or normal accounting relationship.
The concept of ‘low touch’ bookkeeping is a poor provision of very limited data entry services. It would be limited to using technology to read bank transactions that have already happened, and process them into accounting software. This is not cutting edge service provision. It is definitely not true bookkeeping. It is not helping business.
An example: BankFeeds which improve or replace antiquated record-keeping techniques, which might only be as much as 10% of what a bookkeeper should be doing.
An example: Purchase Invoice (from suppliers) scanning software should be implemented, but the processing, authorising and paying requires a professional approach and verification services.
Bookkeeping can be performed by accounting firms, but the provision of ‘true bookkeeping’ will require intense involvement with the business, and a set of integrated business management systems knowledge and skills.