Doug Constable: In this episode of Doug on Debt: we talk about how book keeping may be better done through an external provider, rather than a family member. Often, business’s get into trouble because an unpaid family member is used to do the books save money, only to prioritise family matters over the running of the business. By using an external book-keeper, you’ll take out all of the emotions from money-management and concentrate on proving the product or service that your business is all about.
The thing I get asked almost every day is, “What can I do to turn my business around?”
One of the main things I see in business is that you are so caught up in doing the job that you never get the chance to actually monitor what the business is doing. And one of the best ways of doing that is with a good book-keeping system.
Let’s say, a plumber goes out and works for two or three weeks, looks in his diary and sees that he has to do all these invoices. And he picks a time, sits down and does his invoices. Now he may have forgotten what pipes he's bought, or parts he’s replaced, or that type of thing. Or, alternatively, he gets his wife to do the books, and that may be fine, but there is always the chance that communication can break down temporarily, and things get missed.
I have seen situations where wives have been doing the books and there hasn’t been enough money at the end of the week or month to pay the GST. So what they say is, “We’ve got to feed our kids at the weekend, or my husband’s worked hard and we should go to the pictures, and we’ll pay the GST next week.” And then of course next week there’s school fees or something else and things start to get lost.
What I recommend to clients these days is to engage an external book-keeper. I encourage this for two reasons. One, a good book-keeper will always be on your case to make sure that you are invoicing every day. Secondly they will send you a weekly report so you can see immediately whether you’ve made a profit or a loss. And if you haven’t made money, there will be an itemised account of everything used on the job, and you can make changes to your work in the future to ensure profit is made.
The other thing that happens is that many businesses quote too low, because they think they badly need the work. But that ends up in little or no profit.
So that is why I always recommend an external book-keeper so that everything is recorded and you can keep score, with dollars and cents, and know whether you are in front or behind. There are so many self-employed tradespeople out there that are not even making wages. They’d be better off just getting a job and working for someone else.
But if you’re going to have your own business, then you need to act like a business person. Have your books done regularly, and get regular reports. And if the book-keeper says they don’t do reports, go and get another book-keeper.