Home – New Forums Money matters Error made by Bookkeeper – how serious?

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  • #971141
    Debbie22
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    Just received the accounts from my bookkeeper and in checking the P&L, noticed that she had a data entry which increased our revenue figures by $10,000. This was simply a keying error when she entered one of our invoices.

    I have asked her to correct this error, but she claims it was not a big deal and will do it next month, and that this would have been picked up by herself as soon as the related invoice was paid by our client.

    What are the consequences of the incorrect recording in the P&L, and how could it have been picked up her end if our P&L is based on the accrual method.

    Just want to make sure that we can avoid errors like this moving forward.

    With thanks

    #1047998
    mbwyatt
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    Morning Debbie,

    My first reaction would be to say to you not to panic. Unfortunately errors are a part of life, but if we handle them well then they can lead to our learning and growing from them. They are integral to our learning.

    Also I would definitely want to avoid getting in to blaming anyone (and I am not suggesting you are). Especially if it’s a once off, you could risk offending someone unjustly. Simply raise the error politely and calmly and discuss it together … likely the bookkeeper will be embarrassed already by the discovery without any added negativity needed.

    Yes it could have had consequences from a tax perspective if you are on accrual accounts as you suggest … but it can also be dealt with quite calmly. You may have incurred $1,000 excess gst and extra tax on the increase in profit. But it sounds like the amount was discovered in time anyway. And if it wasn’t, then both these amounts should have been recoverable via respective amendments of BAS or tax returns.

    When it comes to errors with money many people (quite understandably) can get in to a panic, when we do this we risk acting in a way that is unbecoming to ourselves and we may later be remorseful for. Remind yourself not to panic as it serves no useful purpose and can make mountains out of molehills (even if the molehill has a high dollar value on first inspection).

    Moving forward make sure you keep involved in the bookkeeping. Don’t micro manage but don’t distance yourself beyond your own responsibility as the business owner. Look at the P&L and balance sheet, scan the general ledger, monitor your debtors and creditors (remember you may not have found it either).

    Good luck.
    Mike

    #1047999
    mbwyatt
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    Just a correction to my post it sounds like you were the one that discovered the error.

    Remember to, it’s not just about avoiding them in the future. Though you should use the opportunity to look at your processes and why this happened. I don’t know if your invoicing is integrated in your books or not, but it sounds like not if it has affected the P&L this way. If your invoicing isn’t part of an integrated system then you need to look at how it is being entered in.

    Also look at how to handle them in the event they do happen again, because they will. It may not be the same issue, but it will need the same methodic and rational approach.

    Regards,
    Mike

    #1048000
    Jake@EmroyPrint
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    Hi Debbie,

    What kind of book keeping software do you use? If a figure was incorrectly keyed in, in most book keeping programs I know, it takes only a few minutes to make an amendment.

    If your book keeper works on site and has to travel to your business to make the change, providing it doesn’t mean that you go past a bas due date, I can’t see there being any harm in the book keeper fixing it on their next visit.

    – Jake

    #1048001
    StellarScott
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    Depending on normal size of transactions a professional book keeper should have picked this up for a couple of reasons

    I would normally review debtors listing, revenue and unusual transactions before sending records to client.

    Other concern is if client had to be chased and asked for higher amount may cause friction in relationship

    Main concern is attitude of “its not a big deal”. Are there other errors that are not a big deal

    #1048002
    Rhys
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    Hi Debbie,

    I am surprised that your bookkeeper is keying your customer invoices in the first place. We provide a complete finance department outsource for many clients, but not one of them has outsourced their customer invoicing – this is an aspect of the business most clients want to retain control of.

    Do you raise the invoices in the first place in some other piece of software? And then your bookkeeper re-keys them to you accounting system? If so it probably means your client has received the correct invoice (phew), and that this is just a bookkeeping error (which should have been found, and fixed, and fixed promptly, but as Jake points out if the bookkeeper has to travel for a 2 minute job it may be better to fix up next month).

    Overall this is a very inefficient (costly) way to operate, you should be able to either invoice dirctly in your live accounting system, or if you need something more specialised for some reason interface the invoices you raise straight into your accounts (eliminating the risk of manual keying error).

    Good luck with this, cheers, Rhys

    #1048003
    Edmund of BizIntel
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    There are a lot of good advices from enthusiastic members which is very encouraging to see. Like Rhys said, it is important that your customer/client has received the correct invoice.

    The possible additional GST caused by the inflation of a sales invoice is worrying as a SME cash-flow is always the critical factor attributed to the make and break of a business. Conversely any understatement of sales invoices and the consequential shortfall in declaring GST in your BAS may cause you headache with the tax office and facing possible penalty and interest.

    There is a simple fix to avoid future errors. When giving your sales invoices to your bookkeeper to process in the accounting system, try supplying at the same time a total of sales value and GST to your bookkeeper. Ask your bookkeeper to reconcile the accounting totals from the accounting system to this supplied information.

    In the accounting world we call this “Batch Control Total”, this is a skill commonly used in the older days when we batch process our data but dropped into insignificant when we started to process data directly in the accounting system as we go.

    I hope this will help you to control your data and to remove future hassles

    Edmund http://www.bizintel.com.au

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