Hi All, I was wondering if anyone has any comments/advice about the following. I have been approached by a potential client to do his bookkeeping as he has been trying to do them himself for the past four years but has as he says made a mess of it.He says he used to do the accounts on sage instant and at the end of the year send the disk to the accountant who would make any adjustments and send the disk back to him the problem being that the accountant was using sage 50 and when the client got the disk back he couldn't see the adjustments made. He also said that he is in a mess with his tax as he has not done a return for four years and after many visits from hmrc they just took some figures from his sage instant and said they would work off those and give him an estimate.
He says he wants to draw a line under all of this and start from fresh again which is why he wants me to do his bookkeeping. the problem i have is that how would i be able to get accurate opening balances for his accounts and i would have thought that there must be some rules he must follow with regards to the past few years as surely he can't just say that he wants to draw a line under it and start again.
i know this seems long winded but any comments would be greatly appreciated as i am not sure if it is going to be worthwhile or just a can of worms.
Depending on the number of transactions that have gone through during the four years sometimes it's easier, faster and more accurate to redo the books from the beginning and ensure that you get results that tally to the actual accounts each year.
The maximum that I've done is redoing three years accounts for an IT contractor so it was only around 12 invoices per year plus all of the expenditure (mainly hotels and travel). He paid for me sorting him out but then went elsewhere as said I was too expensive! I was only expensive because his books were a joke. Such are the crosses that we have to bear.
If this does sound like the optimal approach then take a look at the real underlying state of the records and how much information is available for a complete rebuild. Whatever you do make sure that he knows that it will initially be expensive to sort out but once sorted you will know his records and his business and will be able to save him time and money in the long run.
Good luck with this one,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thank you Shaun, He says that he has all of the stuff in black bags and has the sage information on disk for each year so it looks like there are a lot of transactions to go through so i think that to re do all of them would be a mammoth task . on the point of him saying he wants to start again properly and forget about the last few years surely he just can't do this i would have thought there must be some procedure that he would have to follow and do it properly.
wanting to start again is normally a sign that there's something deeper amiss than messed up paperwork.
People need to look upon their business as if it were a child. If things are going wrong you can't simply send it back and get another one.
If we're talking about a limited company then a director has a fiduciary duty of care for the company. If they mess things up then dependent upon the circumstances such may lift the veil of incorporation and the director will find himself personally liable for the debts of the business.
I suspect that in this case your client knows that the company is in a financial mess and his wanting to start again is the desire to sweep away all of the existing debts (which may be well hidden so tread with care!) and start with a clean sheet.
Has this situation been instigated by HMRC coming knocking?
In situations where the books are seriously messed up you may find yourself representing the books of a client without actually knowing the true substance of them.
That his accountant has prepared books on the basis of the paperwork should mean that the underlying records have been confirmed against those books. However, all this talk of the books being in a mess, and especially that the records are in bin liners makes me doubt that.
Even though the accountant prepares the accounts 100% of the responsibility for the contents of the accounts remains with the client! (Not many people seem to realise that bit!).
Anyway, back to this situation. If you've got enough other clients it might be a good idea to let this one go. If not then just think hard on how you are supposed to represent a client where you have no faith in the opening balances.
You're right about this being a mamoth task. I've got a whole room in my house with no furniture in it just so that I've got enough floor space to sort out the shoe boxes full of receipts. I don't envy the task of sorting out multiple black bags.... Hope that non of the receipts are from PC world as the writing disappears off them after about a year.
Remember that as far as money laundering regulations are concerned tax evasion is an offence and if you represent a client without knowing the true state of his affairs you may be implicated in the crime.
It may be a mamoth task but personally I think that you need to go back to scratch with the company. Quote your proper hourly rate for the number of hours that you believe that it will take. If you don't you'll find yourself working on this one for about 20p an hour.
If the client persists with wanting to start again then consult with the clients accountant. You will need for your client to send a letter to their accountant giving the accountant permission to talk with you. (client confidentiality requirements). The client will also need to pay for the accountants time when they are talking to you.
If this is a real mess then this is for an accountant not bookkeeper to sort out as they would need to deal directly with the revenue to agree the position of the company. Such could also instigate a revenue investigation and that's going to take a lot of the accountants time which your client is going to have to pay for.
Without knowing all of the facts or being able to see the state of the books / number of receipts my answers are of course just guesswork. Still hope that you find some little gems of information in them though.
Good luck,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi Shaun, Thank you for your comments, he has said to me that he has had many visits from hmrc and that on the last visit they just took some figures off his sage instant accounts to estimate his tax for the past four years and he doesn't use the accountant any more. I am meeting him on Thursday but i had some doubts after speaking to him on the phone and my initial reaction was to walk away and after giving it a lot of thought and with yuor helpfull comments i think i am going to stick with my gut reaction and tell him that i am not interested . I think you are right in saying that it will all just be one huge mess and when i start digging into it there will be many surprises hidden away.
His accountant doesn't want anything to do with him.
... Just run and don't look back. I think that you've definitely made the right call on this one.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thank you Shaun, I am going to tell him that i think that as a bookkeeper i would be out of my depth sorting out a mess this big and he would be better off seeking an accountant especially as he has hmrc on his back. It is hard urning away a client but i do not want to get a bad reputation and be dragged into this mess.
Definately walk away as Shaun says. I know of someone, it was before my time as a bookkeeper and he thought he could trade without doing books etc, and did so for 5 years, and yes didn't pay tax for that time either.
Anyway the HMRC have caught him and have been investigating him for a long time and he owes them loads, it has cost him a fortune with the accountant to sort out and would have been probably cheaper in the long run if he had just got his books done in the first place!!!
He claims to be innocent of course but the figues never lie and the revenue have evidence on him dating back along time and I'm sure its not over yet. The thing is these Sole traders think its easy to set up in business and say be a builder or whatever, but they never do their paperwork and have no desire to either and then think they can get away with it, but they never will!!!
I also think that without the back up of the accountants and with HMRC knocking on the door, this is one to let go.
It's hard saying no, as a little bit of you feels that they may be genuine and you feel that you are letting them down, BUT they may not be genuine and do you really want to be responsible for these accounts.
I think you know you have made the right decision.
