Xero case study

Transposition error gets bookkeeper the snip

Eve runs a successful hair salon in The Hills and has a friendly, professional manner that all her devoted clients love.

She is also a conscientious business owner and knows how easily the books can get on top of her, which is why she appointed an external bookkeeper from get-go.

This financial year seemed the same as any other. In fact Eve was pretty proud of the fact that she’d submitted her year-end paperwork months ahead of the deadline. Then she got on with what she does well – making her clients look and feel great.

Late one Friday afternoon she got a call from the bookkeeper, “You have to come in right away to sign your tax return and pay what you owe.”

Eve was surprised but did what she was told and paid the $2,000 as instructed. Then, six months later, Eve received a call from the ATO out of the blue.

They said her reported revenue did not reconcile with her BAS returns.

“The ATO said there was a $30,000 discrepancy,” said Eve. “I couldn’t figure out why for the life of me, especially when I had done my own bank reconciliations and organised all my paperwork for the bookkeeper.”

When Eve suggested that the ATO take up the matter with her bookkeeper, Eve learned a few home truths.

“Despite getting everything to my bookkeepers ahead of time, they had applied for extensions without my knowing,” says Eve. “When I was called in to sign the paperwork, it had been a rush job and sloppiness caught them out.”

Eve later found out that the $30,000 error was what auditors call a ‘transposition error’. Luckily for Eve this meant that she narrowly avoided being put through a full ATO audit. It also meant that she was on the lookout for a new bookkeeper.

“I now work with a CPA[1] who put me onto a cloud accounting system,” says Eve. “Immediately we could both see my financial situation at any time.”

“We also get our accountants to take on more of a role in our business by following up late payers. They can log into Xero, see which payments are overdue and then put in phone calls to collect the money. They then leave notes in Xero telling me what activity has been done.”

“It’s all very transparent.”

It also means human error is no longer a risk to Eve’s bookkeeping.

“I originally engaged a bookkeeper to look after my business in good faith. The way she put forward her ability to us was as a quasi-accountant. But we know better now and have trust in our new accountant that the job is being done properly, on time and as per the ATO’s requirements.”

“We’re even in a better cash position as our accountants help us keep our debtors under control. We’re very glad we made the switch before it got too messy,” Eve added.

Who would’ve thought that the threat of an ATO audit could be a blessing in disguise?

Let Omnis Group help you how to harness the power of technology to transform your business! As Xero Gold Partners we can guide you on your journey and ensure you get maximum value from your cloud accounting software. After all, adding value to our clients is at the heart of everything we do. Call us in Subiaco on 08 9380 3555 today.

Copyright 2018. Omnis Group @Omnis_Perth

[1] Certified Practising Accountant and member of CPA Australia

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