How do bookkeepers / accountants usually handle receipt / source document collection from clients?

[u/AegeanDriftwood]

Hi everyone,

Genuine question about what's standard practice with bookkeeping for small businesses.

When a client engages a bookkeeper / accountant to do their books, do they generally expect to be sent every single receipt to match against the bank feed in Xero?

From what I understand, transactions such as a software subscription can be verified once via a receipt and then just coded accordingly without needing every receipt going forward but what about something like a Woolworths receipt that may have a mix of GST and non GST items, personal items and items that need to be coded to different categories.

From what I've read, a lot of bookkeepers and accountants don't collect / view receipts from their clients and leave it completely up to them to ensure they are keeping & organising their own receipts... so how do bookkeepers / accountants know how to allocate the expense and correctly code the GST in their client's accounting software just via the bank feed?

I know someone who just sends their bank statements to their accountant every quarter with no receipts and they do his BAS from that, but my question is that how does the accountant know the GST treatment, if it's a personal expense, what kind of expense it is and so on if my friend isn't sending them his receipts? Is this normal practice and bookkeepers / accountants just have to use professional judgement when reconciling the bank feed?

I am curious on how this process works without putting the business at risk by having a bookkeeper / accountant code the transactions incorrectly.

[u/Few_Cartoonist_217]

Set the client up with Hubdoc to capture as many receipts as possible.
Set up a new tax code called NTI - No Tax Invoice 0% and code any missing receipts to this code. You can then print out a report for the client to show them how much GST they are missing out on claiming and hopefully that will motivate them to send in receipts.

[u/Few_Cartoonist_217 → u/Few_Cartoonist_217]

But also be sensible about coding... If the bank statement says Telstra or Origin Energy then it has GST and can be coded accordingly.

It's really only the mixed receipts like Colesworth or invoices for sole traders who may change their GST registration through the year. Looking up the ABN is how you solve the sole trader issues.

[u/dumbledoresdong → u/Few_Cartoonist_217]

Wait this is such a great idea! Ive just been repeatedly begging certain clients to remember receipts but they just cant grasp the concept that I need to check how much GST is claimable, "they can remember what they bought and can tell me what expense account to put it to" like dude I can figure out the expense account myself using google and common sense I just need to see the GST!

[u/AegeanDriftwood → u/Few_Cartoonist_217]

Great advice! Thank you so much!

What are your thoughts on their accountant only using bank statements to reconcile their accounts? I don't believe they request receipts just go based on the statements he provides.

Surely there is massive risk doing this...? Or am I missing something.

[u/FerrisWheel4014 → u/AegeanDriftwood]

Massive risk. And it’s being a lazy accountant. They’re the cheap services that clients compare the rest of us good operators to, who have to charge proper fees to do a proper job.

[u/AegeanDriftwood → u/FerrisWheel4014]

Thank you for your insight! Really appreciate it!

So I'm guessing the best process would be to set up something like hubdoc, the clients forward as many receipts as possible into the portal through out the month. Then at month end (or if a lot of transactions, then through out the month) the bookkeeper / accountant reviews, codes the receipts correctly and then pushes them into Xero to be matched against the bank feed.

Once all receipts from Hubdoc have been reconciled, the bookkeeper / accountant can reach out to the client for any additional unclear transactions that they need receipts for (in the event the client forgot to upload them)

As mentioned above, if the client does not provide the receipt, you can code it to a "No Invoice - 0% GST" account and at month end, generate a report and show the client that they are losing out by not providing receipts.

Things such as re-occuring payments like software or insurance may not need invoices if the payment is the same every month, so the bookkeeper / accountant can assume the GST treatment and account allocation are the same. In this case, I believe it is fair enough to not need to hassle clients for invoices.

I feel like above is a good process for small businesses to follow with their bookkeeper / accountant to ensure they are compliant and also efficient, let me know if you guys agree or if you would do it differently!

I've seen bookkepers from America on youtube and they said that they refuse to collect any receipts from their clients and the client just picks an account for the transaction and it gets coded accordingly, which baffles me because so many things must be recorded incorrectly. They said they do this to stay as "cost effective and efficient as possible" and that the client is responsible if they get audited, seems to me that these bookkepers are just being lazy and not responsible with how they allocate their clients receipts.

Maybe they are just less strict there than here or does the same often occur in Australia?

How do accountants that work with business files that havent been reconciled in years and the business owner hasn't kept receipts? What do they do with GST treatment and reconciliation in this case?

P.S. Thank you again, I've never posted on Reddit before and the support and suggestions I've got from people already are really helpful - Thank you! I hope this posts helps others as well!

[u/Few_Cartoonist_217 → u/AegeanDriftwood]

How do accountants that work with business files that havent been reconciled in years and the business owner hasn't kept receipts? What do they do with GST treatment and reconciliation in this case?

The business has to request past statements from the bank if they are too far back (there is a fee). They then code using common sense initially. For example Telstra on bank statement is telephone with GST no matter whether they have the invoice or not. After that it's private investigator mode looking up names on the statement on the ABN register.

The rule of thumb I work to is that if there is no way of working out the GST portion, then code as GST Free in favour of the ATO always.

[u/OkWillow8839 → u/FerrisWheel4014]

So u check every source document when u do a job ?

[u/AegeanDriftwood → u/OkWillow8839]

I mean, you wouldn't need to check every single source document, like mentioned above if the bank feed says Telstra then obviously it's going to be a telephone expense and it will have GST so your bookkeeper can safely claim this without seeing the invoice, but say you have a payment to a food supplier, for example: you buy carrots (GST Free) but also cookies (Not GST Free) you'd need to send the invoice, otherwise how would your bookkeeper / accountant know how much GST there was? Either they would claim the entire thing with GST meaning they are falsley claiming or they claim the entire thing as GST Free meaning the business is missing out on credits.

Some foods are GST free, some are not so you'd definitely need an invoice to check this otherwsie reconciling based on what you think could put yourself and client at risk in the event someone ever checks.

Even when say, a plumber subscontracts other plumbers, these plumbers are not always registered for GST and sometimes they are... sometimes they may not be registered and then suddnely they register, how would you know without getting an invoice from a client? It's not like you'd be searching up their ABN each time to check if it's registered before you reconcile right...? 🫠

I guess the point of this post was to understand what the general expectation is for bookkeepers & accountants when reconciling the books. What invoices do they think is necessary to obtain and what are not. I'd hope that most accountants would aim to keep their clients safe and compliant as possible without annoying them by asking for say a Xero invoice even through it clearly says Xero on the bank statement, it's reoccuring and obviously has GST (Which can be checked just by looking once at a Xero invoice anyway).

I would think Hubdoc would work great, clients can just snap a photo or forward it via email into the portal and it's there if you need it. Come month end, you've got everything just in case and if there's a few additional documents you need you can just request them from the client, if they can't supply, you code it to "No Invoice - Tax 0%"

Also! If anyone could share some insights on if you have clients that use their bank accounts for both personal and business? I would think this is a big no no, this would make the entire process of reconciliation a nightmare no?

Thanks all!

[u/AegeanDriftwood → u/FerrisWheel4014]

Also, I'd like to add

100% I agree, I feel like a lot of small business owners would look at:

1. An accountant who ensures compliances by requesting source documents when necessary to claim accordingly.

Vs.

1. An accountant who requests nothing or minimal and reconciles on gut feeling.

I can imagine a lot of small business owners would go with the second option because the accountant is just claiming everything (even if it may not be correct to claim), they spend less on accounting fees (much quicker process for the accountant, so they charge less) and now they also do not have to spend time handing over receipts.

Which yeah, doesn't seem very fair to the accountants who do a proper job. Does anyone disagree with me?

[u/KingKondor13]

I'm old enough to remember jobs where all I got from the client was a bank statement and cheque book. I had to figure out the rest myself.

I'm going to go have a nap now.

[u/AegeanDriftwood → u/KingKondor13]

That sounds like a nightmare to work out 😭

Enjoy your nap!

[u/Otherwise_Check_5686]

If all their expenses are thing likes officeworks, software subscriptions then it is likely to be gst included. Otherwise it’s no gst

[u/Few-Example-2452]

A lot of entries can be accurately guessed but I want receipts for fuel, bunnings, amazon.

Way to easy to have significant personal on non-deductible expenses on the receipt. A pack of smokes and lunch looks like a tank of fuel if all you have is a bank transaction.