We all need to save money and so the temptation to do it yourself is always there. Now the DIY trend has hit business too. Many clients are breaking out little pieces of work and going it alone.
That’s absolutely fine but before going it alone, there are two questions you should ask yourself:
1. Can I do it?
Often the simplistic answer is ‘yes’ but perhaps the real question that needs to be asked is, ‘can I do it right?’ We have all heard the saying, ‘I don’t know what I don’t know’ and never a truer word has been spoken.
Take the example of a client whose Company Secretary handles all ASIC lodgements. When new shareholders came on board, the correct ASIC forms were lodged. But they weren’t done right.
The effect of the lodgement was a sale of shares from the existing shareholders instead of the intended new issue of shares. If this wasn’t spotted by us and corrected, the ATO may well have had their hand out for a significant chunk of capital gains tax.
Suffice to say, it’s also cost a bit more to correct the errors than it would have done to let us handle it and get it right in the first place. So, not only was there a ticking CGT time-bomb in the back pocket, but it was also a false economy to DIY on this occasion. Which leads us to the next question….
2. Should I do it?
Just because you can doesn’t mean you should. If you are seriously contemplating doing it yourself, ask yourself these questions:
- Will I do it right and what are the consequences if I don’t do it right?
- Will it take longer if I do it myself and what is that really costing me?
- Will it create more work for someone else and will it cost me more in the long-run?
- Am I thinking about my affairs holistically?
- Would I be better off concentrating on the stuff I know how to do and let someone else take care of this stuff?
This diagram shows the ‘The Top 4 DIY temptations!’ and ranks each one against how easy it is to DIY and how risky it is if you get it wrong.
- DIY bookkeeping – not overly difficult for someone with the right training but just because someone has been to an MYOB course doesn’t make them a bookkeeper. The thing about it is there are lots of opportunities to get it wrong. Most of the time, the meaningful errors will be picked up by your accountant and corrected. Note though – the worse the standard of bookkeeping the higher your accounting fees, so saving money on bookkeeping might cost you more in the long-run. Do yourself a favour and get a good bookkeeper.
- DIY BAS lodgements – pretty easy to do and small errors aren’t disastrous. However, let it go and it can all go pear-shaped pretty quickly. You could end up owing a chunk of money that you’ve already spent and as a company director, you become personally liable for PAYG withholding amounts in the activity statement is lodged more than 3 months late.
- DIY corporate secretarial – it can be a bit tricky dealing with corporate secretarial matters if you’re not experienced. As you can see from the example above, the consequences of getting it wrong can be horrendous. It’s not a big cost item either so we definitely recommend leaving this to the experts.
- DIY corporate structuring – definitely another one to leave to the experts. Accountants and lawyers study for years to make sure they get this aspect right. A good structure takes account of asset protection, separation of risk, flexibility, tax outcomes and of course, simplicity unless complexity is justified. Get your structure wrong and you could be putting assets at risk and you might create six or seven-figure tax issues you didn’t even know existed.
So, what should you do for yourself? Anything involving cash. We’re not saying you need to do it personally, we’re saying someone in your business should be handling accounts receivable, and someone in your business should be handling accounts payable. Cash is king, after all. You need to be in control of cash.