Technology has played a major role in streamlining and improving the accounting industry over the past 30–40 years.
Bank feeds, automated double entry, journal creation, and real-time reporting have made bookkeeping faster and more accurate than ever before.
However, as accounting software has become more accessible, MAYACHI has seen a growing trend: some accountants reduce their fees by asking business owners to carry out their own bookkeeping after only a short training session.
In the recruitment agencies we support, this approach has often led to significant errors, creating potential HMRC compliance issues and, in some cases, giving directors an inaccurate picture of profitability.
Here are the key reasons why bookkeeping should not be treated as an internal task:
ACCOUNTING SOFTWARE DOESN’T TELL YOU WHAT YOU CAN AND CANNOT CLAIM
One of the biggest risks of doing your own bookkeeping is recording expenses that are not allowable for tax purposes. Accounting software processes data, but it does not provide advice. It will not tell you which costs are legitimate business expenses and which are disallowable. As a result, many directors rely on assumptions, which can lead to incorrect claims and problems with HMRC.
IT TAKES YOU AWAY FROM REVENUE-GENERATING ACTIVITY
Bookkeeping is not where a recruitment director adds the most value.
Your time is better spent:
- Making placements
- Managing and developing your team
- Growing the business
Any task that does not directly contribute to revenue or strategic growth should be outsourced so you can focus on what you do best.
ACCOUNTING SOFTWARE DOESN’T TEACH VAT RULES
Under Making Tax Digital (MTD), every transaction entered into your accounting software feeds into your VAT return, and therefore directly to HMRC.
The software will allow you to reclaim VAT, but it does not tell you whether you should.
For example, VAT on client entertainment is not recoverable, yet the system will accept the entry if it is posted incorrectly. These errors are visible to HMRC and can trigger assessments, repayments, and penalties.
THE LIABILITY SITS WITH THE DIRECTOR
If you complete your own bookkeeping and errors are discovered during an HMRC inspection, the responsibility usually sits with you rather than your accountant.
Most accountant engagement letters state that they are not liable for data they did not enter. Any investigation work required to resolve errors is then chargeable.
By contrast, when bookkeeping is handled by an outsourced provider or your accountant, responsibility for accuracy sits with them.
THE REAL-LIFE COST OF GETTING IT WRONG
Unfortunately, MAYACHI has seen multiple cases in which agencies have incurred fines and penalties as a direct result of their own bookkeeping.
In one recent example, a recruitment agency overclaimed VAT on overheads for seven years. The result was an £11,000 backdated VAT bill, plus fines and penalties.
When the business asked their accountant about this, they were told that because the accountant had not entered the data, the liability did not sit with them.
Doing your own bookkeeping may appear to save money in the short term, but the long-term financial, operational, and legal risks can far outweigh the initial cost savings. Your role as a recruitment business owner is to grow the company. Outsourcing bookkeeping allows you to focus on revenue, strategy, and scaling with confidence.
MAYACHI has many years of experience providing outsourced back-office and accountancy support to recruitment businesses.
We ensure that:
- Bookkeeping is completed accurately and compliantly
- Allowable expenses are correctly identified
- Directors have reliable financial data to make informed decisions
While we are always happy to advise on what can and cannot be claimed, the bookkeeping itself should be handled by an experienced external provider to protect both the business and its directors.
