Workers' compensation record-keeping & lodgement l Why is my business not making money? People management
Consequences of inaccurate workers' compensation record-keeping & lodgement
While workers compensation can seem like a bugbear for employers, it’s important to ensure that your records are kept up to date and accurate, and your “Actual Declaration of Wages” lodged. An audit we assisted with recently highlighted the importance of this.
Why was the client chosen for audit?
Because they failed to lodge their 2009 Actual Wages Declaration.
Which years were audited?
2008, 2009, 2010 and 2011.
(one unlodged document meant four years were audited).
What was the outcome of the audit?
- Contractors were under-declared by a significant amount.
- Client records were poor.
- Line items in the expenses ledger often referred to a person’s first name and his role e.g. “Greg Painter”. These were imported from the clients banking records. Matching these strange names to contractor’s business names was near impossible and resulted in a number of tranactions being “taxed” because there was no invoice available to match the claim.
- At one point in the audit we were looking at $360,000 of under-declared “wages” paid to contractors. Only after supplying contractors business names and ABN’s were we able to get these figures down to $190,000, which represented an additional workers compensation charge of $55,000 in tax and penalties.
- ‘ABN only’ contractors were deemed “employees” unless we could prove otherwise.
Correct Business Description?
Our audit produced a silver lining; our client scrutinised the Actual Wages Declaration and noticed they were being rated incorrectly. After successful application, they were able to have the workers compensation charge significantly reduced, because the rate applicable to the correct activity was 3% less than the description on file.
The fees for us to handle this audit amounted to $7800. Our client had applied for audit insurance five days after the initiation by the auditor. Clearly the insurer refused the claim.
- Workers comp is here to stay so pay attention to the lodgement requirements, and your actual business status on the form.
- Pay attention to your contractor’s situation. If they are ABN only, question critically whether you should be covering them for workers compensation.
- Keep good records and ensure that contractor invoices correctly describe activity and do not mention hourly rates unless you accept that the contractor should be deemed an employee.
For more information regarding this case study, or information about how audit insurance can help protect you, please visit our audit insurance web page here, email Rob Douglass, or call Rob on 02-4455 5333.
Follow this link to Workcover Authority NSW's webpage for detailed information about Workers Compensation rules.
We recently ran a business diagnostic program for a client and uncovered an all too common issue with small businesses – you must know your numbers!
In this case the client was not sure why they were not making more money, but thought they just had to sell more. In fact our diagnosis and the actions we put in place proved they had to sell less! Less because on a regular basis the client would have an across the board discount sale and a significant portion of the goods would be sold at a loss!
How can this happen. Well imagine a store with up to 2500 items in stock with a wide variation in margins. When you apply an across the board discount without identifying individual margins you can easily be selling at a loss, and that’s what was happening.
The client had a fabulous stock management system but had not implemented it because “there were so many lines to load - they just did not have time”. The owner was doing it in any spare time available and it had been six months to get it half way.
We employed a data entry operator and in 4 days the program was operational. It immediately made a host of processes more efficient – stock management, ordering, sales invoicing – but the most telling factor was information on margins.
Once it became clear that every discount day was costing serious money we were able to implement some strategies to manage that issue but still offer the clientele great value during the special sales period.
The added cash flows now available enabled the client to implement other great plans which had been hamstrung by budget constraints.
The result is an expanded store, better service, much improved profitability and a very happy owner.
A medium sized firm that had grown from just a few people to 16 in the space of a few years was having difficulty with some of its people. Morale was low, there were lots of gossip groups and no-one seemed to feel very happy with their lot.
The business development team at Hales Douglass met with the senior managers to discuss the current business structure (which was at that time unclear) and what could be done to improve the situation in the workplace.
A new business structure was recommended, one with a little more hierarchy and a change management process outlined. A performance appraisal system was also developed. Specific people within the organisation were given expanded supervisory roles and the business was grouped into teams.
The entire team was kept advised about the process all along and the CEO made himself available to any of the team who were worried about the process. Many did make a visit to his office and all came out feeling a lot better.
The Hales Douglass business development team encouraged the new supervisors to spend quite a bit of time with their new teams, talking about the issues each person had and discussing how to meet the new requirements of the organisation.
Within two months:
- the teams were bedded down
- everyone knew where they stood
- new policies about performance expectation were developed
- new job descriptions were prepared for everyone
- a yearly performance appraisal system was put in place.
Since then the business has grown even more, become even more successful and shown itself to be one of the most friendly, team orientated businesses on the south coast.