Using Xero and a bookkeeper saves you money

Rob has been a truck driver for 25 years. He can drive any truck there is, and has the licenses to prove it.

He has always preferred to be the subcontractor rather than being an employee, as it gave him better flexibility and tax deductions. He always used to say that once he made $1200 for the week he would go home and spend time with his family, rather than taking on too much. This was in the time when $60 000 per year was enough to provide a very good standard of living.

In 2011 Rob accepted an offer to work on a gas pipeline in Queensland. Long days and great income were normal, and Rob moved his family to a newly purchased home in Geelong. There looked like being no further problems ahead for this honest, hard working man.

The problems started when Rob started to make over $75 000 per year – that is the threshold for having to lodge GST returns.

Because Rob didn’t love doing his bookwork he always made a point of at least saving every envelope in the side door of his truck. Even though a lot of the envelopes were not open, he had everything. In that pile of papers was the letter that said he had to register for GST.

Keeping documents is an important part of good bookkeeping. However what Rob wasn’t doing was reporting back to the ATO what he was doing each quarter, and because he didn’t have a BAS Agent he had no access to the ATO to know what they were expecting from him.

When Rob decided that the next step was to buy his own truck, he needed his books to show the bank. The bank also asked to see a copy of the ATO portal printout for Rob. This is where the plan fell over, but because Rob had kept all of his documents it made the catch up a lot easier.

Rob had an accountant five years ago, who, for many years had done his work and who had done a great job. But this accountant retired and Rob moved from New South Wales to Geelong.

Rob didn’t know many people in Geelong and he was very busy with work, often working seven weeks in every eight.

As with many sub contractors, Rob was unsure about who should be paying superannuation, what his BAS obligations were, whether he should have registered for GST, and where he stood as far as tax was concerned. Because Rob was so busy on the pipeline when he moved to Geelong, he started to earn over $75 000 per year consistently. This meant that Rob needed to register for GST. It also meant that Rob should have lodged many BAS returns.

Unfortunately the result was that the ATO garnished Rob’s account one Friday just before Rob was about to pay his mortgage, as there were many fines and much unpaid GST.

The phone call we organised and made to the ATO (as Rob’s new BAS agents) was a bit scary for Rob, because he thought he was going to be in very big trouble as he had been garnished.

In fact when the call went a lot better than expected, Rob was able to relax a bit and we agreed that we would meet each time he came back from the pipeline, with a view to reconciling his tax bill and getting his plan back on track.

Rob worked three weeks on and one week off for eight months and successfully paid off all of his back taxes and in that same time, with our help and by using Xero, reconciled all of his transactions.

During the process Rob started to gain confidence in his financial situation and together we were able to negotiate a payment plan for the ATO that meant there was enough money remaining to renovate his family home.

After eight months Rob was ready to work a lot closer to home and asked for our help to create a business plan for buying a new truck. When Rob went for the loan, his house value was higher, his ATO portal report was clear, his income was good and stable, and he was successful in applying for enough money to buy his own truck.

Because Rob had been using Xero and because it’s such a simple to use system, Rob now had confidence that he would be able to understand and operate the books in his new business, after such a difficult time.

It is over one year since Rob successfully applied for funding for his new truck now and now he is looking for a new driver for the second truck!

Rob’s invoices are made automatically for his regular monthly truck hire rates. All payments are easily reconciled through Xero, and when it comes time to lodge his BAS return, it can be done with the press of a button and it is extremely fast and cost effective.

The most interesting result for Rob is that for what he used to pay his accountant he is now getting all of his bookkeeping done instead of doing it himself, and he’s getting his BAS statements lodged for the same price.

This is what Xero can do by adding confidence, access to information and ease of use.

While Rob was away working he could log into his Xero account at the same time as his bookkeeper and discuss how the plan was going. Obviously when he was in Queensland, phone calls to home were more special and important to him than the call to the bookkeeper, however he did say that the calls to the bookkeeper made it a lot easier to keep going for the last eight months up north.

He says now that he has caught up and has had great help, he will “never look back.”

We say welcome home and well done.