Specialised professional knowledge
To become a bookkeeper in Australia you need to have relevant qualifications in the field of bookkeeping or accounting – especially if you wish to register as a BAS or tax agent or become a member of the Institute of Certified Bookkeepers.
Those qualifications mean that you have specialised professional knowledge that your clients don’t have. Since you’re offering them a professional service based on that knowledge, they have a legal right to rely on your expertise. And that means that if you make a mistake that costs them money, they can sue you for negligence.
Between legal fees and damages, a negligence claim can amount to tens or even hundreds of thousands of dollars – enough to easily bankrupt a small business. Which is why it’s essential that protect yourself with professional indemnity insurance.
What is professional indemnity insurance?
Professional indemnity insurance is a crucial insurance product for anyone who runs a business offering professional services, or providing advice.
It’s similar to public liability insurance, which covers you in case a person or their property gets physically hurt or damaged on your premises, or as a result of your work. But PII covers you for any financial loss your clients suffer because of something you do.
If you ever have to defend a negligence claim, PII covers both your legal costs and any compensation you have to pay to your client if their claim is successful (up, of course, to the limit in your policy).
Legal costs alone can quickly reach five figures if the claim goes to court, and these costs are not usually covered in any other type of business insurance policy.
I’m a good bookkeeper – why do I need professional indemnity insurance?
As a qualified and experienced bookkeeper who pays careful attention to your work, hopefully you’ll never need to rely on your PII or deal with a professional negligence claim.
But you still need it. Here are the top five reasons why:
- You don’t have to be negligent to face a negligence claim
Unfortunately, you don’t actually have to make a mistake to end up looking down the barrel of a negligence claim. If something goes wrong, your client only has to think you are responsible for them to blame you.
To do your job you rely on the financial information your client provides to you – but if someone makes an error or omission somewhere along the way, or even commits fraud, it can be a difficult process to prove that it wasn’t you at fault. Especially if you no longer have access to your clients’ records.
Even if the claim isn’t upheld when it gets to court, you could have to spend thousands of dollars defending your business before it gets that far. If you can’t afford to mount a defence, your reputation could suffer badly along with your bank balance, bringing your business to its knees.
- You can’t be a BAS agent or Certified Bookkeeper without PII
If you’re an employee you should be covered by your employer’s insurance, but if you’re running your own business you’ll need to show evidence of your own PII policy in order to register or apply for membership.
Oh, and as your business grows you’ll be required to increase the level of cover to match your turnover. These are the TPB’s requirements:
- When you’re handling confidential financial information and interacting with clients’ systems, there are lots of things that can inadvertently go wrong.Even simple mistakes can lead to disaster
What you need to be aware of is that your business could face a negligence claim for something completely unrelated to your professional service – like theft or destruction or loss of your clients’ (or their customers’) data, breach of confidentiality, or even libel.
For example, your IT system could get hacked, leading to client data being leaked or corrupted, or you could accidentally email a file to the wrong client.
No matter how innocent, if you make an error that costs your clients money – orin some way harms their reputation and loses them business – you could end up getting sued for damages.
- If you have staff, you’re responsible for their mistakes, too
Hopefully, anyone you employ will operate to the same high standards as you. But even the most skilled professionals sometimes make mistakes – and unfortunately, you can be held liable for their errors.
If you do take on employees as your business expands, you’ll need to make sure your professional indemnity insurance fully covers their activities too, especially if you’re offering any new service lines that weren’t included in your original policy.
- Professional indemnity insurance is there for your clients
The main purpose of professional indemnity insurance isn’t to protect you. It exists to make sure that your clients don’t go down if you make a mistake that seriously damages their business – and to protect their suppliers and customers from the potential fall-out.
Even if you aren’t planning to become a BAS agent or a Certified Bookkeeper, you’ll find that many businesses have policies in place that prevent them from hiring services from any professional who can’t provide evidence of PII, for exactly that reason. So failing to have a policy in place could cost you the clients you work so hard to attract.
Like any other professional running a business in Australia, PII is an essential investment for bookkeepers and BAS agents – giving you peace of mind and vital protection for just a few hundred dollars a year.