You have a lot to do as a business owner. From managing your day-to-day company operations, dealing with clients, developing marketing plans, networking, and maintaining a seamless operation. Finding the time to analyse the data, manage your cash flow, and filter through financial spreadsheets is challenging. The truth is that long-term company success depends on keeping your books, maintaining control over your cash, and ensuring compliance. These are 12 crucial bookkeeping pointers that every firm should be aware of, so read them before you spend another late night going over spreadsheets. You may always ask for our assistance if this is too much! We are Melbourne bookkeepers who can manage the accounts of your company.
1. Keep Personal and Business Accounts Separate
At first glance, mixing your personal and business finances might not seem like a big deal. However, every company needs to have its own bank account that is separate from any personal accounts. Depending on the nature of your organisation, a separate business bank account is frequently required. This separate account will save you a tonne of time, effort, and frustrations by making it simpler for you and your accountant to identify the purchases and sales that are pertinent to your company.
2. Automate with Cloud Based Accounting Software
We’re fortunate to live in a time where cloud-based accounting software enables business owners to access their company data whenever they need it. Every month, heaps of documentation need to be sorted through, spreadsheets need to be checked, and manual calculations need to be done. The majority of your hard work is now done for you by cloud-based software. Accounting software may manage your incoming and outgoing costs, send bills to clients automatically on the appropriate due date, and produce reports on your cash flow. There are many different software alternatives available. The one that simplifies your life is the one that is best for you; but, if you’re unsure, you can always consult a professional.
3. Create An Easy To Follow Record Keeping System
Every transaction that your company conducts should be documented and organised so that you can easily update them and manage your cash flow. You may foresee future business prospects and ensure tax compliance in the event of an audit by keeping track of all company documents, including invoices, receipts, and expenses. Even though there are simple solutions to digitise your paper receipts, if you choose to maintain paper records, they should be organised into a straightforward system and kept in a secured and safe cabinet. Having a backup of your records is also recommended in case something is lost.
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4. Set Reminders for Important Deadlines
As a business owner, the majority of your time is spent juggling many challenges. With so much on your plate, it’s simple to forget when it’s time to pay your normal company bills, payroll taxes, and GST. Set reminders for yourself to prevent missing deadlines that might result in a fine or an unhappy partner. You may accomplish this using your smartphone or even your online email calendar. If you often check your physical calendar, even making notes for a few days before the deadlines will help you stay on track.
5. Build an Audit Trail
No matter how meticulous you are with your accounts, a tax audit might still be in your future. You need to leave a paper trail supporting everything you’ve bought and everything your customers have paid for. An audit trail is simply a group of papers that attest to the veracity of the transactions listed in your records. If you encounter any problems with items like tax mistakes, source papers, or missing transactions, your audit trail will enable you to go back and retrace your steps.
6. Know Your Business Expenses
It might be challenging to foresee what expenditures you will incur when you begin operating your firm and which charges are tax deductible. For instance, expenses associated to your income production and the running of the business are tax deductible. You cannot, however, add items that you purchase just for yourself to your accounts. Combining corporate and personal accounts does not provide you unlimited credit for purchases. You must research and comprehend the Australian tax laws’ claimable expenses. If you’re unsure of what qualifies as a deductible purchase, get in touch with your local tax office or a member of the accounting profession.
7. Create Regular Reports
Not only are sound bookkeeping practises crucial for tax planning. Maintaining a record of your cash inflows and outflows makes it simple to carry out routine financial checks. You can make sure that all of your clients pay their bills on time and prevent any reporting gaps using the appropriate accounting software. Although performing monthly checks is a good idea, you may want to look more closely at your accounting and bookkeeping records at the end of each quarter. Pay particular attention to trends like diminishing or increasing revenue, big costs, or evidence of late-paying clients. A good analysis of your figures can assist you in making plans for future cash flow that will be more favourable.
8. Track Cash Payments
It’s simple to overlook this when you’re initially starting out in company, but you also need to keep track of your cash payments. Even on business-related purchases, all money received by the company must first be deposited into the corporate bank account. Although it may be tempting to use the money right now to pay for supplies, doing so might easily disrupt your bookkeeping process. To avoid having to follow up with the customer again, make sure to identify who made the payment when you record cash payments. Speak to a bookkeeper who can help you set up and utilise your accounting software properly if you’re confused how to handle the specifics of a cash payment.
9. Budget for Tax Payments
There aren’t many things more wonderful than realising your company is profitable. You can elect to invest all of your surplus funds back into the business as soon as you see you’re starting to turn a profit. Maintaining your company’s momentum may be done by investing earnings in product development, marketing, and other growth methods, but don’t go in headfirst. Keep in mind that you will need to set aside some of your income for tax-related costs at the end of the year. For you to have enough money to meet your expenses, you should be saving at least a portion of your income, possibly 20%. Choose a different savings account if you find it difficult to retain this money in your company account.
10. Know the Basics
Seeing that your company is profitable is one of life’s few joys. As you start to turn a profit, you might opt to invest all of your additional funds back into the business as soon as you can. The best method to keep your business moving forward is to invest earnings in product development, marketing, and other growth tactics, but don’t go in headfirst. Keep in mind that at the end of the year, you will need to set aside some of your income for tax costs. To make sure you have enough money left over to pay your bills, you should save at least a portion of your income, possibly 20%. Use a separate savings account if you have trouble keeping this money in your company account.
11. Outsource to a Professional Bookkeeper
It is simpler for company owners to manage their accounts without putting in a lot of extra effort thanks to cloud-based accounting platforms like Xero, Quickbooks, and Reckon. Yet that doesn’t negate the need for a professional bookkeeper. There are various advantages to hiring a professional bookkeeper, including:
- save your precious time
- making sure your books are organised and current
- save cash
- keeping up with all of your compliance requirements, such as your tax and BAS duties
Making crucial business choices is simple when your books are expertly organised since you can see clearly how your company is doing financially.
12. Make Your Books a Priority
Last but not least, while it may not be the most fun aspect of operating your business, keeping track of your spending must be a top concern. One error on a tax return or one carelessly handled set of invoices in your bookkeeping records might completely upend your existence. Make sure you have a plan in place from the beginning for keeping your books organised and current. You should be organising your financial data at least once a month, even if you don’t absolutely need to balance everything at the conclusion of each working day.
Commit to Better Bookkeeping
The appropriate bookkeeping method is essential whether you manage most of your accounting yourself or hire a professional to do it for you. If you use the advice above, your company’s cash flow will be easier to comprehend, tax problems will be less of a concern, and there will be more room for expansion.