Bookkeeping

Bookkeeping For Small Business in Australia

You were undoubtedly excited to meet your first customers and start making money when you first opened the doors of your small business. Learning to bookkeep, on the other hand, may have seemed less appealing, especially if you’ve never considered yourself a “math person.”

Bookkeeping keeps you informed about the state of your small business and helps you stay on track with the ATO. So, what exactly does it include, and how can you make it less tedious? For novices, we break down bookkeeping.

However, in order to run a small business, you must have some knowledge of bookkeeping. If you’re more passionate about, say, selling secondhand books or providing exceptional life-coaching advice than numbers, the idea of learning bookkeeping may seem daunting, but it may transform your business. The practice of recording and organizing a business’s financial transactions is known as bookkeeping.

You’ll feel more secure in your company’s future with the correct bookkeeping tools, and you’ll be able to better understand (and prepare for) its profitability. Best of all, understanding bookkeeping does not necessitate overnight calculus mastery. Instead, keep reading to learn how to master the fundamentals of bookkeeping so that your small business can thrive.

Although running a business might be unpredictable, having a robust record-keeping system can help. This article will teach you about record keeping, including what you should maintain, how to keep records, and how long you should keep them.

What Is Bookkeeping?

Let’s start with a definition of bookkeeping.

A bookkeeper is someone who is responsible for tracking and organizing a company’s financial operations. Bookkeeping is the most common technique for business owners to determine whether or not their company is profitable: keeping track of your numbers allows you to see financial problems early on and fix them before they become a full-fledged disaster. Bookkeeping also assists you in identifying areas for profit growth that you might not have discovered otherwise due to the lack of clear financial records that are simple to read.

A bookkeeper’s job entails keeping track of transactions, sending invoices, processing payments, managing accounts, and preparing financial statements. Although bookkeeping and accounting are comparable, bookkeeping establishes the groundwork for accounting, whereas accounting focuses on analyzing the data that bookkeeping collects.

Bookkeeping entails keeping track of and classifying all of your company’s financial transactions. It’s keeping track of how much money your company spends and how much money it receives.

These tasks were previously managed through the use of books and ledgers, hence the term “bookkeeping.” Daybooks, cashbooks, and diaries were used to record transactions before being moved to a ledger.

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The necessity for physical books has mostly been eliminated by bookkeeping software.

If you require help with your bookkeeping, you can give us a call on (03) 8568 3606 or email us on [email protected].

Bookkept offers complete bookkeeping services for small businesses in Australia. We’ve successfully provided bookkeeping services to organizations of all kinds, from small businesses to international corporations, over the years.

Your books of accounts will be handled with the highest secrecy and care by Bookkept. Also, we guarantee that working with us will make you proud since our team of Bookkeepers will work with you in such a fluid manner that you will feel like you are working with your own team. Why is bookkeeping necessary for small businesses?

An accurate, well-kept set of books is a great start to running a successful business. Here’s why:

  • You can verify that you are earning more than you are spending.
  • For planning and budgeting purposes, you’ll have accurate financial data.
  • By keeping track of when you need to pay suppliers and when you may expect payment from consumers, you can anticipate a cash crunch and take steps to avoid it.
  • You’re more likely to come across errors (or even fraud) that could cost you money.
  • You have the ability to prepare proper tax returns.
  • Having your financial information organized helps working with others like lenders, investors, and accountants much easier.

How To Keep Records?

You can store your records either electronically or on paper. Because the ATO is rapidly moving toward electronic reporting for tax and super duties, businesses should retain records electronically if at all practicable. Keeping your records electronically should make some jobs easier and save you time once you’ve set up your system.

Now that you’ve set up your financial accounts and decided on a bookkeeping system, it’s time to maintain track of your finances.

Each debit and credit transaction must be meticulously logged and reconciled. Otherwise, your account balances will not match, and you won’t be able to close your books.

Single-touch payroll is essential for every firm with employees. You’ll need sophisticated payroll software if you have employees to ensure compliance and ease of use. If you’ve started your own company, you’ll almost probably be paying yourself as an employee and will need a payroll system.

QuickBooks has partnered with KeyPay to integrate payroll as part of their Australian QuickBooks Online solutions. Ironically, Sage Business Cloud Financials has done the same. KeyPay, as an embedded “best-of-breed,” is likely to triumph on this front.

Payroll is not Xero’s strongest suit. Still, it’s more than adequate, and it’s always evolving; it’s light years ahead of MYOB’s payroll system (Essentials particularly).

If you retain your records electronically, there’s no need to save paper copies unless a specific law or rule requires it.

Electronically stored and maintained records are also possible. The ATO accepts pictures of business paper documents kept on electronic storage media as long as the electronic copies are a genuine and clear reproduction of the original paper records and meet the ATO’s record-keeping requirements. Once you’ve saved an image of your original paper records, you don’t need to preserve the paper copies.

Whatever option you choose, make sure to keep your records safe. Back up your files and, if possible, save them in a safe off-site place, such as cloud storage.

The records must also be on a computer or device that:

  • you’ve got access to (including all passwords)
  • is protected in the event of a computer failure
  • allows you to have complete control over the data that is processed, entered, and transferred

Decide On A Bookkeeping Method

Let’s say you want to conduct your books yourself rather than hiring an accounting or bookkeeping agency. In that situation, you must make one critical decision before proceeding with the setup: Are you planning to retain your books in single-entry or double-entry format?

Each transaction is only entered once in single-entry bookkeeping. If a consumer gives you money, you just put it in your asset column. Isn’t that correct? If your business is simple—as in, very, very simple—this strategy may work. If you operate from home, don’t have any equipment or goods to sell, and don’t perform a lot of cash transactions, single-entry bookkeeping can be a good fit for you.

The double-entry accounting system, which is similar to Newton’s Third Law of Motion but for finances, is used for the majority of bookkeeping. According to Newton’s law, “every action (in nature) has an equal and opposite response.” Similarly, any transaction in one account necessitates an equal and opposite entry in another account under double-entry accounting. It’s not physics, but double-entry accounting is more complex than single-entry bookkeeping, but don’t let that stop you.

Double-entry accounting ensures that your books are constantly balanced, so you’ll know right away if profits start to decline. In addition, most accounting software defaults to double-entry bookkeeping. You may do double-entry bookkeeping with ease now that the program is ready to use.

It is, however, as crucial for company management.

Manual bookkeeping

A set of books or ledger accounts is used in manual bookkeeping systems. These are frequently available at your local newsagent, office supply, or book store.

The advantages of a manual system can include:

  • Setup is less expensive, and data corruption is less likely.
  • If you’re not familiar with accounting software, this is an easier system to use.
  • It is common practice to avoid making duplicate copies of the same records.

Electronic bookkeeping

The ATO is transitioning to electronic recordkeeping. So now might be a good moment to go digital. Among the benefits of retaining digital records are:

  • a manual approach requires less physical store space
  • Automatically calculates amounts, making reports simple to create and store in the event of a fire or theft.

Your electronic options include accounting software, web-based systems and spreadsheets.

Accounting software

Off-the-shelf or tailored software accounting packages help you to:

Check with your accountant or business counsel to see what software they recommend. Verify if the software adheres to SBR (Standard Business Reporting).

Web-based bookkeeping

A web-based or ‘cloud’ system:

  • allows you to update your books from anywhere and enables automatic off-site storage for your financial information, making it a more cost-effective digital choice.

However, it does have security risks.

Spreadsheet accounting

Are you comfortable with a computer but lack the finances to purchase an accounting package? Consider creating a spreadsheet system for your accounts.

Point-of-sale (POS) systems

You may need to update or improve your POS system as your business expands. These are computer systems that assist you in processing sales and keeping records.

POS systems can, depending on the system you choose, automatically:

  • adjust sales income and inventory records
  • create receipts, invoices and tax invoices
  • process EFTPOS and credit and debit card sales

Think about the features your business needs before buying a POS system.

How To Do Bookkeeping

Recording and reconciling are the two most critical activities in small business bookkeeping. Let’s dissect them.

Recording every transaction

Keep track of your sales. Traditionally, this was accomplished by entering them into a cashbook or punching them into a spreadsheet. Business owners are increasingly downloading sales data from point-of-sale or invoicing software directly into their books.

Keep track of your transactions.

Every business purchase must be documented. If you plan to claim that expense as a tax deduction, keep the evidence of purchase as well.

You can record these facts in a book or spreadsheet once more. Alternatively, you can automate the process so that all debits from your business bank account go into your accounting software.

Depending on whether you use cash or accrual accounting, you can record income and expenses at different times.

Reconciling every transaction

Reconciliation entails routinely comparing your business books to your bank statements to ensure that the transactions and balances are correct – and determining why they aren’t. Account for bank fees, interest payments, deposits, and payments that haven’t yet arrived in your bank accounts.

Depending on the quantity of transactions that pass through your firm, you may undertake bank reconciliation daily, weekly, monthly, or less frequently. However, you will very certainly be forced to reconcile your books before filing tax reports.

The sooner you reconcile transactions, the faster you can identify and correct problems. It’s best to do it frequently – perhaps daily – to avoid work piling up. More information on how to do bank reconciliation may be found in our guide.

Other small business bookkeeping duties

If you’re acting as a bookkeeper for a small business, you may also be responsible for:

  • accounts receivable (issuing bills and ensuring payment)
  • accounts receivable (paying bills on time)
  • payroll (paying employees)

Professional bookkeepers also assist with financial reporting (profit-and-loss, balance sheet, and cash flow report) and business performance measurement. Bookkeepers are frequently BAS agents and can assist you in filing your taxes.

Choosing A Professional To Do Your Accounts

A good accountant or bookkeeper can help you increase your revenue. They can also assist you with your accounting and financial health.

Consider hiring the following financial experts:

  • Accountants can assist you with your company’s financial needs, such as financial statement preparation, tax management, and financial and business counseling.
  • A bookkeeper may keep track of your daily financial operations, handle your banking, chase down late payments, pay wages, and generate financial statements.
  • Agent for business activity statements (BAS) – can assist you in preparing and filing your BAS to ensure accuracy. They are licensed professionals who are experts in their fields.

Even if you hire someone to manage your books or accounts, you are still accountable for any financial decisions you make.

Check their registrations

Whoever you hire to assist you with your accounting must have the necessary qualifications. They should also belong to a professional accounting or bookkeeping organization.

You can verify if your tax agents, BAS agents, or tax (financial) advisers are registered on the Tax Practitioners Board (TPB) website.

There are two ways you can check:

  1. Search the TPB database.
  2. On their website, stationery, brochures, or business cards, look for the registered tax practitioner emblem. The type of registration and their individual registration number are included in the registered tax practitioner symbol.
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