bookkeeping

Bookkeeping For Small Business in Australia 

When you first opened the doors to your small business, you were certainly delighted to meet your first clients and start earning a profit.

But now that you’ve had some time to settle in, you may find that your excitement has subsided. On the other hand, you might not have been as enthused about learning bookkeeping, particularly if you have never considered yourself to be a “math person.”

Keeping accurate books enables you to evaluate the health of your small business and maintains a positive relationship with the revenue service.

So, what exactly does it entail, and how can you make it a little less dull? We break down bookkeeping for beginners.

However, in order to run a small business successfully, you need to have some level of expertise in the art of bookkeeping.

If you are more passionate about, say, selling old books or delivering exceptional life-coaching advice than you are about numbers, the concept could be overwhelming; but, a simple understanding of bookkeeping can revolutionise your business.

The process of recording and organising the financial transactions of an organisation is referred to as bookkeeping.

You will have a better understanding of (and capacity to plan for) your company’s profitability and a more positive outlook on the future of your company if you use the appropriate bookkeeping tools.

To top it all off, it is not necessary to become an expert in calculus in a single night in order to comprehend bookkeeping.

Continue reading instead, because the advice that we provide below can help you acquire a handle on the fundamentals of bookkeeping, which can help your small business prosper.

The management of a company might involve a lot of unpredictability, but having a reliable system for collecting records can make things simpler.

On this page, you will learn about record keeping, including what kinds of records you are required to keep, how records should be kept, and for how long records should be kept.

What Is Bookkeeping?

Before we go in, let’s define what bookkeeping is.

A person who is responsible for the process of documenting and organising a company’s financial transactions is known as a bookkeeper.

Bookkeeping is the process of recording and organising a company’s financial transactions.

Bookkeeping is the primary method by which business owners can determine whether or not their company is profitable.

Keeping an eye on your numbers enables you to identify potential financial challenges at an early stage and find solutions to those challenges before they develop into a full-blown crisis.

Bookkeeping also helps you identify areas of profit expansion, which are regions you may not have spotted if you did not have clear financial reports that are easy to comprehend.

A bookkeeper’s primary responsibilities include keeping track of transactions, sending invoices and payments, managing accounts, and compiling financial statements.

Bookkeeping and accounting are quite similar, however, bookkeeping is what creates the foundation for the accounting process, whereas accounting is more focused on analysing the data that bookkeeping just collects.

Bookkeeping lays the groundwork for accounting.

Recording and categorising all of your company’s financial transactions is an essential part of keeping accurate books.

It entails keeping track of both the money that is spent and the money that is received by the company.

The term “bookkeeping” comes from the practice of managing these responsibilities historically through the use of books and ledgers.

Initially, the transactions would be entered into daybooks, cashbooks, or journals before being moved to a ledger for further processing.

To a large extent, the use of physical books has been rendered obsolete by the advent of bookkeeping software.

For their Australian clientele, Accounts Consultant offers comprehensive bookkeeping services for small businesses.

Over the course of our history, we have provided successful bookkeeping services to companies of all kinds, ranging from sole proprietorships to international corporations.

Your books of accounts will be managed by an Accounts Consultant with the highest discretion and attention to detail.

Our team of bookkeepers will work with you in such a seamless manner that you will feel as though you are working with your own in-house team, which is another promise we make to you: you will feel proud to work with us. Also, we promise that you will feel proud to work with us. Why is it necessary for small firms to keep books?

A solid foundation for a prosperous enterprise is a set of books that are kept up to date, accurate, and in good order. This is why:

  • You are able to verify that the money you are producing is greater than the money that you are spending.
  • You will have access to trustworthy financial information in order to make decisions on planning and budgeting.
  • If you keep track of when you have to pay your suppliers and when you can expect payment from your customers, you can anticipate an impending cash flow crisis and take measures to head it off in its tracks.
  • It is more probable that you may discover fraudulent or improper payments, which could end up costing you money.
  • You can complete correct tax returns.
  • When your financial information is well-organized and well-maintained, it is much simpler for you to collaborate with other parties, including lenders, investors, and accountants.

 

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How To Keep Records? 

You have the option of keeping records either digitally or on paper. Because electronic reporting for tax and super responsibilities is gradually becoming the standard, the Australian Taxation Office (ATO) strongly suggests that businesses switch to electronic record-keeping if it is at all practical.

Once you have your system set up, maintaining your information electronically should make certain activities simpler and save you time.

After deciding on a method of bookkeeping and establishing your own set of financial accounts, it is now time to start keeping track of what is happening with your money.

Each transaction, whether a debit or credit, must be recorded accurately and placed in the appropriate account.

If you don’t do this, the totals in your various accounts won’t add up, and you won’t be able to close the books.

Any company that has employees needs to use single-touch payroll.

This is a requirement. If you have employees, you need modern payroll software so that you can remain compliant while making the process as simple as possible.

If you have established yourself as a firm, there is a good probability that you will be paying yourself a salary and will therefore require a payroll system.

Payroll services will now be included as part of QuickBooks Online’s offerings in Australia thanks to a partnership between QuickBooks and KeyPay.

Interestingly enough, Sage has done the same thing with Sage Business Cloud Financials. On this particular front, it is likely that KeyPay, which is an embedded “best-of-breed,” will emerge victorious.

The payroll feature of Xero is not the company’s strongest suit. In spite of this, it is more than adequate, it is unquestionably progressing in the right direction, and it is leagues superior to the payroll that MYOB generates (Essentials particularly).

If you choose to retain your records electronically, you do not need to additionally keep paper copies of them unless a specific law or rule mandates that you do so.

You also have the option of storing and maintaining paper records online.

The ATO will accept digital copies of business paper records that have been scanned and stored on an electronic storage media, provided that the digital copies are an accurate and clear duplicate of the paper records’ originals and that they satisfy the standards for record-keeping.

After you have scanned and stored an image of your initial paper documents, you are no longer required to physically preserve those data.

Make sure that your records are kept in a safe location no matter which option you decide to go with. You should create backups of your documents and, if at all possible, store them in a safe location off-site. This could involve using cloud storage.

Additionally, the files need to be stored on a computer or other device that possesses the following characteristics:

  • you have access to (including all passwords)
  • is backed up in case of computer failure
  • allows you to control the information that is processed, entered and sent  

Decide On A Bookkeeping Method

Let’s say you’ve decided to maintain your books in-house rather than outsource them to a company that specialises in accounting or bookkeeping.

If this is the case, there is a very important decision that has to be made before you begin putting things together: Are you planning to employ single-entry bookkeeping or double-entry bookkeeping?

When you keep your books using the single-entry method, each transaction is recorded only once.

If one of your clients gives you money, you should only record it in the asset column of your ledger. That makes sense, right?

If your company is straightforward and uncomplicated, then you might find success with this strategy.

If you operate your business out of your house, don’t have any equipment or inventory to sell, and don’t engage in cash transactions very often, single-entry bookkeeping can be a good option for you.

However, the vast majority of bookkeeping is performed utilising the double-entry accounting system, which can be thought of as the financial equivalent of Newton’s third law of motion. According to Newton’s law, “for every action (in nature), there is a response that is equal and opposite in kind.”

Similarly, in double-entry accounting, any transaction in one account needs to be accompanied by an entry in another account that is equal and opposite to it.

Do not let the fact that double-entry accounting is more difficult than single-entry bookkeeping dissuades you from attempting it.

This is not an anomaly in the laws of physics.

The use of double-entry accounting ensures that your books are constantly balanced, which means that you will be notified right away if your earnings begin to decline. In addition, the majority of bookkeeping software will start you out with double-entry bookkeeping regardless. You won’t need to break a sweat when it comes to double-entry bookkeeping now that the software is all set up and ready to go.

On the other hand, it is equally essential for the management of a company.

Manual bookkeeping

Manual record-keeping methods involve the creation of a number of books or ledger accounts. You can typically pick some of these up in your neighbourhood book store, stationery shop, or newsagent.

The following are some potential benefits of using a manual system:

  • less expensive to set up
  • a lower probability that the data will become contaminated
  • a less complicated method to follow in the event that you are unfamiliar with accounting software
  • it is best to avoid creating duplicate copies of the same records

Electronic bookkeeping

The ATO is leaning towards keeping all of its records in electronic format. Therefore, it seems like a good moment to switch to digital. Keeping records digitally has a number of benefits, including the following:

  • a system that requires less physical storage space than one that is manual
  • calculates numbers in an automatic fashion
  • simple to produce reports with
  • simple to replicate and maintain secure in the event of a blaze or theft

Accounting software, web-based systems, and spreadsheets are all examples of the types of electronic alternatives available to you.

Accounting software

You can do the following with the assistance of an off-the-shelf or customised accounting software package:

Investigate the programmes that are recommended by your company counsel or accountant. Check to see that the programme is compliant with Standard Business Reporting (SBR).

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Web-based bookkeeping

A system that is web-based or “in the cloud”:

  • permits you to make changes to your books from anywhere in the world
  • offers secure, off-site storage for your company’s financial documents automatically
  • can be a more cost-effective digital alternative

However, there are some safety concerns associated with it.

Spreadsheet accounting

Are you comfortable using a computer but lack the finances necessary to purchase an accounting software package? You could choose to arrange your financial data using a number of separate spreadsheets.

Point-of-sale (POS) systems

It is possible that when your company expands, you will discover that you need to update or upgrade to a POS system.

These are computer solutions that enable record keeping and help you process sales more efficiently.

Depending on whatever system you choose with, point-of-sale (POS) computers are capable of automatically doing the following:

  • records of sales income and inventories should be adjusted.
  • make sure you have receipts, invoices, and tax invoices all in order
  • processing sales with EFTPOS, credit cards, and debit cards

Before you purchase a point-of-sale system, it is important to give some thought to the functionality that your company need.

How To Do Bookkeeping

Recording transactions and ensuring everything is in order are two of the most crucial aspects of bookkeeping for small businesses. Let’s analyse them in more detail.

Recording every transaction

Record your sales. Historically, this was accomplished by handwriting the transactions into a cashbook or manually entering them into a spreadsheet. The practise of downloading sales data straight into a company’s books via point-of-sale or invoicing software is becoming increasingly common among owners of businesses.

Record your transactions. Every single purchase that pertains to the company needs to be documented. If you want to deduct that expense from your taxes, you need to make sure that you save the receipt or other proof that you bought the item. Again, you have the option of writing these particulars down in a book or on a spreadsheet. You may also automate the process so that all of the debits from your business bank account are imported into the software that you use for bookkeeping.

Depending on whether you use cash accounting or accrual accounting, you can record your income and costs at a variety of different times.

Bringing together each and every transaction

The process of reconciling your business’s books is making routine comparisons between those books and your company’s bank statements to ensure that all of the company’s transactions and balances are accurate and, if they are not, to determine the causes for the discrepancy.

In many cases, it will be necessary for you to account for bank fees, interest payments, deposits, and payments that have not yet been sent to your bank accounts.

Depending on the volume of financial transactions that pass through your company on a regular basis, you may need to perform bank reconciliation on a daily, weekly, or monthly basis, or even less frequently.

However, before completing tax returns, you will most likely be required to at least reconcile your accounts.

This is a very minimum requirement.

When transactions are reconciled as quickly as possible, problems can be detected and fixed far more quickly. It is preferable to complete the task on a regular basis, perhaps on a daily basis, so that the job does not accumulate. You may find additional information in our tutorial that explains how to perform bank reconciliation.

Other responsibilities related to bookkeeping for small businesses

When you maintain the books for a small company as a book-keeper, you could also be responsible for the following tasks:

  • accounts receivable (issuing invoices and making sure they’re paid)
  • accounts payable (paying bills on time)
  • payroll (paying employees)

Other services, including as assisting with financial reports (such as profit-and-loss statements, balance sheets, and cash flow reports), and assessing the success of businesses are also provided by professional bookkeepers. Bookkeepers are frequently also BAS agents and can provide assistance with the preparation of your tax returns.

Selecting a Qualified Individual to Carry Out Your Accounting Duties

Finding the correct accountant or book-keeper might assist you in increasing the profit your company makes. They are also able to assist you with your books and the overall health of your company’s finances.

The following are some examples of qualified financial specialists to consider hiring:

  • Accountants – may assist you with the financial needs of your company in a variety of ways, including the preparation of financial statements, the management of your taxes, and the provision of financial and business advice.
  • Bookkeeper – can maintain tabs on your day-to-day financial dealings, manage your accounts, track down past-due payments, pay your salary, and create some financial statements for you.
  • Business activity statement (BAS) agent – may assist you in preparing and submitting your BAS to ensure that it is done correctly. They are qualified experts in their subject who have obtained professional registration.

Even if you hire a professional to take care of your books or accounts, you are still accountable for any decisions that pertain to your finances.

Check their registrations

Whoever you decide to hire to assist you with your accounts must possess the appropriate skills and experience for the position. They should also be members of a professional organisation that deals with accounting or bookkeeping.

On the website of the Tax Practitioners Board (TPB), you are able to check the registration status of your tax agents, BAS agents, and tax (financial) advisers.

There are two different methods that you can use to check:

  1. Search the TPB register.
  2. On their website, stationery, brochures, or business cards, you should look for the sign that indicates they are a licenced tax practitioner. The kind of registration and the individual registration number of the tax practitioner are both included on the registered tax practitioner emblem.

Conclusion

Double-entry accounting ensures that your books are constantly balanced.

The majority of bookkeeping software will start you out with double-entry bookkeeping regardless.

If you are comfortable using a computer but lack finances, it seems like a good time to switch to electronic record-keeping. It is possible that when your company expands, you will need to upgrade to a point-of-sale system.

These are computer solutions that enable record-keeping and help you process sales more efficiently.

Before you purchase a POS, give some thought to the functionality that your company need. You will most likely be required to reconcile your accounts before filing your tax returns.

It is preferable to complete the task on a regular basis, perhaps on a daily basis.

Bookkeepers are frequently also BAS agents and can provide assistance with the preparation of your tax return. You can check the registration status of your tax agents on the Tax Practitioners Board (TPB) website.

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