Are you interested in becoming a bookkeeper but have no experience?
Coming up with a concept and beginning a new firm can happen in the blink of an eye for entrepreneurs. When money starts flowing out the door for expenses like office rent, internet fees, paying workers or contractors, and revenue starts flowing in, remaining up to date and compliant with the ATO becomes a struggle.
A very tiny business might be able to get by with spreadsheets or free online accounting software, but based on my experience dealing with a number of startups, there are some distinct differences between those that fail and those that survive year one.
Setting up your own business is exciting and demanding, and it should provide you with the rewards and control you desire. However, if you want your business to be prosperous, you must get the accounting right. That begins with ensuring that the books are properly set up.
What are some of the basic tips to bookkeeping?
Educate yourself on bookkeeping
If you intend to do it yourself, you must first educate yourself. Find an accounting course or hire someone who knows what they’re doing to train you. Understand the basics of bookkeeping.
Bookkeeping is the process of organising, recording and reporting on the financial transactions of your business. This involves several different processes:
- Keeping track of daily transactions.
- Sending out invoices and managing accounts receivable, including chasing late payments.
- Managing accounts payable, including payment of supplier invoices, expenses and petty cash.
- Maintaining the balance of income to expenses, to ensure the business doesn’t run out of day-to-day money.
- Make sure the books are valid and up to date whenever the accountant needs them.
Good bookkeeping will keep your business running smoothly day to day and will make your accountant’s job a lot easier.
Get the right software
Choose the best online accounting software. A complete accounting solution that can handle all of your invoicing, tracking spending, attaching key papers like receipts, and BAS preparation can cost as little as $29 per month.
Choose accounting software that meets your company’s demands and includes all of the capabilities you desire. You may need to experiment with other items and/or get assistance from your accountant. Make sure the product performs what you need it to do in terms of your business, not just the first one that lands in your lap and/or offers every bell and whistle under the sun.
Prepare your BAS correctly
Correctly prepare your BAS. You will save both time and money by doing so. Don’t assume that each of your income and cost transactions has the correct tax code associated with it.
Run detailed general ledger reports to ensure everything is in order before lodging with the ATO, and set up matching rules when importing your bank transactions to save time.
A certified BAS Agent is the recognized statutory word for a Certified Bookkeeper in Australia.
Set aside time to review your accounts regularly
Every week, set aside one day/morning to conduct your bookkeeping. Regularly performing the activity keeps the task reasonable and allows you to see abnormalities such as unpaid bills and slow-paying customers. Each month, set aside time to evaluate your profit and loss statements, balance sheet, and cash flow. It’s a terrific method to stay on top of how you’re doing, and it’ll also point out any flaws with your bookkeeping that you can have fixed right away.
Every month, reconcile to the bank account. You must verify that the bank balance in your bookkeeping system corresponds to the bank statement. This procedure is critical because it not only assures proper record-keeping, but it also ensures that all errors are corrected on a regular basis. Also, don’t rely just on bank feeds for bank reconciliation because they aren’t always accurate. At least once a month, do a bank reconciliation to the real bank statement.
Engage a good accountant to help set up your business properly from the start.
S/he will help with things like business structure, obtaining an ABN, GST registration (if necessary), payroll setup, BAS and tax lodgements, and so forth. Visit your accountant on a frequent basis – don’t wait until the end of the financial year to seek guidance; visits at the end of the quarter are far more helpful because you can spot problems early and avoid unpleasant surprises later.
Correctly set up your chart of accounts. If you have one, speak with your accountant. If you merely do what you believe is best, your accountant will charge you to make changes at the end of the year.
Keep your personal and business finances separate. Never mix personal and corporate transactions in the same bank account. If you do, your accounting will become disorganized and difficult to manage. Because it will take your accounting expert so much longer to process your accounts in this circumstance, your bookkeeping and/or accounting fees will almost certainly quadruple. Always keep a personal savings account and credit cards for personal expenditures and open a corporate bank account for your business.
Use Receipt Bank or a similar app for your record keeping.
All data must be retained for a minimum of 5 years, according to the ATO (or sometimes longer). Five years of data can quickly accumulate, and you may find yourself with boxes and boxes of files to keep. It’s far preferable to move your data online to an app like Receipt Bank. You’ll save not only on storage space, but also on data entry time, as programs like Receipt Bank do the majority of the work for you!
Avoid using paper.
We believe in going paperless in terms of bookkeeping and record-keeping, which is related to the statement made above. You’ll save a lot of real room in your office, but you’ll also have an online filing cabinet that’s very easy to search and accessible from anywhere and on any device. For this task, we recommend Google Drive and Dropbox storage programs.
Don’t over categorise.
Don’t get too caught up in the technicalities of bookkeeping, such as categorizing staplers, printer ink, and coffee under “office items” – no need to create separate accounts for each item, etc. At the same time, don’t categorize too narrowly. Putting all kinds of expenses in accounts like “general,” “sundry,” and/or “miscellaneous” causes your accountant all kinds of problems. It will prevent you from creating accurate and helpful business reports.
Record all business expenses.
Keep track of all business expenses, including those not paid through the business bank account, such as postage paid in cash. Make a note of them in your draws account (if you’re a lone trader) or loan account (for companies or other). Remember, if you want that tax deduction, you must report every expense!
Record deposits correctly.
Your entire income will be inflated if you mistakenly report loan repayments, personal cash injections, and bank transfers as income. As a result, you may unintentionally pay additional tax.
Pay bills on time.
Failure to do so will harm your company’s reputation and credit rating. Include this step in your weekly bookkeeping routine.
Set up money for taxes as well. Taxes and employee benefits are an unavoidable element of owning a business. It’s easy to go about your business without budgeting for these expenses, and then when they come due, you’re in a panic because you don’t have the finances to cover your liabilities. A better strategy is to open a second bank account and move funds from the business account to it on a regular basis. Saving for these kinds of expenses is a far better option and helps with cash flow.
What qualifications are needed to become a certified bookkeeper in Australia and provide bookkeeping services to clients?
Becoming a bookkeeper is a reasonably simple procedure, and the required certification (FNS40217 – Certificate IV in Accounting and Bookkeeping) can be accomplished in as little as six months (Full-time study). Some people start out in bookkeeping with only a high school diploma and learn everything else on the job. However, it is unquestionably beneficial to pursue further education. A college diploma is not required. The majority of bookkeeping credentials are at the diploma or certificate level.
Steps to Become a Certified Bookkeeper
- Determine your company’s identity and trade name (may trade under your name initially) – Develop a business plan
- Register your business name with ASIC.
- Apply for an ABN and GST. – GST Registration and ABN Essentials
- Consider a business structure (Company either with or without a discretionary trust)
- Understand and evaluate the ATO’s perspective on starting a new business – ATO new business checklist
- ATO GST Checklist for Small Businesses – ATO GST Checklist for Small Businesses
- Make a charging policy decision (Result based or time-based) – Calculators for Charge Rates
- Start by reading books like Bookkeeping for Dummies and Bookkeeping Education Reference Material.
- Decide the software platforms you’ll use and become familiar with – MYOB, Xero, Reckon, Saasu, etc.
- Get some preliminary training from software businesses (see above)
- Get your Certificate IV in Accounting (including the BAS Agent skill set)
- Obtain ICB Student Membership (ICB Student Membership) from your ICB Certificate IV Accredited Training Provider or RTO.
- ICB’s Practical Bookkeeping Assessments will certify you.
Commencing Business (May Occur While the Above Takes Place)
- Register your company (see above)
- Obtain Professional Indemnity Insurance (PI).
- Apply for ICB Membership at the appropriate level – see the ICB Membership Levels page for more information. Apply for ICB membership online.
- Obtain an ICB Practising Certificate after gaining at least one year of bookkeeping experience.
- If you offer a BAS service, you must first register as a BAS Agent. What does a BAS Service entail, and what can a bookkeeper accomplish? What is the role of a BAS Agent?
- Understand and think about ICB’s “How to Engage with a Client.”
- Maintain the registrations and insurance listed above.
- Each year, complete the mandatory CPE (Continuing Professional Education).
- Participate in the ICB Annual Skill Review.
How do you become a certified bookkeeper if you’re working full time or part-time?
Part-time, online, and accelerated learning options are available depending on whether you plan to take this Cert IV course at a TAFE or a Registered Training Organisation (RTO). For authorized bookkeeping courses Cert IV and below, VET Student Loans are no longer available, but you may be eligible for Austudy or a Pensioner Education Supplement.
This training does not qualify you to work as a BAS Agent. To become a Registered BAS Agent, you must complete CPE in bookkeeping (1400 hours of relevant experience) and go through the TPB’s formal application process. The Australian Bookkeepers Network offers a specific service called ABN BAS, which acts as a supervising agent for rookie bookkeepers to help them earn hours of relevant experience. For members of the Australian Bookkeepers Association (ABA), this professional development for bookkeepers can be decreased to 1000 hours. You will enjoy complimentary ABA membership as an ABN member.
How do you become a bookkeeper from home?
It is possible to do bookkeeping from home.
You’re ready to take the next stages in starting your own bookkeeping business now that you have a solid foundation of knowledge, abilities, and experience. Those steps may not even get you past your front door for many.
- No office space rent to pay means lower expenditures.
- Provide extra value to clients by passing on savings.
- Make the most of your time; you’ll spend less time commuting.
- Take advantage of tax benefits by deducting your rent or mortgage payments.
- Increase your flexibility to help you balance work and family life.
- You’ll have to give up a room because home enterprises require specialized space.
- Children and pets may intrude on your business, making it difficult to maintain boundaries.
- Meetings are difficult to organize, and hosting a client meeting is even more difficult.
- You might go insane because it’s the same four walls every day and night.
- It’s easy to work all the time and never switch off.
What you need to do it
The internet, like any other job, allows bookkeepers to operate from home. A few online tools can help you service clients.
- You can have face-to-face meetings even if you’re thousands of miles apart thanks to video conferencing.
- Because not all clients are online all of the time, mobile is a must.
- Laptop – Having a laptop that you may quickly transport to a client meeting is convenient.
- When you’re in the workplace, having a second screen is quite beneficial.
- Online bookkeeping software enables you to work on your accounts from any location.
How an online ledger works
You can use an online ledger to look at and work on a client’s finances from anywhere. The business books are available online, and you can access them from anywhere. If you like, you can both log in at the same time.
It means that anyone who has been given permission has rapid access to one source of truth.
Getting the data onto the ledger
An online ledger is, of course, only half of the solution. You need to get the data into it without having to visit the client on a regular basis. There are software solutions available for this as well. Accounting software can be linked to other corporate systems to retrieve sales and spending data automatically.
Taking advantage of home-based bookkeeping
Not only do internet systems allow you to work from home, but they also help you save a lot of money. You save money by not renting a commercial office space and by eliminating hours of data entry. As a result, you’ll be able to provide services for a fraction of the cost of your competitors. You may pass along part of those savings to your client while still increasing your profit margin.
What challenges will you experience in bookkeeping?
Here are some of the most common challenges small business owners face with bookkeeping:
- Incorrect or late invoicing results in lost revenue and a negative customer experience.
- Losing key receipts or failing to allocate them to the proper expenditure accounts, which could result in overpaying taxes or failing to substantiate the amount to the tax department.
- Your BAS was incorrectly prepared. You will either pay the ATO too much or too little. Both will leave you out of money at some point in the future.
- Time spent by you or an employee on record keeping, data input errors, and communicating with external organizations such as the ATO. Surely, you’d be better off spending your time selling your products or services.
- Business loan accounts cannot be reconciled accurately. It’s really expensive if your accountant has to come in and figure out what’s right or wrong, or if you’re audited.
- When you hire an outside bookkeeper or accountant to remedy your mistakes, you’re throwing money away when it could have been done right the first time.
Setting up your business is exciting and challenging, and will hopefully bring you the rewards you deserve, along with the autonomy you dream of. However, if your business is going to be profitable, it’s vital that you get the accounts right. That starts with making sure you set up the books correctly.