What different approaches are there to bookkeeping?
When you are responsible for running a company, it may appear as though the bills are constantly piling up, which makes it difficult to achieve maximum profitability. If you want to have some money left over after all of your bills have been paid, then you need to consider ways to both lower your expenses and boost your income at the same time.
This will allow you to have some additional cash on hand. Today, we will discuss ways in which you can cut the costs associated with bookkeeping, which can assist you in achieving your goals regarding profitability.
When running a business, you are required to keep a record of all of your transactions to ensure the company’s continued existence and efficiency.
It doesn’t matter if your books are kept on paper, are maintained by means of a software programme, or whether you seek the services of an accounts outsourcing firm; what matters is that the method fulfils the purpose efficiently and is immediately available when it’s needed.
Your firm is at an extremely high risk of running into legal trouble and having trouble with its cash flow if it does not have adequate bookkeeping strategies.
Bookkeeping is essential for maintaining an accurate record of your company’s financial transactions and facilitating the preparation of your taxes when they are due.
Your company’s accounting records are essential components of your company since, without them, your figures could become jumbled up on sheets that are too cluttered.
The “Traditional” Approach: Using Accounting Companies
The most time-honored and standard approach to accounting issues is to seek the assistance of a certified public accountant (CPA) or an accounting firm when dealing with a company’s financial matters.
These individuals have numerous advantages in comparison to the do-it-yourself approach, such as the fact that you won’t have to make much of an effort at all and that you’ll have access to expert advice (presuming, of course, that they are qualified).
There are, of course, some negatives associated with this option, such as greater fees and slower turnaround times. Many of these establishments charge high hourly rates for consultations, which can make it challenging to chart a steady course for your monthly budget.
In addition, their services are frequently “behind the times” in terms of integrating technology, which can make it even more challenging to chart a steady course for your monthly budget.
The “Semi-Traditional” Approach, also Known as Do-It-Yourself Software
Do-it-yourself software is becoming an increasingly popular choice that provides proprietors of businesses with a wonderful base from which they may operate independently.
Firms such as Quickbooks offer feature-rich software that is capable of assisting in the performance of complicated accounting activities. Not only are many of these kinds of tools highly helpful, but they may also assist save money when compared to the cost of using a conventional accountant.
This is an excellent choice for those who work in accounting, but it might not be the best choice for those who run their own companies.
Even if you have a reliable piece of software, this does not mean that you are informed about the rules, regulations, or tax codes in Australia.
By submitting their taxes in an incorrect manner, business owners risk losing out on potential deductions, being disqualified as a compliant business, and being subject to audit by the ATO.
There is no way to replace the extensive body of information that an accountant brings to the table with only having completed a college accounting course.
There is still the issue of time to take into mind, even if you are secure enough in your accounting skills. Anyone who has ever attempted to launch their own company is well aware that they will quickly discover that they are being tugged in a variety of different directions.
It takes a lot of work to keep accurate books, therefore owners of businesses need to consider whether or not reconciling transactions is the greatest use of their time.
The Method Referred to as “Fully Automated”: Software as a Service
A bookkeeping service that may be accessed online is the third and last choice.
Users of this hybrid solution have access to specialised software as well as a professional accountant, providing them with the best of both worlds in one convenient package.
A bookkeeper or an accountant will reconcile your transactions so that you won’t have to worry about doing it yourself. Several of these providers provide unrestricted consultation at no additional charge per hour.
They favour, rather, the more contemporary “Netflix” approach, which entails a flat-rate monthly payment.
The knowledge that business owners may seek assistance without the risk of paying additional fees and make more accurate projections regarding their monthly budgets provides them with a sense of comfort.
If you require help with your bookkeeping, you can give us a call on (03) 8568 3606 or email us on [email protected].
This alternative provides all of the benefits (and even more) that are associated with the aforementioned approaches, minus the drawbacks. The burden of deciphering tax legislation and entering data is removed thanks to a hybrid solution that combines cloud-based technology with the human element of a bookkeeper.
Despite this, the solution nevertheless provides a high touch high tech solution.
Strategies for Accountancy Employed by Small Businesses
Create a responsible plan for your monthly spending.
The most fundamental and essential piece of guidance, managing your finances can assist you in saving a significant amount of money.
In order to apportion your financial plan in the most effective manner, tracking your periodic budget is ideal.
Put everything that’s important to know about your financial situation down on paper.
After you have recorded all of your expenses, you can then evaluate this information in light of your income. Review your spending habits and identify any costs that aren’t contributing anything to the success of your business so that you can cut them.
Having access to the Appropriate Bookkeeping Software
In order to put into action an efficient bookkeeping strategy, the software that is utilised for bookkeeping services is the first and most important factor.
The seemingly daunting task of selecting the appropriate accounting software doesn’t have to be as stressful as it may sound.
The goal of any piece of accounting software is to simplify the life of the owner of a small business.
Every individual ought to select the programme that not only helps the process become more automated but also improves the efficiency of the financial procedures.
As a bookkeeper, your time is quite valuable; therefore, you should choose a tool that may help you save time, work more efficiently, and find it easier to handle all of your clients in a single location. It is important for us to consider the features, as well as the technical ability, growth, and utilisation. In essence, it will yield the results that have been listed below:
- Can handle many companies using a single login to the system should only satisfy your needs and not those of anyone else
- Should be equipped with a function that saves time, such as bank feed
- Smart, Quick and easy to get started
- Access through the cloud (i.e. anywhere)
- The MIS reports are simple to distribute.
Utilise the expertise of a professional when filling out your tax return.
Most often, it has been seen that people or businesses submit their own tax returns.
However, if we have income from investments, if this is our first time buying a home, if we own rental property, or if we operate a small business, we should consult with tax professionals.
When you work with specialists, you can be sure that they will offer aid in collecting all of the deductions and credits to which you are entitled. This is one of the many benefits of working with specialists. You will be relieved to know that your expectations will be met in this regard.
On the other hand, if you are the owner of a company, it is expected of you that you would devote the majority of your attention to the management of the business rather than spending a significant amount of time conducting in-depth analysis of the financial data.
Any business could benefit from the guidance of an Account Consultant when it comes to locating answers to day-to-day challenges and figuring out how to overcome them.
However, the fact that you outsource the account does not mean that you may disregard it entirely even if you choose to do so.
Even though the owner has assigned the responsibility for the account to the book-keeper, this does not release the owner from all of the obligations that are associated with the account.
It is important for people to check their accounts on a regular basis, which should be at least once every three months but no less than once each month. It is critical for a person who owns a company to be aware of the financial standing of the organisation at all times.
The fundamental tally takes into consideration shifting patterns in overall profit and loss, expenditures, trade receivables and payables, as well as profit breakdowns by customer. From the viewpoint of an accountant, the owner of a company can also obtain advise or an indication of where the company stands on any particular day.
Document Bookkeeping Process
Only after conducting an analysis of the organization’s operational requirements can a determination be made regarding whether or not to outsource bookkeeping services in whole or in part of its procedures. The company needs to determine its control mechanisms before making the decision to outsource the process (in this case, bookkeeping). It is vital for an organisation to have control over its processes in order to have an internal checks and balances system in place for the process.
Record of Expense Receipts
Corporations should keep expense receipts reason being the same will help for deductions while computing tax returns.
At the same time, it is essential to have a receipt for each expense in order to keep a record of the money spent. During the tax preparation process, it is critical to compile all of the relevant receipts for one’s expenditures and store them in a secure location.
Corporations must have documentation such sales bills, receipts, and deposit slips.
When it comes to bookkeeping, the receipts for expenses are really crucial, and because of this, having an effective bookkeeping strategy is essential for your financial services.
Continually monitor your receivables
An efficient cash flow system of a firm is dependent on having a strong accounts receivable department that assures timely invoicing and collection of payments. To put it another way, it is of the utmost significance to monitor each invoice as well as its status in terms of payments, whether it has been paid in full or in part.
Receivers are not restricted to just receiving payments; in addition, they are tasked with determining the cause of payments that are not issued against any invoice.
Always collaborate with the book-keeper as a team
Every entrepreneur should treat their accounts with the same respect and consideration as they would any other business partner. A visit to the book-keeper by an Owner shouldn’t be limited to just when the business is closing or when they are paying their taxes.
Employing a book-keeper can provide a company with insights that have the potential to transform the way it does business.
The first thing you need to do to ensure your financial success is to keep yourself well organised. If your receipts are unorganised and you are unable to keep up with payments that are past due, wasting time searching for the necessary paperwork would be a waste of your time. In addition, if you are late with your payments, you will be subject to late fees as well as interest charges, both of which will increase to the total amount that is due on the account each month.
There is little doubt that keeping a high degree of organisation can result in significant time and money savings. These benefits can be realised almost immediately.
Your book-keeper can only work with the documents that are given to them to use as references when working on your transactions and financial reports. This is because they do not have access to any other information. It makes little difference whether you handle your books internally by hiring a book-keeper or whether you outsource the task to a third party… You are paying them more than what is strictly essential for their time if they have to spend hours sorting through a tangle of papers.
Getting a system up and operating as quickly as possible is the most crucial thing that has to be done so that the book-keeper will always have access to all of the relevant data for each transaction.
If you buy something and get a receipt, for example, set aside ten seconds to jot down a note on the receipt to record the reason for the purchase so that you can refer back to it later. If you buy something and get a receipt, for example, set aside ten seconds to jot down a note on the receipt to record the reason for the purchase so
When an invoice is paid online, the details of the transaction, including the date the payment was made and the payment method that was used, should be included on the invoice.
If you are looking for methods to cut down on the costs connected with bookkeeping, one of the first steps you should take is to have a discussion with your book-keeper about the most suitable format in which the information should be supplied.
Your book-keeper will provide recommendations and directions that will improve the efficiency of the workflow and enable the book-keeper to spend as much time as possible working on the project. This is due to the fact that your book-keeper is very knowledgeable in things pertaining to finances.
Organization is required at every level of the process in order to accomplish the desired outcome of having a system in place that provides the book-keeper with the information necessary to keep your accounts up to date. This will allow the desired outcome of having a system in place to be achieved.
Use Tested Computer Programmes
Utilizing technology can be an efficient method for organising your funds and reducing the amount of tiresome work that is required.
For instance, a document management system can be used to keep track of your receipts so that you no longer have to store a shoebox full of odd material. This frees up space in your home and makes it easier to find the information you need.
Take a picture of the receipt, and then upload it to the appropriate folder in the cloud storage service. In order to keep better track of everything, your book-keeper should have access to this file.
Another advantage of using a document management system is that it makes it easy to retrieve past receipts if they are required in the future.
When comparing prices or figuring out how much money was spent on various things throughout the day, it might be good to think back on transactions that have already taken place in the past.
There is no need to rummage through stacks of documents in the filing cabinet because this information is easily accessible online and can be obtained with only a few mouse clicks.
Accounting software should also be used if you are looking for ways to reduce bookkeeping costs. For example, this cloud-based software system can pull in the transactions that move through your credit cards and bank accounts.
You have the ability to define categories that will automatically file transactions that occur on a regular basis. Your book-keeper will spend some of their time analysing the transactions that are being processed and checking the system to make sure that nothing has been overlooked.
If you have a reliable accounting programme, you may avoid paying for the hours of people that are necessary for manual data entry, which results in cost savings. You will be required to pay a fee in order to use the software programme; however, this fee will be a very small fraction of the time and money that will be required in order to manually generate the financial reports.
Separate Your Personal and Business Expenses
When company and personal expenses are combined, maintaining your finances becomes more complicated, and it is more challenging for the book-keeper to filter through the many transactions. By establishing a distinct bank account for the transactions related to your company, you can reduce the amount of money spent on bookkeeping.
It will be much easier to reconcile the finances if there is a system in place that clearly differentiates between money spent on business and money spent on personal items. In addition, determining the appropriate deductions that can be totalled when it is time to complete your taxes each year takes significantly less time than it did in the past.
Future-proofing Options Built in
If you are trying to save money right now, cutting corners on your bookkeeping processes could look like an effective approach to do it. If you want your company to grow in the future, changing your accounting systems may be necessary. However, you shouldn’t ignore the potential costs that will be incurred as a result of this shift.
For instance, it may seem like a smart idea to choose the cheapest accounting and bookkeeping system that will cover the demands for your financial reporting, but this may not be the best course of action. Even if this software could solve all of your problems right now, if it is unable to keep up with the expansion of your business in the future, you will have much more significant problems to deal with in the future.
As a result of this, investing a little bit more money right now could wind up saving you money in the long run when it comes to the expense of switching bookkeeping systems. Bring in a team of financial specialists who can offer guidance about the best system built to support the expansion of your firm in the years to come rather than attempting to build your own system as a do-it-yourself project.
Utilise Technology to Increase Precision
When you make an error in your tracking and accounting, it will cost you both time and money to remedy the mistake. Even while mistakes are inevitable, there are a few things you can do to lessen the likelihood that your accounting and bookkeeping procedures will produce errors.
Utilizing technology to perform computations and provide reports is one method that is both efficient and productive. You are able to avoid performing computations by hand and can relax in the knowledge that your figures are correct and unambiguous. Pick a solution that can improve the effectiveness of your business operations while also providing you with actionable financial intelligence.
Reduce Costs by Reducing Waste
How much money is lost every month and year as a result of payments and transactions that are made without being recognised but nonetheless go through? Utilizing the skillset of the team to cut down on waste and eliminate unneeded financial burdens is one way to cut costs when it comes to hiring accounting and bookkeeping services.
For instance, your accountant or book-keeper might be able to offer guidance on how to cut down on overhead costs and how to increase the amount of money collected through accounts receivable. Because of this, you will see an increase in revenue, and you will be able to reduce costs that are not required for the operation of your business processes.
Not only will you have the opportunity to cut back on the amount of money that is spent, but the adjustments that you make internally may also have an effect on the productivity of your employees. When it comes to optimising corporate operations and maintaining spending targets, your employees will grasp the necessity of both. Therefore, the daily choices made by the employees will help support the overall efforts made by the firm.
Employ outside Accountants and Bookkeepers
There is no room for doubt regarding the necessity of retaining bookkeeping and accounting services. The majority of business owners operate under the assumption that employing an employee is the simplest method to bring these abilities into the organisation. However, you need to take into consideration the fact that you are not only adding the financial strain of having to pay the individual’s salary, but you are also adding the weight of having to handle the additional costs associated with having another employee in the office.
The costs of getting whatever you want will build up over time! The following is a rundown of some of the costs that you should anticipate incurring in order to employ an accountant or book-keeper full-time:
- Salary or wage
- PTO IT and equipment
- Office space and utilities
- Overtime pay
A growing number of companies are opting to use accounting services that are provided by third parties in order to avoid the fully laden costs associated with hiring another employee.
If you do the arithmetic, you might be astonished to find out that it is simple to save thousands of dollars each month by hiring an outsourced accountant as an alternative to a full-time staff. This revelation could come as a pleasant surprise.
In addition to being a more cost-effective solution, many business owners discover that tapping into the knowledge of an outsourced team results in a reduction in the amount of stress they experience. Knowing that the service provider has relevant expertise working on the financial reports for other small and medium-sized firms gives one a sense of relief and satisfaction.
If you outsource your accounting services, you won’t have to be concerned about managing employees or providing them with training.
Instead, you may delegate the management of the financial details to your accounting team with the peace of mind that comes from knowing they are handling the necessary activities to keep track of your accounts and reports.
You can get better results in a fraction of the time you might imagine it would take by using one of the many business apps that link with one of the many accounting software programmes. For instance, time-tracking tools allow you to boost your profitability by tracking the amount of time spent on specific activities, clients, or business units.
You will obtain vital data that may be utilised to develop future service offers, conduct payroll, invoice customers, validate the bills of subcontractor vendors, and identify what is working… and what possibly isn’t working. Consider a similar scenario in which you have expenditure reports that need to be sent in or received in order to be paid.
In that case, there are very good apps that can sync with your bookkeeping software and significantly reduce the time spent creating or review those reports.
It is not necessary for small businesses to have extensive accounting systems. It will be much simpler for you to continue in the right direction if you get off to a good start by doing actions such as organising your records and going over your financial reports. You will have an easier time predicting the future financial state of your firm as a result of this.