Keeping up with accounting tasks can be challenging for any company or organization. But it is especially difficult when you run a small business and do your bookkeeping! To keep things under control, it's a good idea to put a foolproof system that works for your company's size, revenue, and industry while accommodating your hectic schedule.
Furthermore, you want to use a simple, effective process that allows you to quickly and easily track and record all financial aspects of your business. This way, your expenses, invoices, deposits, and other financial information will be neatly stored and accounted for when tax season arrives. So, this article discusses the ten great bookkeeping tips to get you started on the path to bookkeeping bliss for your businesses.
First we will understand what bookkeeping is
Bookkeeping is the procedure of recording and organizing all business transactions that occur during a business. Bookkeeping is a crucial part of accounting that focuses on recording the day-to-day financial transactions of the business. All financial transactions, such as sales revenue, tax payments, interest earned, payroll and other operational costs, loans, investments, and so on, are documented in books of accounts.
The accuracy of the accounting process followed by the business is determined by how the bookkeeping is managed. Thus, bookkeeping ensures that financial transactions are recorded in an up-to-date and, more importantly, accurate manner. The following are the benefits of bookkeeping:
In addition, Bookkeeping offers a three-tiered approach to developing and maintaining your company’s overall financial processes and management.
As we have seen the overview of bookkeeping, we will next understand bookkeeping tips.
As a business owner, you are liable for keeping track of your company's books. Your company will be successful if its accounting records are up to date and accurate. However, if you fail to focus on your accounting tasks, your business will sink before it can grow. Use the following ten bookkeeping tips to ensure your books are accurate from the moment your company is born.
Mixing your personal and business funds may not appear to be a big deal. Every business, however, should have a separate business bank account that is separate from any personal bank account. In addition, a separate business bank account is often required depending on your business structure. This separate account will save you time, effort, and headaches by making it easier for you and your bookkeeper to sort through the purchases and sales relevant to your business.
We are glad to live in a time where cloud-based accounting software allows you, as a business owner, to access your financial information whenever you need it. Technology allows us to sort through piles of paperwork, check spreadsheets, and perform manual calculations every month. The major part of the hard work is now done for you by cloud-based software.
Accounting software can send invoices to customers automatically on the due date, track your incoming and outgoing expenses, and generate cash flow reports. There are numerous software options available. Of course, the best option for you will be the one that makes your life easier, and if you're unclear, you can always consult a bookkeeping expert for clear guidance.
Every company transaction should be recorded and organized to allow you to maintain and manage your cash flow easily. In addition, keeping track of all business records, including invoices, receipts, and expenses, will assist you in forecasting future opportunities for your company and maintaining tax compliance during an audit. While it is simple to digitize paper receipts, if you prefer to keep paper records, keep them in a locked and secure cabinet and organize them into a simple system.
It's also good to back up your records if something goes missing. On the other hand, most cloud-based bookkeeping software can store these documents by scanning receipts with your phone or forwarding electronic bills directly to your online bookkeeping system for reconciliation and record storage.
Many business owners believe that if their books are managed by a professional, they do not need to learn about tax and accounting rules. You may even feel that way if you use automated accounting software. However, while these assets reduce your chances of having tax problems, it is best to be aware of your tax obligations. Go online and learn everything you can about the type of business you hold.
Remember that registered companies have different rules than sole proprietors and partnerships. For example, consider whether you pay corporation tax, GST registration, and other regular fees. Knowing the fundamentals of taxation could save you from some severe penalties.
As a business owner, you spend most of your time juggling one challenge after another. With so many responsibilities, it's easy to lose track of when to pay GST, payroll, and regular business invoices. Set reminders to avoid missing deadlines, which could result in a fine or a disgruntled partner. You can do this using your email calendar online or on your smartphone. Regularly checking your physical calendar and taking notes a few days before deadlines can help keep you on track.
Even if you keep meticulous records, you could still have a tax audit. This is because you must leave a trail of documentation that backs up everything you've purchased and paid for. An audit trail is essentially a set of documents demonstrating that the transactions recorded in your books are correct. If you have issues such as tax inaccuracies, missing source documents, or missing transactions, your audit trail will help you retrace your steps.
It's difficult to predict what expenses you'll face when you start your business and which costs are tax deductible. For example, costs associated with the operation of the business and related to your income generation are tax deductible. However, you cannot add items purchased solely for yourself to your accounts. Combining business and personal accounts does not give you the right to claim everything you buy.
To begin, you must review and comprehend what is deductible under Australian tax laws. If you're unsure whether a purchase is deductible, consult an accountant or your local tax department.
A good bookkeeping strategy is not only necessary for tax purposes. Regular incoming and outgoing cash monitoring makes performing regular financial checks simple. With the right accounting software, you can verify that all your customers pay their invoices on time and that your reporting is complete. While monthly checks are important, you should look closely at your accounting and bookkeeping records at the end of each quarter.
For example, paying close attention to trends such as declining or increasing sales, large expenses, or evidence of late-paying customers. A thorough examination of your numbers will enable you to plan for improved cash flow in the future.
It's easy to overlook this when you're starting, but you must also keep track of your cash payments. Before spending money on business products, any cash the company receives must be deposited into the company's bank account. It's tempting to use cash immediately to buy supplies, but this can easily derail your bookkeeping system. When recording cash payments, please keep track of who paid, so you don't have to chase them down later.
If you're unclear about managing the details of cash payment in your accounting software, consult a bookkeeper who can assist you in setting it up and using it correctly.
Few pieces of stuff are more satisfying than seeing your company profit. You might notice that you're starting to make a profit and decide to reinvest your profits as soon as possible. Spending revenue on product development, marketing, and other growth strategies is a great way to keep your company moving - but don't get too carried away. Remember that a portion of your income must be set aside for tax purposes at the end of the year.
As a result, you should save at least a portion of your income - perhaps 20% - to guarantee that you have sufficient money to pay your bills. If you find it difficult to keep this money in your business account, open a separate savings account.