Bookkeeping Tricks

When you're running a small business, it's important to keep track of your finances. But, if you don't know where your money is going and what kind of budget plan works best for you, things can get out of hand fast! That's where bookkeeping comes in: this process will help keep everything organised and make sure that all the numbers add up. 

Bookkeeping is a pain in the neck. Trust me, I know. But you can make it much easier for yourself if you use some of these bookkeeping tricks and tips I've come up with over the years.

Once you get them down, they'll become second nature to you! If your business is growing and becoming more complex every day, then check out this blog post for advanced bookkeeping tricks that will help keep your financials straight. With just a little bit of effort on your part now, you'll be glad when tax season rolls around next year. Let's get started! 

Must-Know Bookkeeping Tips for Businesses

As a business owner, you have a lot on your plate. From managing your day-to-day business operations, working with customers, marketing strategies, networking and keeping everything running smoothly. It’s tough to find time to sort through financial spreadsheets, analyse the numbers and manage your cash flow. 

The reality is that managing your books, staying in control of your finances and making sure your business is compliant is vital for long term success. 

So, before you spend another late night reviewing spreadsheets, here are 12 essential bookkeeping tips every business should know.

And if this is too much, you can always ask us for help! We're Melbourne Bookkeepers who can keep your business finances on track.

Keep Personal and Business Accounts Separate

Mixing your personal and business cash might not seem like a huge problem at first. However, every business should have a separate business bank account independent of any personal bank accounts. In many cases, a separate business bank account is compulsory, depending on your business structure. 

This separate account will make it easier for you and your bookkeeper to sort through the purchases and sales relevant to your business and save you a lot of time, effort and headaches. 

Automate with Cloud-Based Accounting Software

We’re lucky to live in a time where cloud-based accounting software gives you as the business owner the power to access your business information whenever you need it. Technology has made it possible to sort through piles of paperwork each month, check spreadsheets, and perform manual calculations. Today, cloud-based software does most of the hard work for you. 

Accounting software can automatically send invoices to customers on the right due date, track your incoming and outgoing expenses, and generate reports on your cash flow. There are plenty of software options out there. The right choice for you will be the one that makes life easier for you, and if you’re not sure which option is correct, then you can always speak with a bookkeeping expert to get clear advice.

Create An Easy To Follow Record Keeping System

Every transaction your business makes should be recorded and organised in a way that’s easy for you to maintain and keep your cash flow on track. Keeping track of all business records, including invoices, receipts and expenses, will help you predict future opportunities for your business and maintain tax compliance in the case of an audit. 

While there are easy ways to digitise your paper receipts, if you prefer to keep paper records, these should remain in a locked and secure cabinet somewhere and be organised into a simple system. It’s also best to have a backup of your records just in case something goes missing. 

Alternatively, most cloud-based bookkeeping software can store these documents for you by scanning receipts with your phone or forward electronic bills straight to your online bookkeeping system for reconciliation and record storage.

Set Reminders for Important Deadlines

You spend most of your time as a business owner running from one challenge to the next. With so much on your plate, it’s easy to lose track of when you should be paying GST, payroll, and regular business invoices. To avoid missing deadlines that could leave you with a fine or disgruntled partner, set reminders for yourself. You can do this with your email calendar online, or even your smartphone.

Even writing notes down for a few days before the deadlines can help keep you on track if you regularly check your physical calendar. 

Build an Audit Trail

No matter how careful you are with your books, you could still end up with a tax audit on your hands. You must leave a trail of documentation that backs up everything you’ve purchased, and everything your customers have paid for.

An audit trail is essentially a selection of documents that prove the transactions recorded in your books are, in fact, true. Your audit trail will help you to retrace your steps if you have any issues with things like tax inaccuracies, source documents, or missing transactions. 

Know Your Business Expenses

It’s difficult to predict what kind of expenses you’re going to tackle when you start running your business and what kind of costs are deductible from your taxes. For instance, costs related to the company's operation and connected to your income generation are tax-deductible. However, if you buy something that’s just for you – you can’t add that to your accounts. 

Mixing business and personal accounts doesn’t mean that you can simply claim for everything you buy. First, you need to review and understand what’s claimable under Australian Tax Laws. Contact either an accounting professional or your local tax department if you’re not sure what counts as a deductible purchase. 

Create Regular Reports

A good bookkeeping strategy isn’t just essential for tax purposes. Keeping track of your incoming and outgoing cash makes it easy to perform regular financial check-ups. With the right accounting software, you can ensure that all your customers pay their invoices on time and avoid any gaps in your reporting. 

While it’s good to perform monthly checkups, you might want to take an in-depth look at your accounting and bookkeeping records at the end of each quarter, paying close attention to trends like declining or growing sales, large expenses, or evidence of late-paying customers. A proper evaluation of your numbers will help you to plan for a better cash flow in the future. 

Track Cash Payments

It’s easy to forget about this when you first start building your business, but you need to record your cash payments too. Any cash received by the business needs to go into the business bank account before spending it – even on business products. It’s tempting to take the cash immediately to purchase supplies, but this can easily mess up your bookkeeping system. 

When recording cash payments, remember to make a note of which customer paid, so you don’t chase them up again later. If you’re unsure how to manage the details of a cash payment on your accounting software, speak to a bookkeeper who can help you set it up and use it correctly. 

Budget for Tax Payments

There are few things more wonderful than seeing that your business is making money. You might know that you’re starting to make a profit and decide to plough all your extra cashback into the company as soon as possible. Spending profit on product development, marketing, and other growth strategies is a great way to maintain your company’s momentum – but don’t rush in.

Remember that a portion of your income will need to go towards tax expenses at the end of the year. Therefore, you should be saving at least a part of all your income – perhaps 20% - to ensure that you have enough money left to pay your bills. If you struggle to keep this money in your business account, use a separate savings account. 

Know the Basics

Many business owners think that they don’t have to learn about tax and accounting rules if they have a professional to manage their books. You might even feel that way if you have an automated accounting software solution. However, while these assets reduce your risk of having problems with your taxes, it’s best to be informed about your tax obligations.

Go online and read everything you might need to know for the type of business you run. Remember that registered companies have different rules for sole traders and partnerships. Consider whether you’re paying corporation tax, registered for GST, and other regular fees. Having a basic insight into how taxes work could save you from some severe penalties. 

Outsource to a Professional Bookkeeper

Cloud-based accounting systems like Xero, Quickbooks, and Reckon to make it easier for business owners to handle their accounting without a lot of excess effort. However, that doesn’t mean you shouldn’t use a professional bookkeeper. Outsourcing to an experienced bookkeeper offers several benefits, including:

• saving you valuable time
• ensuring your books are always up to date and organised 
• save money
• meeting all of your compliance activities, including BAS and tax obligations

When your books are professionally organised, it is easy to decide on important business decisions as you have a clear picture of how your business is performing financially.

Make Your Books a Priority

Finally, tracking your expenses might not be the most exciting part of running your business, but it does need to be a priority. One mistake on a tax report or a poorly managed set of invoices in your bookkeeping records can throw your life into turmoil. So from day one, make sure you have a strategy in place for keeping your books organised and up to date. 

Although you don’t necessarily need to balance everything at the end of each working day, you should be sorting through your financial information at least once a month. 

Tips To Great Bookkeeping

If you own a small business, great bookkeeping is vital.  Many start-ups, as well as existing business owners tend to neglect this aspect of their business until the end of financial year (EOFY) is upon them.

By law, every business is required to maintain accurate and timely records.

I can’t stress enough how important it is to organise your accounts from the onset by setting up and using simple accounting software that suits your needs.

Here are six simple tips to make record keeping easier and less stressful during EOFY:

1. Allocate time each week and devote to bookkeeping

It is very important to be on top of this. Regular reviews will let you know how your business is going and allow you to control your cash flow.

2. Open a new business bank account for business earnings and expenses.

It is important to keep your private transactions separate from your business transactions.

In time, you can apply for a business credit card and apply the same terms.

3. Get accounting software that suits your business needs.

If you are unsure which software to select, you may contact a business consultant or accountant that can better advise you before you buy.

We prefer to use MYOB accounting solutions.

With cloud software, one key benefit is that you can access your financials anywhere, anytime or have your bookkeeper or accountant check information for you.

Your files will always be backed up regularly in the cloud.

However, always ensure you keep backups of your financial data as an added security measure. With desktop software, you will have to get into a habit of regularly backing up your files.

4. Get all your tax and compliance obligations right

All businesses are required to register for an ABN, and if your turnover is more than $75,000 then you must apply for GST registration.

You must also keep receipts for all acquisitions in order to claim on your expenses.

If you employ staff, you must also register for PAYG withholding Tax. This is where you pay staff and withhold some tax on their behalf.

You are also obliged to complete and lodge monthly/quarterly Business Activity Statement (BAS) with the ATO.

With the appropriate accounting program and setup, you can have this information at your fingertips.

This way you create systems to help you streamline and automate your business processes for you to stay compliant.

5. Keep your receipts

The ATO requires you to keep records for a minimum of five years.

The records you are required to keep and have accessible upon request are:

Invoices and receipts you provide for sales or services rendered by your business.

Invoices for goods, services or other business acquisitions purchased for your business.

Records of payments made to employees plus other organisations on their behalf like Superannuation funds and PAYG tax.

All financial statements including profit and loss statement and balance sheet.

Tax Return information.

Bank accounts and credit card statements

Stocktakes records at end of financial year and asset register etc.

Anything else with a monetary value to the business

You could create digital files on your computer to store this information or keep a well organised filing cabinet.

6. Or, get a great bookkeeper

As you expand your business you may need to engage the assistance of a great bookkeeper, keep in mind that this service is also tax deductible.

Hiring a bookkeeper helps you focus on growing your business while ensuring your record keeping is up to date.

For a peace of mind this financial year, it is important to meet all your tax and compliance obligations for this EOFY.