Bookkeeping is an integral part of running a business and, when done correctly, can genuinely impact profitability.
It is a systematic approach that requires skill and effort to analyse the numbers, keep track of everything, and do it well. It must be precise to deliver meaningful information.
See below for our Good Bookkeeping Tips.
What is bookkeeping?
Bookkeeping is verifying receipts, depositing payments and keeping track of all financial information so that it can be accessed easily when necessary.
This helps with a company’s sustainability and will help manage cash flow, meet financial obligations, and plan for future investments.
Why is Bookkeeping Important?
Bookkeeping does not discriminate, and whether you are an independent contractor or a multinational corporation – it will aid your business with growth and income.
Bookkeeping will also help create a budget, allowing you to plan for future expenses. However, one of the primary purposes of accurate bookkeeping is tax lodgement purposes.
Tax Time is much Easier with a Good BookKeeper
The financial record keeping necessary for tax time saves you a lot of hassle and stress when it is done right the first time.
In addition to this, the financial information gathered from bookkeeping can support business owners or shareholders to make vital financial decisions involving the company.
Accurate books will also allow your small business tax accountant to complete a far cleaner tax return.
Why Small Businesses Need Bookkeeping
Apart from the legal requirement, bookkeeping aids businesses and supports the owners to become more successful.
It can help with the following:
Budgeting
It is easier to review your financial statements and estimate cash flow when everything is recorded correctly and in an easy to manage system.
Organisation
The ATO, investors, accountants and lenders all have an interest in your financial records. It is easier to locate and provide data when everything is systematically organised. This will also help you secure funding if it becomes necessary for your business.
Analysis
When your company has good bookkeeping, it helps you to generate financial statements. You can use these statements to analyse cash flow and work out what is going well and what needs improvement.
Planning
When you have analysed strengths and weaknesses, you can then use the financial statements from bookkeeping to plan and strategize. Future planning is essential for the success of a business.
Difference Between Bookkeeping and Accounting
The big difference between bookkeeping and accounting comes down to the roles and responsibilities. While the two usually work in tandem, there are vast differences.
- Bookkeeper: A bookkeeper ensures that financial transactions are organised and recorded for financial reporting. Quarterly reporting may be required, depending on the company’s size, while in many cases, reporting is only required at the end of the tax year.
- Accountant: An accountant takes the work produced by a bookkeeper and analyses the data to make financial statements for the company.
The two must support each other to work as a cohesive unit. Accountants 2 Business work with Bookkeepers 2 Business to do just that in a cost effective way for our clients.
Single Entry vs Double-Entry Bookkeeping
Single-entry bookkeeping
Single-entry bookkeeping is excellent for small businesses that have a low volume of activity. You record one entry per transaction and keep a simple two-column ledger, containing one column for revenue and one for expenses. Accountants 2 Business offer a free single entry bookkeeping system for our tax or BAS clients. Please speak to us about the free A2B App.
Double-entry bookkeeping
A double-entry bookkeeping system is slightly more complex and has two columns, with each transaction located in two accounts. One account for debit and the other for credit. An example of this would be if your business wants to pay a bill, the “cash” account is reduced by the amount you pay and the expenses item is increased by the same amount, net of GST and the GST refund due is also recorded. This technique is the best way to keep track of asset and liability accounts, and it also ensures accuracy. Every debit has a corresponding credit.
All businesses operating as a Company are required to keep an accurate double entry bookkeeping system.
3 Bookkeeping Tips for Small Business Owners
When implementing a bookkeeping practice within your business, certain best-practice methods will help you establish a solid system.
Keep in mind the following:
Maintain accurate records
Accurate recordkeeping will help when it comes to tax time and also with financial decision-making.
Use accounting software to track expenses
The technology that account software provides saves business owners time and money. They are easy to navigate and easily link with your businesses bank account, so you don’t have to record entries manually. Xero and MYOB essentials are both excellent.
Keep track of everything
Keeping a watchful eye on your cash flow means you won’t run into overdraft and be hit with expensive bank fees. Keep track of all receipts as proof of spending. This will be necessary should your business ever be subjected to a tax audit.
Who Should Manage Bookkeeping for your Small Business?
This depends on the size of your business and how much money you are willing to invest into your bookkeeping requirements. You could do your own bookkeeping when first starting out with plenty of online tips to help you navigate this world and do so correctly.
However, if you do not have the time and want to focus on other parts of the business, then we recommend using a third-party service. Speak with Accountants 2 Business about our cost effective bookkeeping solutions.
Accountants 2 Business can provide bookkeeping services. If you have any questions, then reach out to us today.
Please arrange a meeting with one of our Accountants to discuss your particular needs. Accountants 2 Business Ph (07) 3823 2344
