With nearly half of businesses in Australia facing increasing operating expenses, staying on top of your accounting is even more critical than it was before. It helps you account for every expense and know when you break even and if you begin to make a loss.
In Australia, accounting for small businesses is straightforward. There are some state taxes that vary depending on your location, and we’ll discuss them here. Here’s an overview of accounting and its essentials for Brisbane-based small businesses.
Decide if you’d prefer to hire an accountant or DIY after reading this blog. Let’s get started.
Basic Accounting for Small Business Principles
There are a few basic things you need to do to stay on top of your business accounting. The first is to make sure your bookkeeping methods are accurate.
This seems like a no-brainer, but it’s important to keep accurate records from the start. Not only will this help you stay on top of your finances, but it also makes it easier to do your tax return at the end of the financial year.
Second, you need to have a complete understanding of GST. If your business is registered for GST, you need to charge GST on all your sales. You can then claim back any GST you’ve paid on your business expenses.
Along with GST, you need to know all of your tax obligations. All businesses in Australia must pay income tax, regardless of where they’re located. However, there are some specific state tax for small businesses in Queensland.
If you have employees, you need to withhold Pay As You Go Tax from their wages and pay it to the ATO.
Payroll tax is an additional state tax, so the rates and thresholds vary from state to state. In Queensland Payroll tax is generally payable when your annual payroll exceeds $1.3 Million per year. Businesses are responsible for registering once their payroll reaches the threshold. Also, be careful of the definition of payroll for Payroll tax purposes. In Queensland payroll, you must add super to gross wages, and other adjustments are also needed.
At the end of the financial year, you lodge a tax return and pay the income tax that’s owing. If you’ve been keeping good records throughout the year, this shouldn’t be too difficult.
Accounting for Small Business That’s Easy to Follow
Whether you hire a business accountant or you do your accounting yourself, it’s important to know these principles. That way if you hire out, you will be able to follow what your accountant is doing with your books and make sure they’re accurate. For small businesses, here is a simple guide to learn.
Enter Your Transactions
The first step is to enter all the transactions that happen over the accounting period. The accounting period is the length of time that your company’s financial statements cover. This is monthly, quarterly, or yearly.
Record them in your accounting for small business system as accurately as possible. You’ll need to include the date, the amount, and a description of the transaction. Your accounting package holds the primary record of all business transactions. Consider using a system like Xero.
Your accounting package will ensure that the transactions are reflected in your financial statements. These transactions could be sales, purchases, payments, or receipts.
Review the Transactions
Next, review the transactions during the accounting period you’re processing. This includes purchases, sales, payments, and receipts. Check to be sure that these have been allocated to the correct codes.
Run a trial balance report to help your review. A trial balance lists all the ledger accounts and their balances. This step is important because it allows you to check that the recorded transactions are accurate.
Adjust the Accounts
Certain transactions need to be adjusted before they are correctly reflected in the financial statements. This includes accruals, deferrals, and estimates.
In accounting for small business, an accrual is an entry that records income or expenses of a company that has not yet been paid or received. This could be a bill that is incurred but not paid or revenue that is earned but not received.
A deferral is an entry that delays the recognition of an expense or revenue. This includes a bill that is due next accounting period or revenue earned in the current period but not recognized until the next period.
Accruals and deferrals are important because they ensure that expenses and revenues are recognized in the correct accounting period.
Prepare Financial Statements
The next step is to prepare the financial statements. This includes the balance sheet, income statement, and cash flow statement. The financial statement is a summary of a business’s financial position.
After that, you’ll prepare the tax returns. This includes the business income tax return and the GST return. Be sure to check your ATO lodgement due dates.
Get Professional Accounting for Small Businesses
So there you have it, a simple guide to accounting for small businesses in Brisbane, Australia. With this information, you should be able to keep on top of your accounts and ensure that your financial statements are accurate.
For the most accurate accounting, reach out to Accountants 2 Business. We’re a team of accounting professionals who help small businesses in Brisbane with all their accounting needs.
Book your free meeting today and join the dozens of 5-star rating customers we serve.