Bookkeeping Basics for Small Business

We know as small business owners you wear a myriad of hats to ensure your business runs smoothly and successfully—from sales and marketing, managing clients and employees, paying the bills and collecting the revenue, and of course, managing your books. The bookkeeping of your business might seem like the most daunting of all tasks, but it doesn’t need to be. 

1. Understand the basics

Bookkeeping is more than a necessary evil. It is the cornerstone of your business’s success. It is the way you will understand your current financial position, and will enable you to meet your ATO obligations.

One of our early blogs, Accounting & Bookkeeping- What’s the difference? explains the very basic of Bookkeeping. We recommend all business owners have a good overall understanding bookkeeping tasks and their benefits.

Do your research, go online and read everything there is to know about the type of business you run, the structure of our business and your ATO obligations. There are many resources available for small business such as Fairwork ,  ATO , Business.gov.au and your state government (e.g., NSW Government)

Remember, as a business owner, you can’t plead ignorance. Having a basic insight into your obligations could save you from severe penalties down the road.

2. Make your books a priority

Whether you’re handling all the bookkeeping yourself and preparing paperwork for a professional, make it a priority. We recommend you set it as a daily, weekly or monthly task depending on the volume of transactions in your business. Let’s face it, a few steps each day is a lot easier than running a marathon at the end of each quarter.

Keeping on top of your bookkeeping will also give more relevance to your reports. Up-to-date books means up-to-date reports, allowing you to address your business challenges, uncover opportunities and plan your next goals.

3. Keep your business and personal finances separate

After you have registered your business, the next step is to open a business bank account. Use this account for all your business expenses and for collecting the revenue. You may also consider a business credit card for managing your cashflow. Even if you are a sole trader, it is recommended to keep your business and personal expenses separate.

By keeping all personal transactions out of your business accounts, you’ll greatly reduce the number of transactions you (or your bookkeeper) will need to categorise and reconcile. It also reduces the chance of error of categorising personal expense to a business expense, which can get you in trouble with the ATO!

At Pacific Accounting, we also recommend setting up a Saver Bank Account. Transfer PAYG, Super and GST liabilities here regularly (weekly or monthly), so that when it comes time to pay the ATO, you have the funds ready and waiting.

4. Choose the right software

Whether you Netflix and Chill, pay your bills online or have a phone full of apps, these days, we all understand the power of technology including cloud-based software and apps. Cloud-based accounting software gives business owners (and their accounting team) the power to access their business information whenever and wherever needed. Accounting software can also be set-up for automation in many areas, increasing accuracy and efficiencies.

In our blog Innovation Integration and Technology, we speak about ways technology can help you to run your business better—including  ways to reduce the need for manual data entry, to assist with collections and payments, and receive powerful reports that can ultimately help to increase your gross profit.

Again, do your research, speak to a trusted professional and other business owner in your industry. Advice on what software works (and what doesn’t) from firsthand experience is often invaluable.

We suggest starting with your accounting software, and then build on with POS integration, Payroll software or any other industry specific software and apps that will allow you to work effectively and efficiently.

5. Payroll

Payroll can be a minefield. Legal obligations, employee rights, ATO compliance, hiring, terminations, leave, payments, payslips—there are so many things to understand, remember and execute.  You may consider getting professional assistance in this area. There are several companies that can assist with employment contracts and legal obligations, and a qualified bookkeeper or accountant can assist with processing your payroll cycles.

If you decide to do it yourself, you will need to understand all the legal requirements. Our two-part blog on Employment and Payroll outline many of the areas you need to understand as an employer –  Part 1 and Part 2

You should also consider if you will pay yourself a salary as the business owner. Again, it is recommended to get advice from your accountant to put yourself in the best tax position.

6. Track your expenses and keep on top of your sales invoices

Tracking your expenses can be made easier by using your business bank account (as recommended in #3) for all expenses. You may also consider a business credit card. Remember to reimburse yourself and your staff for business expenses paid personally and record cash payments.

Keeping on-top of your sales invoicing is critical for cash flow. If you don’t invoice, you can’t be paid. Where possible, set-up automatic invoicing. Having your Accounting software set-up correctly will also help with faster, more accurate creating of invoices. Make invoicing a part of your daily or weekly routine.

You may also consider eInvoicing for both expenses and sales. It is a government initiative that allows for the automated digital exchange of invoices between suppliers’ and buyers’ software. This allows faster and accurate processing and payment. Learn more at ATO – eInvoicing.

Our blog on Record keeping outlines your legal obligations on what records, receipts and other paperwork are needed to be saved for audit purposes. 

7. Set reminders for important deadlines

There are many important dates to remember when running a business and there can be severe penalties if they are missed. Diarise when your BAS, Super and Tax Returns are due for lodgement AND payment. You can find many of these Important dates on our website. 

8. Check and understand your reports

There’s not much point in doing all of this work, if you don’t review and understand your reports. Keeping your finger on the pulse of your business is critical for making timely decisions to run your business better. Get guidance from your accountant on what targets you should be achieving. Set your budget and goals, and track them against your actuals. You can learn more about Preparing a business budget in our blog. 

9. Hire a pro

All too much? Get help! If keeping up with your books is becoming overwhelming, get help. At Pacific Accounting we can tailor a package that is right for you. We can do project work, like setting up your accounting software and training you on how to use it, we can do your payroll and of course full bookkeeping, or a quarterly review and lodgement of your BAS. We also specialise in Business Advisory services where we can assist with Budgets, Financial Reporting and Strategic Planning. The options are limitless! What’s important is to find what works best for you and your business.

To learn more about how Pacific Accounting can assist you with you bookkeeping, book a consultation from our website FREE VCFO Consultation – Contact Us  or call us on 1800 1800 98.