Why you can’t be bad at Bookkeeping

Maintaining your books not only saves you a headache with the tax man and money on taxes it can also ward off any issues that may arise legally over commingling your funds.  Here are five significant reasons for maintaining a separate set of books for each of your businesses:

  1. Corporate veil.Maintaining separate accounts substantiates the corporate veil, one of the primary reasons for forming a new corporation. Having separate accounts shows you recognise the company is its own distinct entity. Furthermore, separate accounts should encourage you not to commingle personal and business funds.
  2. Tax savings. Separate banking will improve bookkeeping procedures, prevent payments from being missed, and provide better records to improve your tax return.
  3. Audit protection.Having separate accounts will improve your chances in a tax audit. The ATO will often disallow a number of expenses when personal and business expenses are commingled in a single account.
  4. Less stress and more sanity.When your books are disorganised, you’ll feel constant stress to take care of it, and this ultimately can cause you to feel undone. Having separate accounts and bookkeeping for a new company will save you time and money in the long run.
  5. Improved decision making.Having separate accounts starts the process of better bookkeeping, expense tracking, and budgeting, which leads to quality decision making. How can you expect to be a successful business owner without accurate records?

The next step is implementing a system for tracking income and expenses. Here are just a few things that good accounting software can do to help you become a better, smarter business owner:

  • Keep essential information at your fingertips.Accounting software can generate reports that allow you to easily stay abreast of your business’s most important financial information, like profit and loss by product or property, accounts receivable by customer, sales reports, or expense reports.
  • Better use of your online banking system.It allows you to harness the online benefits that many banks offer. It coordinates with most banks, even lesser-known ones, to provide instantaneous information so you can download transactions and reconcile your data with ease.
  • Collect more of your accounts receivable.Accounting software allows you to generate professional-looking invoices that can be delivered via email and offer your customers the option to make online payments. You can also generate statements and create various reports to determine who your high-risk customers are for collection purposes.
  • Pay your business bills efficiently.Let the software track your accounts payable so you can better manage your cash flow and pay bills when it’s most convenient for you. Ultimately you’ll save on past-due fees and interest, and you’ll be able to interact with your vendors in a more professional manner.
  • Receive payments immediately. Accept credit card payments online, and have the funds recorded directly in your software’s file. You can even upgrade your software and tech supplies to integrate a point-of-sale (POS) system with your cash register and merchant/credit card machine.
  • Access your financial information anywhere.The online version of some software allows you or your accountant to access your books anywhere you have an internet connection.
  • Use scanning software to track receipts.Scan in receipts through a service, which can immediately record and categorise the information in your accounting software. You can then keep a copy in your cloud storage of all receipts and contracts for audit and legal protection.

Get help implementing your accounting system

Be honest with yourself: Do you want to do the bookkeeping for your business? If so, great. But if not, who’s going to do it? Have a plan! The following are five options to consider.

Option 1: Learn the accounting software and input items yourself. I know this strikes fear in some of your hearts. In fact, this may be why your books currently aren’t getting done. But you still may want to hold off delegating any part of the process until you put in a few hours a week to learn the basics, like inputting figures. At the bare minimum, you need to be able to view and print reports and check the accuracy of the work.

Option 2: Hire a family member to keep up the books. This is a great way to have the teenagers or young adults you’re supporting financially earn their keep and teach them about entrepreneurship in the process. They’ll learn about the heart and soul of small business by doing the books. Adding them to the payroll is also a great tax write-off.

Option 3: Engage a local bookkeeper. This could be a local college student wanting internship/externship hours or a seasoned bookkeeper with affordable rates. It can free up your time so you can do what you know best: Make money for the business. This is also a natural step in the growth of a business before choosing the next option. Remember, this person will probably not prepare your taxes or do significant planning for you; they’ll simply maintain your books affordably so you can focus on more pressing tasks.

Option 4: Hire someone “in house.” You’d be amazed how quickly you can find a local college student or bookkeeper wanting to pick up some part- or full-time work for an hourly wage. This person could come in daily or a few days each week to input data and print reports. You might need to provide some supervision, or you could have your outside CPA train and supervise your in-house bookkeeper. It can be extremely convenient to have an employee available to keep things in order. You can also hire someone who can wear different hats and help with other tasks, like answering phones, scanning, doing collections, shipping, or running errands.

Option 5: Use your CPA or tax professional throughout the year. Many business owners like the comfort and security of knowing they not only have highly skilled accountants doing their books daily but the benefit of one-stop shopping for tax planning and quarterly and annual reports as well. It may seem more expensive, but the value of better long-term planning and a higher quality of books can far exceed the cost. More mature and seasoned business owners may naturally “graduate” to a more experienced bookkeeper when the time is right. At most firms, you can get an accounting support package tailored to your budget and needs.

Author:
Sally Hams

Get in Touch

Email: accounts@balancebooks.com.au

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