At this time of year we’re all thinking about Christmas and one of the best songs for the festive season is “The 12 Days of Christmas”. In keeping with this theme, this week we’re bringing you our 12 very best bookkeeping tips – it’s our gift to you! These tips will suit business owners at every stage, from start ups to old hands. Enjoy!
- Choose accounting software that best suits the needs of your business and has all of the features you require. You may need to experiment with various products and/or ask your accounting professional for their advice. Don’t just choose the first one that lands in your lap and/or promises every bell and whistle under the sun – make sure the product does what you need it to do in terms of your business.
- Engage a good accountant to help set up your business properly from the start. S/he will assist with aspects like business structure, obtaining an ABN, GST registration (if required), payroll set up, lodgements for BAS and tax etc. Visit your accountant regularly – don’t wait until end of financial year to obtain advice; visits at end of quarter are much more valuable as you can catch issues as they happen and avoid nasty surprises down the track.
- Separate personal and business finances. Never, ever use the same bank account for personal and business transactions. If you do, your bookkeeping will become very messy and difficult to navigate. Bookkeeping and/or accounting fees will probably double as it will take your accounting professional so much longer to process your accounts in this scenario. Always open a business bank account for your business and keep personal savings accounts and credit cards etc for personal spending.
- Set aside one day/morning every week to do your bookkeeping. Doing the job regularly helps keep the task manageable and allows you to catch anomalies like unpaid bills, slow-paying customers etc.
- Use Receipt Bank or a similar app for your record keeping. The ATO require that all data be kept for a minimum of 5 years (or sometimes longer). Five years of data can really add up over time and could mean that you end up with boxes and boxes of files to store somewhere. Moving your data online to an app like Receipt Bank is a much better idea. Not only will you save on storage space but you will also save on data entry time as apps like Receipt Bank do most of the hard work for you!
- Go paperless. Related to tip no 5, we really believe in going paperless in terms of bookkeeping and record-keeping. Again, you save heaps of physical space in your office but you’ll also end up with an online filing cabinet that is super easy to search and is available to you everywhere and on every device. We recommend storage apps like Google Drive and Dropbox for this task.
- Don’t over categorise. During the process of bookkeeping, don’t get caught up with too many details e.g. categorise staplers, printer ink, coffee all under “office items” – no need to create separate accounts for each item etc. At the same time, don’t under-categorise. Lumping all sorts of expenses into accounts called “general”, “sundry” and/or “miscellaneous” makes for all sorts of issues for your accountant and will not allow you to produce accurate or useful business reports.
- Record all business expenses, even those not paid via the business bank account e.g. paying for postage with cash. Record them against your drawings account (for sole traders) or loan account (for companies or other). Remember – every expense must be recorded if you want that tax deduction!
- Record deposits correctly. If you accidentally record things like loan repayments, personal cash injections and bank transfers as income, your overall income will be overstated. As such, you may end up paying extra tax by mistake.
- Pay bills on time – not doing so will affect your business reputation and credit rating. Make this task part of your weekly bookkeeping session.
- Reconcile to the bank account every month. You need to ensure that the bank balance in your bookkeeping system matches that of the actual bank statement. This process is extremely important as not only does it make for accurate record keeping but it also ensures that all mistakes are ironed out regularly. Also, don’t rely on bank feeds as your sole method of bank reconciliation as they aren’t 100% reliable. Always perform a bank reconciliation to the actual bank statement at least once a month.
- Set aside funds to pay tax. Paying taxes and or employee super is an inevitable part of running a business. It’s easy to drift along running your business without budgeting for these costs and then when they are due, you end up in a mad panic because you haven’t got the funds to pay the liabilities. A better plan is to open another bank account and regularly transfer funds across to it from the business account. Saving for these types of payments is a far better option and assists with cash flow.
We hope you have found these bookkeeping tips useful – they’re our gift to you this festive season.
Do you have any bookkeeping tips that really work well for you? If so, feel free to share below.