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Bookkeeping – How to organise business accounts
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Published on Thursday, 04 March 2021 10:00
You may be doing your own business books/account records, or working as the bookkeeper for a business.
As a business owner, you find you have several roles to juggle including production/service, marketing, operations, sales, dispatch, invoicing, and bookkeeping of the accounts. These must all be done!
2 main areas need to be organised – the bookkeeping/accounting records and the money (bank and cash and credit cards).
Starting your bookkeeping accounts correctly (or re-organizing your current books and accounts)
Most business owners don’t like doing the books! But if you want to be in business then accept that the books and finances are one of your responsibilities and JUST DO IT or PAY SOMEONE to do it.
To keep accounts organised, you need a set of systems to ensure:
- ALL sales and expenses are recorded and transactions aren’t forgotten (eg Cash receipts);
- To keep all documents required by law easy to find them and neat and tidy;
- Good records of conversations with customers or suppliers; and
- At year end - a good set of all required data and reports so your accountant can complete your tax return quickly and efficiently.
Bank and Credit Cards
- First, use a dedicated business bank account and credit card. Processing your records is much easier if you have these separate bank and card accounts (even if only a personal credit card in your name to start) that you only use for business transactions.
- Secondly, request that all statements, including bank, debit card, credit card and petrol accounts, are sent on a monthly basis. That’s because the key aspect of processing your financial documents is reconciling them on a monthly basis.
If you follow these suggestions, nearly all of your income and expenses will be captured in statements from both your bank account and credit card account and account keeping is much easier.
The Australian Tax Office (ATO) has a good overview of what is required, and they explain more as follows – Record keeping for Small Business.
Good record keeping is essential for anyone in business because it makes it easier to manage your cash flow, meet your tax obligations and understand how your business is doing.
What the law requires
By law your records must:
- Explain all transactions;
- Be in writing (electronic or paper);
- Be in English or in a form that can be easily converted;
- Be kept for five years (some records may need to be kept longer).
If you don't keep the right tax records, you can incur penalties.
How to keep records
You can keep invoicing, payment and other business transaction records electronically or on paper. The principles are the same for each, but keeping electronic records will make some tasks easier.
With the right electronic record-keeping software you can:
- Automatically tally amounts and provide ready-made reports;
- Produce invoices, summaries and reports for GST and income tax purposes;
- Keep up with the latest tax rates, tax laws and rulings;
- Report certain information to us online;
- Save on physical storage space;
- Back up records in case of flood, fire or theft.
If you intend to use a bookkeeper or accountant, get their advice about the best system for you – choose a system you can understand and operate easily.
These are 6 steps to get your books/accounts off to the right start (or improve current systems). Coming up next month we will look at some templates that can help you get organized and keep you and your accountant happy!
Need help? Not sure? Call for FREE 30min advice / strategy session today!
Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!
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