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Is Bad Bookkeeping A Big Deal?

For small businesses, getting a bookkeeper is considered another big expense. Perhaps you have never considered the serious impact of bad bookkeeping on your business. However, if you are going to see the big picture, you will realise that it is indeed necessary to have someone to handle the financial aspect of your business properly. You may not easily realise the problem that bad bookkeeping creates but once you see your financial statement in chaos, you will know how important good bookkeeping is.

Why you should invest in a good bookkeeper?

•    It gives you peace of mind.  You have nothing to worry about knowing your finances are in good hands. Having someone who has full understanding of your finances can give you an assurance that you will not be going out of business. Although a bookkeeper executes simple procedures such as record keeping, it has a huge impact on the outcome of your business.

•    You can put your business in proper perspective. When you cut cost on hiring a bookkeeper, you will realise in the end that have not really saved money, but accumulated additional expenses. With a good bookkeeper, you will be able to ensure that the lifeblood of your business is handled properly. Aside from taking care of your accounting bookwork, there are various responsibilities that a bookkeeper needs to take care, but an inexperienced bookkeeper may not be able to provide you the results you are looking for.

•    You are assured that your business is taking the right direction. It is easy to determine your business is headed toward the right direction if you have your bookkeeping in place. If your books are incorrectly completed because you just appointed a family member or friend to carry out the bookkeeping task, you will realise that there are data details incorrectly entered. It can take some time before you correct the information needed for your business and this means you should opt for a bookkeeper that can do the job correctly. It would not come to this point if a good bookkeeper has been considered in the first place.

•    The bookkeeping process is systematic. If the systems and procedures are inadequate, record-keeping will not be effectively executed. When a bookkeeper knows what his doing. Your business will be in a better position to be well-aware of cash-flow and other important aspects of bookkeeping.

Bookkeeping is an essential part of every business because without it, you will end up mismanaging your finances. It is important that you know how to choose the right bookkeeper for your small business because the effects of bad bookkeeping is beyond repair if you choose cost over quality. You will realise the importance of good bookkeeping once you notice the improvement in your business’ financial aspect.

Here’s How You Can Make Bookkeeping Less Stressful

January is by far the busiest month of the financial year because this is the time when financial records need to be recreated and reassessed. For business owners, the idea of checking financial records and identifying areas for improvement can be a challenging task. Suffice it to say, it is a stressful event that makes bookkeeping the most dreaded task for a business owner. It is easy to get side tracked with other obligations but allowing bookkeeping to take a backseat can have a negative effect on the overall outcome of your business. Instead of hoping for the best, you are only increasing the chances of taking a turn for the worse.

How to avoid bookkeeping stress?

1.    Create a folder for your expenses – For business owners who are busy attending to various transactions, throwing all receipts and folders into one folder is the easiest way to take care of financial activities. However, when you need to retrieve specific receipts, you will have difficulties getting the right information because you got the invoices mixed up. When you make it a habit to compile essential information by creating an expenses folder, not only will you speed up the process but also have enough time for carrying out other tasks.

2.    Set up a bookkeeping system – These days, it is easy to store bookkeeping information with the use of bookkeeping system in the form of a software program. You reduce the chances of duplicating entry of information and you automatically capture the details you need. There are various software programs for you to choose from and the program you choose will greatly depend on your bookkeeping needs.

3.    Update your system on a regular basis – It is not enough that you have set up a system as you also need to update it on a regular basis. However, this does not mean you should do it every day. It depends on how frequent you need your system updated. Some owners update the system every month, while others update it on a quarterly basis. Make sure all information is captured because you will need them in the future.

4.    Capture information as soon as you have them – It is easy to overlook some things that are going to be essential to your business if you are only focusing on big expenses. If you have used your personal card for business transactions as you have not brought your business credit card, it does not necessarily mean that you are going to skip liquidating your expenses. While the amount may seem small it can still add up causing you to lose track of your business expenses.

Bookkeeping need not be stressful if you know how to organise essential information for recreating financial records. Even if it is the busiest month of the financial year, you can still maintain a steady pace with these best practices. Once you follow these practices, you will begin to notice that your day-to-day task becomes easier and faster. It is important that you keep your system organised so you can make bookkeeping less daunting.

Can You Completely Rely On Your Bookkeeper?

One of the things that a business owner needs to ensure is hiring a professional and experienced bookkeeper.  While this can be a challenge to those who own a small business, a bookkeeper who knows how to carry out the most crucial task in a business can provide business owners much greater peace of mind. However, there are instances when a business owner loses track of the business’ day-to-day transactions and relying heavily on the information that the bookkeeper provides is the only available option. Unfortunately, business owners are taken by surprise once they see financial statements in chaos. Where exactly does the problem lie?

Common mistakes bookkeepers commit:

1.    Failure to reconcile bank accounts for long periods of time. This mistake can be costly if not properly addressed. If you are the type of a business owner who leaves everything to your bookkeeper, without taking time to evaluate or check the financial statement, duplications in entries become unavoidable.

2.    Unmonitored cashflow. Business owners do not have the time to update bank and credit card reconciliations, payment processing and invoicing of debtors. This is why a bookkeeper needs to regularly update these records. Monitoring cashflow regularly allows the business owner to receive update of their current position so contingency plans can be formulated for future business development.

3.    Making a mistake in assigning accruing annual and personal entitlements. Bookkeepers have the ability to set up the entitlement calculations and superannuation in the accounting software and their job includes ensuring that the numbers are calculated accurately. As a result, employees are paid more than the 9% super based on their ordinary times earnings. If this is not corrected immediately, it can become a costly mistake for both the bookkeeper and the business owner.

4.    Unable to understand when Fringe Benefit Tax (FBT) should be applied. Old bookkeepers had erroneously entered wrong information causing businesses to suffer due to huge ATO debt. This could have been avoided, had the bookkeepers understood FBT and the schedule that the tax must be applied.

5.    Posting GST transactions incorrectly using the accounting software. Another mistake that can cause a diabolical mess is entering the wrong information in the accounting software causing figures to mix up. Dealing with GST requires accuracy to ensure that the Business Activity Statement (BAS) that is lodged with the tax office contains the correct information.

6.    Failure to categorise expenses and income. The profit and loss spreadsheet reports are one of the essential tools that bookkeeper use to know the business’ current standing. If the bookkeeper fails to review the reports and correct entries, reports become more vulnerable to a myriad of mistakes.

7.    Overlooking tax and compliance obligations. Bookkeepers may not be completely aware of lodgment dates and compliance obligations that business owners fall behind payment schedule. These dates are critical to every business and a bookkeeper needs to be aware of these important dates.

8.    Not filing invoices and receipts. Aside from financial statements, bookkeepers must also keep a record of receipts and invoices because they allow businesses to keep track of sales and services rendered. A bookkeeper must have a simple filing system that provides business owners and bookkeepers access to the essential business information.

Bookkeeping Tips To Start The Year Right

For small business owners, the New Year is also the best opportunity to rethink things and determine what else needs to be done. The financial aspect of your business is often overlooked especially if you have a bookkeeper or accountant that takes care of your finances. Unfortunately, things may not go as planned if you do not have a thorough understanding of how financial aspect of your business works. As you are about to welcome another year, now is the time to analyse and reflect on the things you may have missed out on doing.

1.    Choose bookkeeping software that meets your needs

If your business is not yet using bookkeeping software to make your day to day tasks easy and hassle-free, you should consider using it can provide you the most convenient way of accomplishing your task. However, you should also keep in mind that software is not created equal. This is why you should not choose the first one you come across. Make sure the software you choose is tailored to your needs.

2.    Engage a competent bookkeeper

If there are some aspects of your business that you have to reassess due to bad bookkeeping, you should choose a bookkeeper that can put your business structure in proper perspective. A bookkeeper should assist you with aspects like obtaining an ABN, GST registration, payroll set up, BAS and tax lodgements etc. Make sure you search for a bookkeeping professional before the end of the financial year and obtain advice from an expert so you can prevent nasty surprises along the way.

3.    Never combine personal and business finances

Using the same bank account for your business and personal transactions can spell trouble and this is the habit you need to get rid because it takes away your ability to track your finances. The reason you need to separate your personal and business finances is to avoid doubling your bookkeeping fees. Make sure you open a business account and use a personal savings account and credit cards for personal spending.

4.    Keep receipts

The ATO requires business owners to keep data for a minimum of 5 years so you can keep your finances in check. However, five years of data have the tendency to add up over time and going paperless is the best option. Aside from saving physical space, the data are also stored safely for future retrieval.

5.    Avoid over categorising

You may find yourself get caught up with lots of details and you have the tendency to create separate account for each item. While categorising these items is a good practice, you should also avoid over categorising your items as you may find it difficult to look for the items you need. Make sure you categorise bookkeeping items accurately.

6.    Prepare funds to pay tax

It can be stressful to fall behind your tax payment schedule, but instead of allowing delayed payments to take a toll on your business, you should consider setting aside funds so you can pay tax in a timely manner. You can either open a separate bank account for paying taxes or simply transfer funds from the business account to pay these taxes.

When It Comes To Bookkeeping, Time Is Going To Be Of Essence

Are you keeping track of the time you spent on projects? Do you make it a point to record the amount of working time spent on a specific project or task? Small business employees can greatly benefit from time tracking because it does not cost a single cent. You just need to be mindful of your time so you can accomplish the task at hand without compromising on quality. There are time tracking applications made available to smart phones, desktops and tablets so you can religiously time your task and determine the exact amount of time you should allocate for each task.

If you have not yet realised the importance of a time tracking tool, here are reasons you should try one out:

•    It gives you the ability to estimate the amount of time spent on a particular task. Are you completely losing track of time as you become focused on a specific task? Have you totally forgotten about other tasks assigned to you because you are concentrating on a single task unmindful of the time spent? When you are completely aware of the time you spend on a single task, you will be able to estimate the time you need for completing other tasks. An ability to manage time without setting quality aside is a good sign of overall efficiency.

•    You can accomplish future projects in a timely manner if you learn to develop the habit of timing your current projects accurately.  Time-tracking allows you to time projects realistically and you can also plan in advance and still meet your goals without sacrificing other projects.

•    You can also improve your efficiency if you track your time because in any business, time is money. When you make it a habit to track your time, you become more responsible. You are also preventing getting side tracked by social networks that can deter you from completing your task in a timely manner. Actual time differs from ideal time. As much as possible, you should challenge yourself to finish the tasks more efficiently.

•    When you track your time, you will easily determine if you have enough time at your disposal. If there are too many tasks at hand, and you cannot finish them without getting help from other employees, the time tracker can help you identify the amount of time you need for the task to be completed. As a result, backlogs and delays are prevented.  You can also use the time trackers as means of estimating the time your outsourced employees need to finish the task.

•    A time tracker also helps maintain authenticity and integrity when it comes to invoicing. Tracking time also allows both clients and employees to reveal hidden time. These things often go unnoticed when time is not properly tracked.

Why Entrepreneurs Need To Understand Finances?

finance balance Mk184uDuThere are several reasons businesses are bound to fail, but the most common reason is weak financial management, which includes bookkeeping, accounting, cash flow management and raising capital. Most entrepreneurs do not have issues handling daily operations except the business’ financial aspect. Since financial management is considered essential to every business, especially when it comes to its success, entrepreneurs must learn the importance of proper financial management. Entrepreneurs are not required to study for years to become good at financial management. You just need to be keen on determining the factors that can contribute to poor financial management.

The effects of poor financial management on your business:

Most entrepreneurs put more focus on generating more sales for the belief that it is one important aspect that can make your business succeed. While this may be partly true, there are also businesses that fail in spite of generating sales.  There is one reason for bankruptcy and that is because of poor financial management.  

Cash Flow Mismanagement

Proper cash flow management must be observed if you want your business to prosper in the end. The failure to manage your cash flow properly can take a toll on your business as your inability to pay rent, insurance, phone, and so on, can definitely hurt your business in more ways than one. This is why planning ahead pays off because you will be able to foresee problems that arise.  You should know how to negotiate with vendors and customers so you can cover your bills. If there are cash flow gaps, learn to manage them as well. Cash flow gaps happen at some point and this will test your ability in managing cash flow.

Unpaid Taxes

You can run from tax collectors but you can never hide and that is certain. When it comes to paying your taxes, you need to plan ahead because there are instances when your business does not generate the same profits as the previous months. Obtain the skill of timing investments so you can get the most out of your purchases. You can postpone some of your investments for the following year if don’t intend to pay a lot in taxes this year.

Failure To Keep Expenses As Low As Possible

Many entrepreneurs often overlook expenses. Careless spending can lead to bankruptcy as there isn’t enough money left to cover all expenses. It can create a domino effect on your business, deterring you from expanding because you do not have money for making additional investments. Learning the art of cost management is essential as this includes keeping your expenses as low as possible. Your business will be more profitable if you try to look at the aspects that can help your business prosper. When you have enough to cover all expenses, business expansion is not far from happening.

Never take financial management for granted because it is an essential skill that every entrepreneur should master. The financial aspect of your business should not be relied on others because at the end of the day, you will be held responsible for the success of your business.

Can You Take A Christmas Break And Keep Your Cash Flow Working At The Same Time

background 20126 1920As the year closes to an end, it is every business owner’s dream to welcome 2016 with a big bang especially in terms of finances. This is why setting priorities before the year ends can help you with your financial forecast. For months of doing the number crunching and analysing where your business is going, it is high time you take a break so you can meet the challenges and adjust the direction of your business. However, if cash flow is not available to fund your efforts, your growth targets for 2016 will be impossible to meet.

Trade payments have the tendency to slow down during the holidays and this is going to be an issue for business owners as untimely trade payments can leave businesses struggling especially when it comes to meeting fixed costs. As a result, New Year plans are instantly forgotten. Taking a holiday is a good thing, so long as your cash flow does not also take a holiday.

Depending on the business you own, the holiday season can either bring you financial luck or deny you of healthy cash flow. The main challenge for most businesses is ensuring that payments are received in a timely manner. Unfortunately, this is beyond the businesses’ control. There can be times when payment collection process is slowed down because customers are busy planning for the holiday. Payments are often made in January, but this could affect your supposed steady cash flow. 

Businesses need to be mindful of strategies so Christmas cash flow crunch can be minimised:

Review your previous cash flow experience: it is easy to obtain a detailed cash flow forecast if you already have an idea of your cash flow experience in the past. This way, you can prepare in advance and formulate plans that can protect your business when cash flow starts to slow down.

Make collections your top priority: Before the holiday season kicks in, make sure you have already issued invoices so customers will have time to prepare payments and you can also follow up on those who have not lodged their payment yet. Giving customers timely payment reminders and overdue notices can reduce the risk of not receiving any payments during the holiday season.

Keep your stock in check: It can be difficult to control inventory levels during Christmas but you can still put unsold stock to better use by selling them cheaply so you can continue to meet on-going expenses.

Establish a backup: A steady cash flow helps you survive the season and to maximise your cash flow, make sure you reserve your cash into a high interest savings account.

Tighten your payment terms: You can also improve seasonal cash flow by testing your payment terms. You can either offer early payment discounts to encourage timely payments or negotiate full or part payments ahead of time.

Seasonal bumps are inevitable, but they can definitely be controlled with some effective strategies you can use such as managing unpaid invoices and fixing expenses with the use of debtor finance. While taking a well-deserved holiday is a good way to start fresh, you can throw your worries away once you are assured that your working capital is still intact.

Never Become A Hapless Victim Of Another Costly Bookkeeping Disaster

Bookkeeping and accounting fees can cause small business owners to tighten their belt, but imagining the vast amount of money you need to spend to repair a bookkeeping mistake can make rethink about skimping on bookkeeping cost. Any business owner is left with no choice but to submit for the business operation to continue.

A business that is competitive and you cannot afford to miss out on grabbing every business opportunity that comes your way. You know that customer loyalty is measured by how you deliver their needs. You know for sure that everything is on the right track until you open your email. Just the thought of opening your email fills you with excitement and fear. You are wondering where the email came from then lo and behold, an email from the ATO.

Although you have not completely gone over the email you received from the ATO, you know that something is not right. Your suspicions have been confirmed as you read the email. To make matters worse, the letter has already been forwarded to your bank by the ATO and they have already been advices of the non-payment. Nothing can be more horrifying than discovering that your bookkeeper is no longer doing what they are supposed to do. You know what is going on and you are waiting for the bank manager to give you a call.

If a small business owner no longer has the ability to pay debts, insolvency and bankruptcy are not far from happening. The bad news is, these things can be beyond the business owner’s control. Financial loss can be due to a number of reasons. For instance, if your business partner is experiencing marriage break down, it can definitely result in business mismanagement and cash flow shortages. However, a business owner still has the option to get out of this difficult financial situation.

A business can be compared to driving a car because you know to keep an eye on the dashboard and avoid driving too fast or too hard. It is also your responsibility to meet your financial obligations to keep the ATO at bay.

The Following Are Alarming Indicators That You Need To Pay Heed To Your Financial Activities:

• Your superannuation payments and GST are always falling behind their schedule.

• Wages, payroll and contractor’s bill are no longer met.

For A Business Owner To Ensure Financial Stability, A Bookkeeper Must Do The Following:

• Ensure that invoices go out promptly and reminder notices are received in a timely manner to avoid making late payments and incurring penalties.

• Create a system that provides bookkeepers the ability to highlight late payers as soon as they are falling behind payment schedule. Bookkeepers can also follow up on late payers the next day.

• Add terms on invoice so that collection costs waived once recovery service becomes a requirement.

A business owner must also perform their obligation so matters will not be taken to court. There are various options available to business owners in settling their unpaid debts. They can call the bank manager, call ATO, arrange payment plan, prepare budget and reduce head-count before the situation becomes worse.

Can Accountants And Bookkeepers Work Harmoniously

As cloud technology becomes increasingly popular and in demand, changing role of bookkeepers is necessary because of the benefits that changes are capable of providing. However, the idea of changing role of bookkeepers can also create challenges in terms of their working relationship with accountants. The role of accountants differs from bookkeepers but these roles remain indefinite, making the client suffer from its effect.

Issues that accountants and bookkeepers may face:

• If accountants fail to communicate with bookkeepers when doing their work for the client, there are plenty of rooms for mistakes and confusion. Potential problems can also arise if the bookkeeper fails to inform the accountant of issues concerning the task at hand.

• There will be territorial disputes when one or both parties tend to be protective of their role in terms of client’s affairs.

• Bookkeepers have not thoroughly understood their limitations and the absence of skills needed for a specific task results in a huge mess that the accountant has to clean up.

Due to the challenges that accountants and bookkeepers are continuously facing, working together may seem like an impossible thing to do. However, when proper expectations are set and both parties are putting extra effort to make the relationship work, nothing is impossible.

There are some practices that both the accountant and bookkeeper need to follow for a harmonious working relationship to take place:

• Both parties should act in the best interests of the client and should prioritise thinking about what will work best for the client. They should not be competing against each other because both roles are crucial to the success of the client.

• The lines of communication are essential for the accountant and bookkeeper to be in perfect harmony. If there are issues related to the task, it should be immediately discussed for the problem to be quickly resolved. More often than not issues or concerns become worse due to lack of communication.

• Both parties need to be clear about the tasks they are carrying out. If they do not have the skills required for the task, they should not take on the work and find out when to seek advice. Instead of making the task less burdensome, more problems are encountered because of failure to recognize the importance of skills in carrying out a task.

• Knowing exactly where to draw the line and to set boundaries before the work commences can also help an accountant and bookkeeper establish a good working relationship. They need to be in agreement of the role they are going to play. Disputes over territory must be sorted out before working together. When accountants and bookkeepers are fully aware of their limitations, the tasks will be successfully accomplished.

Accountants and bookkeepers have important roles to play in every business. Aside from making the job easier for a client, they are also instrumental to the success of the business by ensuring that its financial aspects are kept in check. Once accountants and bookkeepers are in harmony, the best possible outcome can be achieved. The client can benefit from a great working relationship between a bookkeeper and an accountant.

What To Expect From Two Essential Financial Statements

As a business owner, you get to take a look at the financial statements every once in a while because it is part and parcel of managing your business finances. The financial statements have a lot to tell you including how your business is performing financially. You will also know why your business is making money or losing it. These statements also help your financial planners, bookkeepers and advisors analyse the figures. There are 2 key financial statements that are commonly used for your business: the Profit & Loss and Balance Sheet.

Profit & Loss

A Profit & Loss Report refers to a summary of your business expenses and income at a specific period of time. It provides you an idea of your business’ performance. The data you will usually find in a Profit & Loss Report include Cost of Goods Sold, Equals Gross Profit, Expenses, Operating Profit, Tax Payable and Net Profit.

Although they may seem easy to interpret, you need to develop specialized skills so you can determine what the figures say. Unfortunately, this essential financial statement is not often understood by some business owners. The Gross Profit Margin is the gross profit over sales and this is usually presented in percentage. This margin is essential for tracking so you can ensure that profitability is improved and maintained. The Gross Profit Margin also allows you to compare your figures with competitors.

If there is a decrease in Gross Profit Margin, it only means there is a rise in inventory cost, heavy discounting and many more. The Net Profit Margin can also be measured as a percentage and this is referred to as net profit over sales. If you notice any decrease in your Net Profit, it means you are paying more in your expenses.

It is necessary that a Profit & Loss Report is prepared on a monthly basis because this practice enables you to perform regular analysis of your expenses and income. You will also be able to know your key business drivers. As you master the skill of reading a Profit & Loss Report, start planning how your business can keep up with competitors.

Balance Sheet

A Balance Sheet is another important statement that business owners should not miss out on checking because it demonstrates the financial strength and net worth of your business. In a Balance Sheet, you will be able to see the assets, liabilities and equity or net worth.

The assets refer to the tangible and non-tangible items that your business owns. The liabilities are the amounts you owe to other parties. The difference when assets are subtracted from liabilities is referred to as equity or net worth. The Balance Sheet helps you identify the key performance indicators such as control of working capital, financial strength, return on equity and return on capital. A Balance Sheet may be harder to interpret than a Profit & Loss Report because of all the technical terms you can find in it. This is why you need to make sure that key areas are not missed such as the Current Assets and Current Liabilities. You should also pay close attention to the amounts on your Balance sheet as they can assist you in making a decision and cash-flow.

Reading A Profit And Loss Report

stock exchange 921605 1920The profit and loss report is one of the essential reports that most business owners hold on to in order to find out which direction their business is heading. Going over the numbers require accuracy in interpreting data. There should be no room for mistakes because bookkeepers base their recommendations and suggestions on the report. In essence, a Profit and Loss Report is a determining factor whether a business is making money or losing it. While most business owners leave this task to the bookkeeper, there are still some business owners who do not know understand the report. If you are heavily relying on your bookkeeper without taking time to look at the report, it could only mean that you are not actively planning your business or budgeting.

Interpreting numbers is a bookkeeper’s second nature, but to some business owners, they are often dazed and confused because all they know is that these numbers are only meant for forecasting where there business is going. When figures are good enough, it is easy to overlook some other details. Unfortunately, business owners are missing the point because financial reports offer more than just the figures. They are also crucial to making business decisions that can contribute to the business’ success. If you fail to regularly monitor the performance of your business, it may not take a while for you to discover that your business is already losing money.

Income

The Income refers to the total of sales or invoices you have invoiced over a selected period of time. This amount is also GST exclusive and considered as accrual based. Keep in mind that the Income amount does not include investment income as this falls under a section known as ‘other income’, which is found on the bottom of the report. Your income is also referred to as ‘turnover’.

Cost of Purchases or Goods Sold

The Cost of Purchases and Goods Sold refers to the total of all the expenses you have incurred. These expenses have directly contributed to your income. The purchases are the inventory items that the company has purchased and sold. The Cost of Goods Sold are the items for sale including the freight charges for the items and the costs incurred to bring the purchased item into a saleable state.

Gross Profit

The Gross Profit is the income less the Cost of Goods Sold and purchases. As a business owner, you will be able to understand the markup percentages by referring to the gross profit. In a report, this is expressed as a percentage of income. 

Expenses

Aside from the Cost of Goods Sold, the expenses also provide you figures of other business expenses. The expenses are categorised according to your industry and it includes operating expenses such as rent, power, telephone and many others.

Net Profit or Net Loss

The total net profit or loss refers to the total of income, less cost of goods sold or purchases less expenses. The business makes a profit if the figure is positive. A negative figure indicates that a business is losing money.

Another important note to consider is that the profit and loss report is an indicator of the amount of money you have in your bank account. Your profit may be high, but your cashflow is low. However, you should also keep in mind that a healthy cash flow does not necessarily mean healthy profit.

 

Signs Your Business Needs Help With Budgeting

Spending is necessary in every business, but it should come with a plan. The failure of assessing your spending habits may result in getting a zero balance in your bank account. The rule of thumb is to spend the least amount of money while obtaining the best possible return. This is where budgeting comes in. For you to manage the financial aspect of your business, a cost-effective way of using your money is a must.

You may not be doing things right if:
Bills Are Not Paid In A Timely Manner 

While it is acceptable to miss out on accomplishing some items on your to-do list, not paying important bills is a different story. Set aside money for paying your bills and budgeting is a good way to prioritize your expenses. It should start with the most important payment obligations such as tax payment. If you have to make credit card payment, you should keep a budget for funds are ready to use again.

Your Business Is Showing Clear Signs Of Overspending 

Your business is making a profit if you earn more than you spend. However, this does not mean refusing to spend money even when it is already considered necessary. It only means spending your money on necessary expenses and budgeting is going to help you monitor your expenses. 

You Have A Long List Of Unresolved Obligations 

It is time to rethink how you spend if you always find yourself depleting your funds. A long list of unresolved obligations only means that something is not right with your spending habits. You should know the difference between going out of business and growing your business. Your creditors and the people you are doing business with may lose faith in you, so you need to make sure that your problems are resolved. 

You Have Trouble With Your Petty Cash 

If your account ends up unbalanced at the end of each week, there might be part of your expenses that you need to review or re-assess. If you cannot identify what the problem is, you might be having problems reconciling your petty cash with your business accounting. The lack of budgeting can leave your financial activity in chaos. Not resolving issues with your petty cash only means that you have no idea about the amount of money you have. You also allow your spending habits to wreak havoc on your overall financial status by overspending. Make sure you are in control of your petty cash and never take money out of the rest of your budget if it is intended to cover items you have previously provided.

Poor financial management can increase the likelihood of losing your business. There are businesses that are forced to close because of not keeping an eye on the expenses. Ignoring payment obligations and spending money on unnecessary items can create a serious impact on your business. If you cannot properly identify where the problem lies, a bookkeeper can teach you wise financial management. Closely monitoring your financial activities helps you identify problems before it gets worse. You will also be able to know if changes should be made with your spending habits.

Reasons Your ABN Can Be Cancelled By ATO

binding contract 948442 1920For business owners, there are various obligations that need to be fulfilled and once Australia Business Number or ABN has been issued, you need make sure that you do not commit any violations. Although there are only a few reasons your ABN can be cancelled, the process of obtaining ABN can be difficult. One of the reasons your ABN can be cancelled is when your business lacks profitability. For instance, a business that is no longer gaining a profit can have its ABN cancelled. ATO monitors businesses that can potentially have their ABN cancelled.

How To Avoid Cancellation Of ABN

When it comes to growing your business “one size fits all” does not apply. In fact, there is no special formula in ensuring profitability. You just need a dedicated team that can help you run your business in an efficient manner. You need to spend less and have an action plan that can help you promote effective management.

Your bookkeeper will also play a huge role in helping you avoid ABN cancellation. If you want to improve your company’s outlook, a positive cash flow is necessary. Although this is not the only technique to make your business more profitable, a steady cash flow can definitely make a difference. A bookkeeper can also help you monitor your business so you will know if something needs to be fixed. As a result, you will be able to make plenty of room for growth and you can also make necessary improvements.

A competent bookkeeper should help you separate assets from your liability. A bookkeeper is also responsible for organizing your financial statements and reports so you can easily determine if your business is generating a profit or a loss. When your business has proper bookkeeping, you can identify if your business is really doing well.

A cancelled ABN can be stressful, but this is definitely avoidable if you know how to take care of the financial aspect of your business. To ensure your business continues to be in operation, make sure you evaluate various financial factors.

• Re-evaluate your spending habits.

Assess how much you are usually spending and find out if your purchases are based on impulse. You may need to implement new measures if there are unnecessary spending going on. You can speak to your bookkeeper for some recommendations if you wish to re-evaluate your spending habits.

• Consider your business goals.

Ask yourself if you have already achieved some of the goals you set when you opened your business. If all of these goals have already been achieved, you need to make new ones. If there were goals that you have not accomplished, make sure you know the factors that hindered you from achieving them. You should also make necessary changes such as formulating some techniques so you can effectively achieve your goals.

• Establish new connections.

If your business has already been established, it is the best time to make new connections. You can build new connections if you attend networking events. A business with a strong system is more likely to get ample support during tough times.

• Reconnect with your associates.

As you build new connections, you should also reconnect with associates as they can help you obtain new approach that can make you improve your business and prevent ABN cancellation.

Never Make The Same Financial Mistakes Again

accounting 761599 1920Even if you have just opened a small business, it does not necessarily mean that you cannot survive or emerge victorious in your chosen business niche. While it can be a series of trial and error, learning from your mistakes will hone your business management skills. Among the various business aspects, the financial aspect is often the target for mismanagement. A simple mistake such as overlooking the correct details on a statement can create a deleterious effect on the outcome of your finances. Before problems with your record could get worse, you should be careful with your financial activity and avoid committing these mistakes:

1. Not Taking Feedback Seriously

Getting advice or feedback from your bookkeeper can hurt your ego if you have not prepared for it, but as a business owner, you need to take your bookkeeper’s opinion especially if you are still trying to gauge your business. The feedback from your bookkeeper can help you take the right direction if you listen carefully.

2. Not Keeping The Receipts

If you are already familiar with your financial activity and you have estimated your expenses, throwing away your receipts seems like a natural thing to do. This may not be an issue at first, but come tax season, you will realize their importance. Never toss out receipts as they are part of the record keeping process. Save them in a file or give them to your bookkeeper for safekeeping.

3. Not Focusing On A Niche

Your business will not prosper if you do not consider sticking to a niche. Marketing is indeed expensive. This is why you need to spend your marketing budget in such a way that will reap positive results. Make sure you only focus on a niche that your product can satisfy. Never concentrate on people that are far from becoming your target market because you will not only waste your time but your money as well.

4. Not Giving Importance To Making A Budget

If you go to a battle unarmed, you are most likely to lose. The same is true when opening a business. You need to have a plan of action so you can calculate the adjustments you need to make. You won’t know the direction you are going to take if you don’t have a financial road map. You will also find it difficult to measure or track your progress.

5. Failure To Hire A Bookkeeping Professional

For business owners who have completely understood the nature of their business, they will sure realize the importance of a bookkeeper in leading the business in the right direction. New business owners are often concerned about the service cost, but you should also pay attention to quality. Choose a good bookkeeper and never fall prey to those who offer the lowest price, the result may not be desirable.

6. Not Analyzing Your Start-Up Costs

Your initial capital is important when starting a business. If you have not analyzed your capital, you can wreak havoc on a solid operation. You should keep in mind that positive cash flow does not immediately take place. You need to observe and make a wise investment  so your business will have a positive direction.

Are You Asking Too Much From Your Bookkeeper

hand 65834 1280When you are working in the business world, there will be expectations that you need to meet or set. While employees have a set of expectations from employers such as paying them regularly, employers also have some expectations from employees and your bookkeeper is no exception. One of the expectations of business owners from their bookkeeper is to provide accurate statements and in return the bookkeepers also expect to receive timely payments for their service.

As a business owner or employer, it is reasonable to expect from your bookkeeper to:

• Obtain more than just basic understanding of accounting and explain them in simple terms. When they are asked for a brief explanation of these terms, they should be able to provide answers in an understandable manner.

• Go into details. Dealing with numbers can make every bookkeeper more prone to mistakes and it is a good sign when your bookkeeper is detail oriented because this only means they pay more attention to the essential information of your statement.

• Be a self-starter. You will no longer have a feeling that you need to give your bookkeeper a constant reminder that you do exist.

• Have the ability to see the big picture. A bookkeeper should make realistic suggestions when it is necessary. Based on the available details, the bookkeeper must know how to recommend a course of action by simply putting all the puzzle pieces together.

• Have willingness to follow through. A bookkeeper should be able to meet deadlines and accomplish the goals you set.

• Provide information to the financial status of your business. The bookkeeper should be able to explain everything in layman’s term.

• Prepare a balance sheet, statement of profit and cash flow statement on a monthly basis. The bookkeeper must also stick to the deadline when it comes to providing these statements.

• Create a commitment and stick to it. If your bookkeeper just cannot handle deadlines, there is no point keeping them.

• Have an idea of the reasonable charge for the service rendered. If the bookkeeper has a broad understanding of their business, they will know how much the services cost.

• Gain a basic understanding of the bookkeeping industry and the type of business. This is going to be essential because business owners turn to bookkeepers to ask for some recommendations, advice or suggestions. Choose a bookkeeper that is connected with a company with substantial experience in various businesses especially in your industry.

• Have solid communication skills. Your bookkeeper should communicate through emails, phone calls and conversations clearly and concisely. They should also be polite.

• Be computer literate. Most bookkeeping tasks are performed using computers or software such as Reckon and MYOB.

While these are realistic expectations, there are times when they are not met because they seem unreasonable. For instance, if you expect your bookkeeper to email back within minutes, this is considered unreasonable as your bookkeeper may be working on a busy schedule.

If you expect your bookkeeper to agree with you most of the time, then you will not be able to hear any constructive feedback that will save or help your business. Your bookkeeper will not also drop any projects just to focus on your books. Building a strong connection with your bookkeeper is possible once you discuss your expectations.

Essential Financial Statements You Need To Receive From Your Bookkeeper

copy 160129 1280Although you cannot always expect yourself to know everything about accounting or bookkeeping, it really pays to have a basic knowledge of the documents you should expect to receive from a bookkeeper. Familiarizing yourself with the documents your bookkeeper is using will help you understand the reasons they are needed for your business. You are not expected to memorize every statement that bookkeepers are dealing with, but you need to make sure that you have a deeper understanding of the gist of the statements. 

Cash Flow Statement

The purpose of a Cash Flow Statement is to show you the movement of your assets over a period of time. There are several categories that the movement is broken down into: investing, operating and financing activities. The investing activities refer to the purchase and sale of various assets such as buying a new location. Operating activities refers to the tasks that the business regularly performs such as making a sale. Financing activities refer to paying or generating debt.

Balance Sheets

Your bookkeeper heavily relies on balance sheets to demonstrate profit and loss. As a business owner, it is your guide in determining the amount of money that is currently available. However, you should take note that the balance sheet does not necessarily reflect your specific investments. Your bookkeeper may go into the details of your statements, but it generally presents your business’ overall success.
The balance sheets are also referred to as statements of financial position. They are considered bookkeeping’s building block. They are often used by professional for additional statement creation or data analysis so conclusions can be drawn.

There are three essential elements that you can find in balance sheets: equity, assets and liabilities.

1. Equity refers to the capital left after the asset have been used for paying off liabilities.
2. Assets are the business-controlled items such as machinery and cash.
3. Liabilities are the items that your business owes such as loans.
If you are going to examine the balance statement, your business’ assets are equal to the sum of equity and the liabilities.

Income Statement

This statement shows the profit and loss, showing the losses and net profits for the current period. If you would like to know your business’ current income, the statement provides you the necessary details you need including sales revenue. Aside from the profit and loss, the statement also provides you details of your expenses such as the rent and wages. A net profit or net loss is taken from the difference between the expenses and income. Business owners have high hopes of seeing a net profit on an income statement.

Bookkeepers also use the statement to give recommendations and advice to business owners. It provides the bookkeeper an idea how profitable your business is. It also provides business owners with the next steps to take for the business to become more profitable.

A meaningful conversation with your bookkeeper about the purpose and functions of these statements will help you find out how you can improve your business so it can generate additional profit. Make sure your bookkeeper provides you these statements so you are well aware how your business is doing.

Take Note Of Australia's Most Important Bookkeeping Dates

time 481444 1280Aside from mastering the skills of business management, a business owner is also expected to be well acquainted with the concept of deadlines. Proscratination is not an option especially when it comes to making payments. The dates that you need to pay attention to are the filing dates and the tax deadlines. These refer to the bookkeeping dates and falling behind your payment schedule can create a ripple effect on your business.  

Pay as You Go Withholding

Pay as You Go (PAYG) withholding refers to the summary of payments that employees made based on a specified period of time. Your business makes the payment and the summary shows the amount withheld. The statement must be presented if your business did not withhold payments. You must take note that the deadline for PAYG withholding is always 21 days after the end of the month or 28 days after the end of the quarter. It also depends on the system you have chosen. 

Business Activity Statements

All Australian businesses must fulfill the tax obligations such as securing business activity statements. Each month, business owners are required to make payments. The payments should be lodged 21 days after the last day of the month. However, if you choose to pay on a quarterly basis, your payment needs to be made by the 28th day after the quarter. For the December quarter, payments are not due until February.  

Annual Withholding Declarations

There is a good reason employees are required to give their withholding declaration and one of which is to claim entitlement. Claiming entitlement enables employees to reduce the amount withheld from their wages. It can also work in the opposite way by increasing the amount of money withheld from each payment. If there are changes in the employment status or address of your employee, the declaration can also provide you enough information about these changes. Make sure you meet the deadline for tax declaration, which is on August 14th. Once you receive the declaration, you need to make changes to the employees' payments from the very first payment.  

Payment Summaries 

The purpose of payment summaries is to detail the payment that you have made to non-employees. The type of payments that fall under this category is the payment you made under a labour-hire arrangement and voluntary agreement. Take note that the due for the payment summaries is every 14th of July.  

Superannuation  

The funds that will be made available upon retirement are also included in superannuation. Your task as an employer is to set aside a portion of the employee's wages into a superannuation fund. The employees also have a choice of putting additonal funds into the account. It is essential for employers to pay superannuation fees regularly. The payment can either be made on a monthly or quarterly basis. Payment for superannuation must be made 28 days after the established period of time. 

Both business owners and bookkeepers must understand the significance of these dates. If you want to keep your business and finances in check, it is imperative that you take note of these dates. You can avoid penalities if you know when payment should be made. 

All You Need To Know About Keeping Your PAYG Payment Summary

file0001770792325As a business owner, you will be asked to run through your PAYG (Pay As You Go) payment summary and when you have nothing to present, it can spell trouble on your part. It is easy to get sidetracked by other business obligations and forget about the payment summary. You may consider these summaries less important especially when you lodge timely payments. However, there can be instances when you need to file a payment dispute and if you don't have any concrete proof to show, necesary corrections and updates cannot be made. 

What every business owner should understand about PAYG?

 There are two types of PAYG that every business owner must be familiar with: the first one is referred to as Pay As You Go Installment or PAYGI. This refers to the tax installment payments business owners make to the ATO. The second one is called Pay As You Go Withholding or PAYGW. This refers to the tax that employers or business owners collect from payees, workers or employees. The summary provides the payment made and the amount withheld throughout the financial year. 

The importance of payment summary to your business:

 Not everyone has a sharp memory to remember the payment made by the employees. Business owners are often busy on other tasks that tracking payments become the least of their priorities. With PAYG payment summary, it will be much easier to take note of the payments regardless of the date the payments were made. If there are discrepancies on the information, erroneous entries can be corrected right away. 

The benefits of keeping a copy of PAYG payment summary

1. The process of filing taxes becomes much easier.

When it comes to filing your taxes, accuracy is going to play a huge role to ensure a stress-free process. If you already have a payment summary, there is no need to do some calculations as figures are available. You are less likely to overlook essential details such as withholding taxes.

2. A detailed accounting information is obtained.

You can get very specific information about each payee right off the bat when you have a copy of PAYG payment summary. Their tax numbers, tax liablities, salary and earnings are available. In case payees need to gain access to the relevant information, you can provide what they need easily. 

3. It will be simpler and faster to generate reports.

The fact that PAYG information has already been sorted can save you a great amount of time generating reports. Since the information for each payee is available, discrepancies can be spotted easily. 

4. You can answer queries accurately.

If payees are going to ask about under or over-payments, you know where to get the answers from. The summary can also remove doubts especially when it comes to deductions. If you are being audited, the summary can help you stay on the right track. The request for accounting records can also be reduced when the summary is available. As a result, financial transactions become more efficient and errors are effectively reduced. Not only do you spend less time gathering data, but you also complete the task in a timely manner.

Signs You Need To Consider Hiring A New Bookkeeper

IMG 6960 2A bookkeeper will always be considered necessary in every business especially if you are managing a fledgling company. Aside from making your financial activities more sensible, they are also considered your partner in running your business. There are different aspects of your business that you need to keep an eye on and in your absence, your bookkeeper should be able to keep track of your budget or cashflow so your business' financial aspect remains intact.  

However, there are problems associated with hiring a bookkeeper especially when their presence does more harm than good. Have you ever found yourself doing the task that a bookkeeper is supposed to carry out? If you think that your business operation is interrupted because your bookkeeper is unable to achieve your business' primary goals, it can already be a sign that you and your bookkeeper need to part ways. 

Signs You Need A New Bookkeeper  

1.Your bookkeeper fails to deliver financial reports and other forms to you on time. 

One of the reasons you hired a bookkeeper is for you stay on top of your business' financial aspect. Your bookkeeper does not make the entire process easier for you if they don't deliver timely reports. Find out if you contributed to the delayed submission. Have you sent the reports they need on time? If all things that the bookkeeper needs are made available to them before the deadline, you may need to think twice of keeping the same bookkeeper. While these reports require ample time to be completed, being consistently late means you need to consider another person for the job. 

2. Your bookkeeper is always busy or out with other clients. 

A bookkeeper that has strong commitment to your business should be available whenever you need to engage their service. There are days when you can be very busy and you need financial reports done ASAP. However, when your bookkeeper is nowhere in sight, you may want to choose someone that can devote his or her time for your bookkeeping task. It's time to bid your current bookkeeper goodbye if your bookkeeping tasks become the least of their priorities. 

3. Your bookkeeper does not take time to explain financial reports. 

As a business owner, you have the right to understand your financial reports and your bookkeeper should schedule a meeting to present the reports. If you are being denied of your right to obtain information of your business's financial aspect, how can you be confident that the figures on the report are correct? You don't have any assurance that ATO also gets the right information and this can spell trouble on your part.  

4. You receive repeated notices from ATO.

If you are constantly receiving notices from ATO, this only means that your business has not been taken care of correctly. This is considered a serious warning sign because if notices become very consistent, you may have to deal with bigger problems with ATO. You might also be flagged as a repeat offender and this could mean penalty on your part. 

5. Your bookkeeper fails to return your phone calls. 

Do you always find yourself in a waiting game when trying to check in on your bookkeeper? If your bookkeeper never returns your phone calls even when you left a message, this can be a sign that he is no longer interested in working for you. While there can be instances when employees encounter circumstances beyond their control, it is a different story if this happens regularly. 

Reasons Good Bookkeeping Is Necessary

tax 468440 1280

A successful business follows a bookkeeping practice to ensure that payments are made in a timely manner and all financial activities are recorded properly. There's bad bookkeeping and there's good bookkeeping. One thing that separates bad bookkeeping from good bookkeeping is the system. Even if you have a small business, it is not a valid reason to not pay attention to your bookkeeping task. It may appear to be the most trivial task, but it can be the most critical to your business especially when you start auditing your finances. 

It takes a large chunk of your success and a lot of things needs to be undone if something goes wrong. In every business, you are expected to be in complete control of your financial activities. You don't just make a mental note of your expenses, budget and cashflow because you are required to keep a record. You may not fully appreciate the importance of good bookkeeping but you will once your business starts to grow. 

Reasons You Should Maintain Good Bookkeeping

It improves your tax return.

One of the dreaded obligations of most business owners is keeping their tax payments up to date. This is why many of them rely heavily on the expertise of a bookkeeper to ensure that everything is in proper perspective. Unfortunately, business owners often fail to realize that just integrating bookkeeping into their business is not enough to keep it in tip-top shape. You have to maintain organized records that can be easily analyzed when needed. 

It provides audit protection.

Having a separate checkbook should be regularly observed because it can provide you audit protection. More likely than not, ATO does not allow a great number of expenses, which usually take place when your personal and business accounts are one and the same. 

It substantiates the corporate veil.

A separate checkbook gives you the ability to recognize that the company is its own unique entity. You also avoid mixing your personal and business funds with a separate checkbook. 

It encourages tax savings.

Nothing can be more frustrating than falling behind tax payments. This can be due to a number of reasons and one of which the lack of ability to provide an accurate record of your finances. This can be very stressful on your part especially if you heavily rely on your bookkeeper to do the job without checking the details of your books. 

It makes record-keeping less stressful. 

When your records are disorganized, it seems like you are always try to beat the deadline. You end up juggling various tasks but none of them are accomplished. There's one important aspect of your business that you might have taken for granted. If bookkeeping is the least of your priorities, you need to change the way you manage your business. Good bookkeeping is as equally important as other aspects of your business. 

It helps you make the right decision.

Accurate records are going to be important when making a crucial decision that is related to your business. You can cloud your judgment and make poor decisions if you are being presented with records that you find difficult to understand. You can't be a good business owner if you can't get your bookkeeping task straight. 



­ Questions? Give Andrew a call 0450 605 592

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