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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.

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.

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.

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.

One Task That Most Small Business Owners Dread

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As a small business owner, you need to fulfill your responsibility in ensuring that your business is in tip-top shape. You need to hire the right employees, keep your business finances in order and create a website that potential and existing customers can turn to if they need to buy your product or engage your service. Without a doubt, you are ready to roll.

Unfortunately, there is still one essential element in managing your business that should never ever take a backseat regardless of priorities. While bookkeeping can take so much of your precious time especially if you don’t have any extensive experience dealing with quickbooks and other bookkeeping related tools, every task that involves bookkeeping seems complex.

Although bookkeeping can be everyone's least favorite task, this can play an important role in running your business. Bookkeeping is unappealing to small business owners because of the basic practices that can still be foreign to someone who does not have an accounting degree. You will need to learn the ropes before you can breathe a sigh of relief when deadline for submitting financial reports approaches. If you are new at bookkeeping, it can also be time-consuming and making mistakes can't be undone by simply changing figures. The painful part is that it can be costly.

How to make bookkeeping easy for business owners?

You don’t have to love math to master your business’ bookkeeping side. You just have to employ some simple techniques: 

• Take a short course on bookkeeping basics

Bookkeeping can be overwhelming when you don’t know anything about it especially if you hate numbers. However, a small business owner should make the effort to know what bookkeeping is all about so you know where your business finances are going. A short day course can give you long term benefits.

• Use bookkeeping software

When it comes to balancing the bank statements, you can't do all the work because it will sure be a tiring job. Instead of doing the job by hand, try using reliable bookkeeping software that allows you to enter the financial statements in a jiffy. It is best to use software that allows you to link your bank transactions automatically for real-time monitoring.

• Keep records organized

Keeping accurate financial records is a sign of good bookkeeping. It starts with developing good work habits and ensuring that you keep your company workflow in check. Keep receipts in one folder and be sure to label it to avoid confusion. File them on a monthly basis and store them in one place.

• Get a reliable bookkeeper

Even if you are running a small business, hiring a bookkeeper should not be set aside. A bookkeeper will be responsible for setting a workable system that your company can follow. All you need is a basic understanding of the system so you know how the process works. 

You can’t promote business growth if you don’t pay attention to small but essential details of your business. This is why giving importance to bookkeeping is a must. A lot of businesses have failed because of not paying attention to the business’ financial activities.

Reasons Small Business Struggles With Bookkeeping

entrepreneur 696976 1280It is easy to pay little attention to bookkeeping when your business is going well. Why would you still go into the smallest details of your business when you can focus on more important things? Any business owner can hover on the brink of disaster with this mindset. Your business’ bookkeeping task does not end where your success begins.

In fact, you can’t take shortcuts on other tasks such as selling without prioritizing bookkeeping. You can overlook financial activities but once these errors take their toll on your business, it is already too late for you to realize that you have already made a costly mistake. If bookkeeping stays in background, you won’t be able to determine the factors that have driven the success in your small business.

Avoid These Bookkeeping Mistakes:

Failure To Maintain Records

A small business can swim in its pool of success and just watch the bookkeeping task take a nosedive. As the temporary allure of your business starts to fade, bookkeeping starts to resurface, but this time, there are numerous questions that quickbooks can’t provide any answers to. Record-keeping is important in every business. Even if you have already tasted the sweet success of your business, this does not take the glamour out of bookkeeping. Make sure you keep all receipts in a safe place as you will need them in the future.

Unaware Of The Amount You Spend For Your Business

It is perilous to every business to assume that there is still enough cash without budgeting your spending. Keep in mind that you are spending money to run your business on a daily basis. If you are complacent that you have sufficient money at your disposal, unable to keep your financial activities in check can make you spend more than you know. When budgeting the money for your business, make sure you separate them into 4 categories: 1. Fixed expenses; 2. Prospective income; 3. Paycheque-allowance; 4. Variable expenses. You should give priorities to needs more than wants.

Spending Rather Investing

There’s a difference between spending and investing. When you spend, your business does not obtain any benefits from it as you just let your money go out the window. On the other hand, investing your hard-earned money can help you reap long-term success. While it can be inevitable to spend, make sure that the benefits still outweigh the cost. Although the balancing act can be challenging, making a sound judgment usually does the trick. If you need to buy office supplies, think first if these are necessary to improve your business’ quality of work.

Not separating your business bank accounts

You can easily lose track of your cash reserves when you don’t separate your business and personal bank accounts. If you continue to follow this practice, you may end up using all the money for your business and you have nothing left to pay for your living expenses. You can avoid confusing your personal bank account for your business bank account if you pay your business expenses from a business credit card. There should be a credit limit so you can control your cash flow. It will also give you the ability to be more flexible.

Why Good Cash Flow Management Is Essential

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Managing your cash flow wisely is not just a business practice but a household practice as well.  There are plenty of reasons you should keep your cash flow in check especially if you are running a business. Most bankruptcy in businesses is due to poor financial management. Even if your products and services are making it big in the business industry, you still have to find a leverage that will ensure sustainability in your business. If your financial activity is in chaos, you may want to look at the benefits that a good cash flow management provides.

The major benefits of managing cash flow

In running a business, you don’t just maintain a cash flow, but a healthy cash flow. However, it takes good management skills for you to pull off a balancing act ensuring the money that comes in and goes out are proportion. When money is not coming in, you won’t be able to pay your employees or purchase essential supplies. You will also see loans and debts piling up because your business appears to be breaking the bank. A good cash flow management helps you fulfill your tax office obligations such as superannuation, GST and PAYG. 

Cash Flow vs. Profit

You might confuse cash flow for profit, but these two are never one and the same. They serve a different purpose and are not created equal. A business can be considered profitable, but may not be in a position that brings in money. The real income of your business will be determined once the Profit and Loss report has been turned in. If you have not really paid off your debts and loans yet, a steady cash flow is not yet in the picture.

Cash Flow Budget Preparation

Anticipating receipts, expenses and other income should be kept in mind as it is part of preparing a cash flow budget. You don’t just provide budget without preparing a cash flow projection. You can turn to bookkeeping software packages with features that allow you to produce graphs and reports easily. 

Note that a cash flow projection does not deliver 100% accuracy. This is just a prediction of your financial activity, but it allows you to track your cash efficiently.

How to improve cash flow

There are various ways you can improve cash flow such as cutting down on your expenses or reducing the number of contractors or employees you have. If you have items that are slow-moving, you can also avoid overstocking them. You can prevent falling behind payment schedule if you only take out a short-term loan. It helps you pay your debts and other obligations in a timely fashion. If you can’t pay your debts all at once, you can also stagger payments where possible.
As a business owner, you should be keen on checking your financial activity and cash flow is going to be an essential part of it. If you fail to keep track of your expenses and other financial activities, you might be surprised to discover in the end that more money is going out instead of coming in. Check financial reports regularly so you know where your business’ financial status is at.

Are You Stuck In A Routine Or A Deadly Sin?

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Whether you have a busy day or you just want to get things done more quickly, multitasking is usually the route you are more likely to take. You believe that doing several tasks at once can save time, but what about the quality of your work? If there's one aspect that multitaskers often compromise, it is the quality of their work. Sure you save time doing things at the same time, but since each task only gets 50% of your attention, you give little time to ensuring that you deliver high quality results. Imagine working at the computer and talking on the phone at the same time. These tasks are both demanding and distracting.  You lose your focus even if you are a seasoned multitasker. 

What makes multitasking less efficient?

The chaos that a divided attention brings can be compared to money: it is quantifiable. If your attention is shifted to another task, you are only giving less than 100% of your attention to the first task. Even if you make an effort to finish earlier than usual, there is still one important aspect of the task that you might miss out. While you try your best to make the task error-free, the attention you give to the task will not give you any assurance. 

Even if you only perform one activity and thinking about another, it can also be considered multitasking. Note that your attention is still divided even when you are just thinking of another task. If you always find yourself doing two tasks at once, you need to consider introducing mindfulness into your life. Mindfulness is the opposite of multitasking. 

Unlike multitasking, mindfulness lets you pay full attention to what you are doing at the moment. For instance, if the phone rings and you are working at the computer, you leave your current task and answer the phone. If it is an important call, you are a hundred percent sure that you are getting the message right as you are not distracted. Once the call is over, you resume working and quality is not compromised. 

A complete attention to the task at hand ensures that errors are corrected and your job is kept to a satisfactory level. Mindfulness hit two birds with one stone: your work life and your personal life. More likely than not, multitaskers find it easier to be lost in thought or become absent-minded as there are so many things running in their head. Even at home, they still can't give their full attention to their family and quality time is already out of the picture.  

Mindfulness breaks the spell that binds multitaskers into the same routine. It puts things in proper perspective so it will be easy to carry out various tasks without the need to multitask. Not only do you promote efficiency but you also ensure that the job you accomplished is consistently satisfactory. 

When you integrate mindfulness into your daily routine, you will begin to notice a transformation in how you accomplish your tasks. You genuinely focus on the quality and take your work to a higher and more consistent level.  

 

How To Classify Your Allowances Correctly?

For employers, getting bookkeepers to ensure that financial activities including handling allowances are kept in check is a difficult responsibility to fulfill. In fact, it is one of the most complex areas that both employers and bookkeepers are trying to decipher. When you misclassify an amount, the impact on your business and your employees are going to be serious. There will be some corrections that need to be done so you can put your finances the way they should be. Why are there misclassifications on allowances and how can they be avoided? Misclassifications take place when the amount that employees expended are not identified correctly.

When are allowances given to employees?

Allowances are separately identified payments and they are given to employees for:

• Expenses that are work related such as traveling between work sites.
• Working conditions
• Expenses that are not considered as an employee’s tax deduction.
• Special duties or qualifications.

Allowances should not be mistaken or confused for reimbursements. Allowances are intended for covering anticipated costs and these are given whether or not the employee incurs these expenses. These are also considered an assessable income and they are already included in the employee’s tax return. The employee has the right to claim a deduction for the expense.


On the other hand, reimbursements are given to employees for the expenses they have already incurred. The employer may also shoulder the fringe benefits tax (FBT). The reimbursement is not considered an assessable income if it is covered by FBT. The employee cannot claim a deduction for this type of expenses.

Super obligations for paying allowances:

• Reimbursements and expense allowances are not considered wages or salary. They are not ordinary time earnings as well but can be included in ordinary time earnings.
• Employees will only be granted expense allowances if they have fully expended the money on items that are tax deductible.
• When employees are required to work during non-working hours, they will be excluded from ordinary time earnings.

Travel Allowance

• The expenses incurred when employees travel in the course of their duties.
• The expenses for food, drink accommodation and incidental while employees travel.

Reasonable rates for travel allowance

The travel allowances given to employees must also be compliant to the reasonable travel allowance rate for the following expenses:

• Meals
• Deductible expenses which are related to travel
• Accommodation

For domestic travel, the rates only apply in commercial establishments such as serviced apartments, motels and hotels. If another type of accommodation is used other than these commercial establishments, the rates will not apply.

In the event the allowance has not been fully expended, the amount must be recorded on the employee’s summary report and this should be part of the gross earnings. The employee must also show the allowance received as assessable income in their tax return. The claim will only be the amount of the deductible expense that the employee incurred. Tax Office tables can also be used for ensuring that the summary reporting for payment is error-free. Gaining a deeper understanding of how allowances should be handled can save you from committing some errors. You just need to be keen on details and be able to tell the difference between reimbursements and allowances.

The Future Of Bookkeepers: Are They Becoming Obsolete?

 

grid 725269 1280With the bookkeeping software stealing the limelight, is this already the end of bookkeepers’ career? For sure, every business owner relies heavily on the modern advancements of technology to accomplish daily tasks quickly and easily. However, bookkeeping software is not the be-all and end-all of every business transaction. No matter how advanced the software in carrying out bookkeeping tasks, they still have glitches that can take a large chunk of your time if you choose to fix these errors. These days, people rely on real-time information and this is one of the benefits that cloud software provides. The information you need is available right off the bat and the process isn’t time-consuming. 

The allure of accessibility, convenience and speed often make bookkeeping software more attractive to business owners. Gone are the days when you have to check a pile of receipts and enter them into the database manually. Everything is replaced by a microchip that does all the bookkeeping jobs instantaneously. However, the success of a company does not just depend on bookkeeping software and with that being said, a reliable bookkeeper will still play an important role to the company. In fact, software and bookkeepers make a great tandem. You just have to know how to play your cards right.

How to utilize bookkeepers in a world of modern technology?

Just because entrepreneurs are relying heavily on bookkeeping software does not necessarily mean that businesses are formally saying goodbye to bookkeepers. In fact, a bookkeeper can still continue to stay in the game so long as the skills required are present.

• Create a solid understanding of bookkeeping fundamentals.

If you only have basic knowledge on bookkeeping, there is only a slim chance that you will emerge victorious in a stiff competition. Attempting to step out of your comfort zone and do more than just gaining knowledge on QuickBooks can help you acquire an edge. Take it a step further by obtaining useful information on debits and credits. This is going to give you a great advantage especially when you need to fix data that have been incorrectly imported.

• Find your niche and develop it.

Instead of trying your luck on mastering various products, focus on a single product so you will only deal with a single standardized process. This way, you can work on a specific niche and ensure remarkable results.

• Participate in the community of bookkeeping technology.

If you are looking for a valuable resource that can help improve your skills and have an edge in spite of the proliferation of bookkeeping software, get involved in a community where views on bookkeeping technology are shared. When you are in the loop, you will remain updated of the principles of bookkeeping that you need to stick to.

• Explore cloud bookkeeping tools.

Searching for bookkeeping tools that might be helpful to your clients and developing a system where you can minimize errors or glitches on these tools are a must. You can also ask feedback from your colleagues so you will have an idea on the tools’ area for improvement.
You don’t need to be left behind even when bookkeeping technology continues to soar high. Regardless of the competition, being keen on seeing the loopholes and acquiring the ability to foresee future problems can still make you relevant to the world of bookkeeping technology.

Reasons Oral Advice Must Be Documented

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When oral advice is given based on professional standards, documenting it may be considered unnecessary. However, clients who fail to document oral advice may suffer its deleterious effect in the event of liability claim. Without the documentation, the defense will find it difficult to support any claims. Clients rely heavily on expert advice, but if this is not documented, it is as if the conversation had not really transpired. It will be impossible for the client to mitigate disputes especially when it comes to liability claim. When both sides don’t depend on oral advice, the discussions will be kept in place. 

Essential elements of documenting oral advice:

When clients have some important questions lingering in their mind, advisors will provide information for the enlightenment of the client. This is where written correspondence comes into play. While general questions only require basic notes, some information must be present to ensure that the discussion really took place.

When documenting oral advice, make sure it includes the date that the discussion took place and the names of the persons involved in the discussion. The specific advice that the solicitor provided must also be included in the documentation. The additional items that must be present in the documentation are the appropriate disclaimers, recommendations, tax and accounting considerations and the details of client follow-up. 

Essential things that must be taken into consideration

More likely than not, the client will receive unsolicited advice which is generally work-related. This may be about the work flow enhancements or improvements on record-keeping. The advice is very general and firm working papers are enough to support such an advice.

There are also instances when the client receives more specific advice which can affect business operations. In this case, the client needs to be detail-oriented. If there were allegations that the advisor or accountant failed to provide the right advice to the clients, the documentation will serve as a strong defense.

There are also some special considerations for consulting engagements that must be put to mind. Some examples of consulting engagements include discussions between the solicitor, client and sometimes, third parties. It is definitely the client that can benefit from these engagements as they are the ones that will be held responsible for making the final decision and executing plans.

As much as possible, the consultant should only provide the recommendations or conclusions to the client alone. This way, a third party will be deterred from relying on the information that was provided for their personal interest. For consulting engagement working papers, the date, parties involved and the things discussed by all parties must be included. If specific oral advice was given, it should be confirmed in a written report. There is a huge difference when these are included in the documentation. Any discrepancies will be prevented and disputes will be corrected before worsening the problem. 

For tax advice which revolves around providing information on filing obligations, penalties, interest charges and deadlines, everything must be documented. It should show the advice provided to the client and the negative impact in case no actions are taken.

Five Tips for Choosing Bookkeeping Software for Your Business

man 475557 1280It is a dream-come-true for every business to keep transactions smooth, hassle-free and fast. This is where bookkeeping software comes into play. You can be sure that your tasks are kept in order because one of the primary benefits of the software is to reduce redundancy especially when it comes to data entry. For small businesses, the process of encoding the customer’s information can be time-consuming if they heavily rely on employees. If one employee is assisting a handful of customers, the level of efficiency is more likely to suffer.

How to spot the right software for your bookkeeping needs?

1. Choose the software that is specially designed for your business’ niche because it can save you from choosing unnecessary features.

2. It is important that you determine your budget so you will know how much you are willing to spend for the software. While your budget can be your primary concern, do not put too much focus on it because you should also take quality into consideration. 

3. It is worth investing in the software that can help your business grow. One of the challenges of most small businesses is keeping up with the well-established businesses but with the help of efficient software, this goal will be achievable. 

4. Make use of a trial version for you to find out if you have picked the right software. 

5. Ask your bookkeeper for some recommendations in case you don’t know which option to choose. Read reviews from reliable sources to get an idea about your prospective software’s features and benefits. 

The Software Small Businesses Can Rely On:

• MYOB

This bookkeeping software allows you to get an accurate view of your cash flow. You will be spared from getting stuck in endless computations for your financial report. All you have to do is to link your bank account and the software will enter the necessary data for you. If you need to obtain real-time information of invoices and tax liabilities, MYOB will provide you a clear picture so you will know the status of your company’s finances. 

While accounting tasks can be a tiring and daunting, the software will make the process a whole lot easier. You can fulfill your tax obligations in a timely fashion because your supplier invoices and bills are stored securely. The best thing about MYOB is that you can collaborate with your bookkeeper without being physically present. You can keep up with the changes and updates with this feature.

The time you spend for payroll preparation will also be reduced by up to 40% because there are only three easy steps you need to follow. You can also send invoices with the use of your mobile device. Once you download free MYOB OnTheGo app, you will have the ability to use EFTPOS and credit card. 

• Xero

Xero is the noteworthy software that small businesses can put their trust in. This is not just the usual online bookkeeping software because it provides you up-to-date financial reports so you can keep track of your financial activities accurately. Its dashboard gives you quick and clear view of your bank balances, bills, invoices and other transactions.

Sales and purchases are also tracked easily so your employees will no longer spend too much time on this task. It also has the ability to categorise or import your bank transactions. As opposed to waiting at the end of the month to generate budgets and reports, Xero gives you the ability to obtain reports in real-time. 

When it comes to paying super contributions, the process will be fast and easy as the usual long process is by-passed. With this software, you can simply pay your employees’ contribution in a snap. The software can be downloaded so you can gain access to it anywhere you go. 

• Reckon

The software is such a time-saver because of its ability to generate over 200 reports. It also features unlimited payroll and massive lists of inventories. You can also make use of its job tracking tools so you will remain in control of your business no matter how busy you are. It also integrates BAS and payment summary so you can save time sorting them. 

For bank transactions, all you need to do is to link your bank account for real-time bank transaction monitoring. The invoices are also customizable and this is going to be advantageous because the feature lets you create your own logo and payment terms.

When it comes to choosing your bookkeeping software, it really pays to start with a free trial so you can gauge the software’s ability to deliver efficient and effective service. You should also keep in mind that the software has its own glitches and this is why it is imperative that you opt for the software that offers 24/7 technical support.

­ Questions? Give Andrew a call 0450 605 592

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