Brisbane Bookkeepers & Taxation Blog

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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 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.

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.

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

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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. 

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.  

 

Tax Systems And Other Impediments To Business Growth

Business expansion is a big decision and it can create a rippling effect on other factors of your business. It is not just a decision that you make on the spur of the moment. You need to consider several factors before you can decide which direction you are going to take. However, there are several factors that can stop a small business from growing. These factors are part and parcel of having a small business. They only become deterrents when entrepreneurs decide on taking their small business to a higher level. You may need to take a look at these several factors first, before you can decide whether or not you are going to broaden your busines horizons.

Tax systems and other barriers to business growth:

Limited access to the privileges you get from having a small business. 

When you are running a small business, you are also entitled to gain complete access to various small business concessions, which are related to GST, income tax, CGT and many others. Once you decide to expand your business, all of these will be no longer be accessible for you. When taking the road to business expansion, you need to ask yourself if you are willing to gamble or if you are ready to lose access to these concessions. 

Business restructures. 

If you want significant change to happen to your business, you need to welcome restructures. Although it is not going to be an easy decision, being familiar with the effects that restructures make can help you stay on the right track. If you are going to switch to a more effective business structure, you also have to be prepared for the challenges ahead of you. One of the challenges that you are going to face is the CGT liability. 

Payroll Tax  

One of the essentials of putting up a business is making sure that you pay the right tax including payroll taxes. The government is very particular with tax payments and they are keeping their eye on small businesses as well. This is why you need to take it seriously if you really want to run your business smoothly. You subject yourself to a series of problems if you fail to pay on time. You can also get stuck in debt which can take a serious toll on your business. Make sure you keep your payroll taxes in check and avoid falling behind your payment schedule because debts can pile up faster than you know. 

For business owners who decide for an expansion, it is necesary to step out of the business' comfort zone. There are some challenges along the way but once you are familiar with how your business works, everything will fall into place. It does take time before you can reap positive results but it will be all worth your efforts. 

There are other barriers to fulfilling your dreams of expanding your business. Regardless of the obstacles that you will face, you need to keep in mind that you can obtain remarkable results if you are going to consider the risk factors and the steps to take to reduce the possibilities of failing. 

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.

5 Signs Of Fraudulent Payroll Activity

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When it comes to your business’s financial activity, accuracy is important because it is not just a simple number crunching. However, your keen eyes may not always take notice of payroll irregularities and because you’ve put so much trust in the people in charge, you become oblivious to the fact that something is not right. Payroll fraud is very common these days. The execution may be different but it all boils down to the same intention. Being complacent is not an option especially if you run a business with hundreds of employees. You just cannot afford to ignore erroneous entries on payroll reports especially if this has taken place numerous times. When payroll fraud takes place, undoing things can be such a painful and costly process.

5 signs you need to put a stop to fraudulent payroll activity:

1. Sharing logins with other employees.

The information in your payroll system should be treated with confidentiality. This is the reason logins are created. However, if your employees are sharing logins or using obsolete logins, this activity is already questionable. Make sure you have the payroll staff delete your old login to ensure that no one will use it. If you suspect that someone is trying to access your account, request a password reset. 

2. A drastic change in regular masterfile.

It is also a cause for alarm if you see the masterfile changing information at a rapid rate. This should be investigated especially if the essential information such as bank details is not what you hoped for. If changes need to be made, they have to be subject for the manager’s approval.

3. Access to payroll system outside business hours.

When payroll cut-off is getting near, you feel as though there is so little time but so much work to do. If someone in the payroll department attempts out of hours access without your permission, this activity may already be in question. If your payroll staff needs to access the payroll system outside business hours, it needs to be audited.

4. Increasing numbers of casual employees.

There are companies that may often have more casual employees than regular ones and even though this is not a tell-tale sign of fraudulent activity, casual workforce is often used to execute payroll fraud. It is important that you pay more attention to your business if the percentage of casual employees is much higher than your regular employees.

5. Inconsistent payroll reports.

You should also be suspicious if there are some obvious discrepancies in the payroll reports. These reports often undergo extensive scrutiny before they are finalized and if this process is by passed, then you know that something is just not right. It is best to outsource someone that can check the reports on a monthly or quarterly basis. More serious problems such as payroll fraud can be effectively avoided this way.

Payroll fraud needs to be taken seriously as it creates a serious impact on your business. If you suspect an employee engaging in fraudulent activity, do not hesitate to conduct further investigation. Payroll fraud prevention lies in your hands. While you cannot immediately put a lid on the problem, you can prevent more serious issues from happening when you monitor payroll activities closely.

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.



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