Bookkeeping For Small Business in Australia

Are you a small business owner in Australia? If so, good news: plenty of bookkeeping services can take the hassle out of managing your finances. This blog post will introduce you to some of the best bookkeeping options available to Australian small businesses and help you decide which one is the best fit for your needs.

When it comes to bookkeeping for your small business in Australia, there are a few things you need to know. Firstly, what is bookkeeping? Bookkeeping is the recording of all financial transactions relating to your business.

This includes sales, expenses, and payments. By keeping accurate and up-to-date records, you'll be able to make sound financial decisions for your business. We'll take a closer look at bookkeeping for small businesses in Australia. We'll discuss what needs to be recorded, how often it should be done, and tips on staying organised.

Did you know that Australia has specific bookkeeping laws and regulations for small businesses? If you're running a small business in Australia, it's important to understand these laws and how to comply with them.

This article will provide an overview of the key bookkeeping requirements for Australian small businesses. We'll also discuss some common mistakes that small business owners make when keeping their books, and we'll give you some tips on how to avoid these mistakes.

So without further ado, let's get started!

Why Do You Keep Books?

Before we go in, let's define what bookkeeping is.

A person who is responsible for the process of documenting and organising a company's financial transactions is known as a book-keeper. Bookkeeping is the process of recording and organising a company's financial transactions.

Bookkeeping is the primary method through which business owners may determine whether or not their company is profitable. Keeping an eye on your numbers enables you to discover potential financial difficulties early on and find solutions to those challenges before they develop into a full-fledged catastrophe. Bookkeeping also helps you identify areas of profit expansion, which are regions you may not have spotted if you did not have clear financial reports that are easy to comprehend.

A book-keeper is responsible for keeping track of transactions, managing accounts, sending invoices and payments, and preparing financial statements. Bookkeeping and accounting are quite similar, however bookkeeping is what creates the foundation for the accounting process, whereas accounting is more focused on analysing the data that bookkeeping just collects. Bookkeeping lays the groundwork for accounting.

Recording and categorising all of your company's financial transactions is an essential part of keeping accurate books. In addition to this, it is important to maintain track of the money that is received and spent by your company.

The term "bookkeeping" comes from the practise of managing these chores using books and ledgers in the past. Following their entry in daybooks, cashbooks, or journals, the transactions would be moved to a ledger for further processing.

To a large extent, the use of physical books has been rendered obsolete by modern bookkeeping software.

Australian clients can receive comprehensive bookkeeping services for their small businesses from an accounting specialist. Over the course of our history, we have provided successful bookkeeping services to companies of all kinds, ranging from sole proprietorships to international corporations.

Your books of accounts are going to be handled with the highest discretion and attention by the accounting consultant. Our team of bookkeepers will work with you in such a seamless manner that you will feel as though you are working with your own in-house team, which is another promise we make to you: you will feel proud to work with us. Also, we promise that you will feel proud to work with us. Therefore, why is it necessary for small enterprises to retain their books?

A solid foundation for a prosperous enterprise is a set of books that are kept up to date, accurate, and in good order. This is why:

• You are able to verify that the money you are producing is greater than the money that you are spending.
• You will have access to trustworthy financial information in order to make decisions on planning and budgeting.
• Keeping track of when you are expected to receive payment from consumers and when you are required to make payments to your suppliers can help you anticipate a cash flow crisis and prepare for it accordingly.
• It is more probable that you may discover fraudulent or improper payments, which could end up costing you money.
• You can complete correct tax returns.

When your financial information is well-organized and well-maintained, it is much simpler for you to collaborate with other parties, including lenders, investors, and accountants.

Why Is Bookkeeping Necessary for Small Businesses?

A solid foundation for a prosperous enterprise is a set of books that are kept up to date, accurate, and in good order. This is why:

• You have the ability to verify that your income is higher than your expenditures.
• You will have access to trustworthy financial information for the purposes of planning and budgeting.
• Keeping track of when you are expected to receive payment from consumers and when you are required to make payments to your suppliers can help you anticipate a cash flow crisis and prepare for it accordingly.
• It is more probable that you may discover fraudulent or improper payments, which could end up costing you money.
• You can complete correct tax returns.
• When your financial information is well-organized and well-maintained, it is much simpler for you to collaborate with other parties, including lenders, investors, and accountants.

How Can Records Be Kept?

You have the option of keeping records either digitally or on paper. The Australian Taxation Office (ATO) recommends that businesses retain their records electronically since the government is going in the direction of requiring electronic reporting for tax and superannuation requirements. In addition, maintaining your information online should, after you have your system set up, make certain duties simpler and save you time.

After deciding on a method of bookkeeping and establishing your own set of financial accounts, it is now time to start keeping track of what is happening with your money.

Each transaction, whether a debit or credit, must be recorded accurately and placed in the appropriate account. If you don't do this, the totals in your various accounts won't add up, and you won't be able to close the books.

Any company that has employees needs to use single-touch payroll. This is a requirement. If you have employees, you need up-to-date payroll software so that you can assure compliance and make the process easier for yourself. If you have established yourself as a firm, there is a good probability that you will be paying yourself a salary and will therefore require a payroll system.

Payroll services will now be included as part of QuickBooks Online's offerings in Australia thanks to a partnership between QuickBooks and KeyPay. Interestingly enough, Sage has done the same thing with Sage Business Cloud Financials. Therefore, it is likely that KeyPay, which is an embedded "best-of-breed," will triumph on this front.

The payroll feature of Xero is not the company's strongest suit. In spite of this, it is more than adequate, it is unquestionably progressing in the right direction, and it is leagues superior to the payroll that MYOB generates (Essentials particularly).

If you retain your records electronically, you do not need to keep paper copies unless there is a specific law or rule that compels you to keep a physical copy.

You also have the option of storing and maintaining paper records online. The ATO will accept digital representations of paper-based business records that have been archived on an electronic storage media. Their needs for record-keeping are satisfied by the electronic copies, which are an accurate and unmistakable duplicate of the records that were originally kept on paper. After you have scanned and stored an image of your initial paper documents, you are no longer required to physically preserve those data.

Make sure that your records are kept in a safe location no matter which option you decide to go with. For instance, you should make copies of your records and, if at all possible, store them in a safe location off-site. This location could even be in the cloud.

Additionally, the files need to be stored on a computer or other device that possesses the following characteristics:

• you are able to access (including all passwords)
• is stored elsewhere in the event that the machine fails.
• permits you to exercise command over the information that is being processed, entered, and transmitted.

Select A Bookkeeping Technique

Let's say you want to keep your books in-house rather than outsource them to a company that specialises in accounting or bookkeeping. If this is the case, there is a very important decision that has to be made before you begin putting things together: Are you planning to employ single-entry bookkeeping or double-entry bookkeeping?

When you keep your books using the single-entry method, each transaction is recorded only once. For instance, if a client gives you a certain amount, you would just enter that specific amount into the asset column. That makes perfect sense, doesn't it? If your company is straightforward and uncomplicated, then you might find success with this strategy.

If you run your business out of your house, don't have any equipment or inventory to sell, and don't engage in cash transactions very often, single-entry bookkeeping can be a good option for you.

On the other hand, the double-entry accounting system, which is similar to Newton's Third Law of Motion but for finances, is used for the majority of bookkeeping. The primary tenet of Newton's law is that "there is an equal and opposite reaction for every action" (with regard to natural phenomena).

Similarly, in double-entry accounting, every transaction needs to be accompanied by an entry in another account that is equal and opposite to it. Do not let the fact that double-entry accounting is more difficult than single-entry bookkeeping dissuade you from attempting it. Again, this is not an issue with the laws of physics.

The use of double-entry accounting ensures that your books are balanced, which means that you will be notified right away if there is a decline in profits. In addition, the majority of bookkeeping software will start you out with double-entry bookkeeping regardless. You won't need to break a sweat when you tackle double-entry bookkeeping now that the software is all set up and ready to go.

However, it is equally essential for the management of a company.

1. Manual bookkeeping

Manual record-keeping methods involve the creation of a number of books or ledger accounts. You can typically pick some of these up in your neighbourhood bookstore, stationery shop, or newsagent.

The following are some potential benefits of using a manual system:

• less expensive to set up
• a lower probability that the data will become contaminated.
• a less complicated method to follow in the event that you are unfamiliar with accounting software.
• in most cases, it is best to avoid creating duplicate copies of the same records.

2. Electronic bookkeeping

The ATO is leaning towards keeping all of its records in electronic format. Therefore, it seems like a good moment to switch to digital. Keeping records digitally has a number of benefits, including the following:

• a system that requires less physical storage space than one that is manual
• calculates numbers in an automatic fashion
• simple to produce reports with.
• simple to replicate and maintain secure in the event of a blaze or theft

Accounting software, web-based systems, and spreadsheets are all examples of the types of electronic alternatives available to you.

3. Accounting software

You can do the following with the assistance of an off-the-shelf or customised accounting software package:

• record your transactions
• figure out the tax on goods and services (GST)
• update ledgers
• produce financial statements
• generate invoices

Investigate the programmes that are recommended by your company counsel or accountant. Check to see that the programme is compliant with Standard Business Reporting (SBR).

4. Web-based bookkeeping

A web-based or ‘cloud’ system:

• permits you to make changes to your books from anywhere in the world.
• offers secure, off-site storage for your company's financial documents automatically.
• can be a more cost-effective digital alternative

However, there are some safety concerns associated with it.

5. Spreadsheet accounting

Are you comfortable using a computer but lack the finances necessary to purchase an accounting software package? You could choose to organise your financial data using a number of separate spreadsheets.

6. Point-of-sale (POS) systems

It is possible that as your company expands, you will require an updated or upgraded POS system. These are computer solutions that enable record keeping and help you process sales more efficiently.

Depending on whatever system you choose with, point-of-sale (POS) computers are capable of automatically doing the following:

• records of sales income and inventories should be adjusted.
• make sure you have receipts, invoices, and tax invoices all in order.
• processing sales with EFTPOS, credit cards, and debit cards

Before you purchase a point-of-sale system, it is important to give some thought to the functionality that your company need.

How Technology Can Help

The completion of these tasks is sped up by the use of online bookkeeping software, which also reduces the likelihood of errors caused by the entry of data by hand. These tools are able to:

• data on transactions can be taken directly from point-of-sale (POS) systems, accounting software, and financial institutions.
• accelerate the process of bank reconciliation significantly.
• bills are paid on auto-pilot.
• remind people who owe you money by sending them automated reminder invoices.
• inform you when outstanding invoices for sales have been paid
• give you the ability to monitor the cash flow from your mobile device.

Tutorial on Keeping Books

Recording transactions and ensuring everything is in order are two of the most crucial aspects of bookkeeping for small businesses. Let's analyse each of these in turn.

1. Keeping track of each transaction

Record your sales. Historically, this was accomplished by handwriting the transactions into a cashbook or manually entering them into a spreadsheet. On the other hand, owners of businesses are increasingly inclined to import sales information into their accounting software directly from point-of-sale or billing software.

Record your transactions. Every single purchase that pertains to the company needs to be documented. If you want to deduct that expense from your taxes, you need to make sure that you save the receipt or other proof that you bought the item. Again, you have the option of writing these particulars down in a book or on a spreadsheet. You may also automate the process so that all of the debits from your business bank account are imported into the software that you use for bookkeeping.

Depending on whether you use cash accounting or accrual accounting, you can record your income and costs at a variety of different times.

2. Consolidating each transaction

The process of reconciling your business's books is making routine comparisons between those books and your company's bank statements to ensure that all of the company's transactions and balances are accurate and, if they are not, to determine the causes for the discrepancy. In many cases, it will be necessary for you to account for bank fees, interest payments, deposits, and payments that have not yet been sent to your bank accounts.

You may need to reconcile your bank accounts on a daily, weekly, or monthly basis, or even less frequently, depending on the volume of financial transactions that pass through your company. However, before completing your tax returns, you will most likely be required to at least reconcile your books. This is a bare minimum requirement.

Transactions need to be reconciled as soon as possible so that errors can be detected and fixed as soon as possible. It is preferable to complete the task on a regular basis, perhaps on a daily basis, so that the job does not accumulate. You may find additional information in our tutorial that explains how to perform bank reconciliation.

Other responsibilities related to bookkeeping for small businesses

When you maintain the books for a small company as a book-keeper, you could also be responsible for the following tasks:

• accounts receivable (issuing invoices and making sure they’re paid)
• accounts payable (paying bills on time)
• payroll (paying employees)

Other services, including as assisting with financial reports (such as profit-and-loss statements, balance sheets, and cash flow reports) and assessing the success of businesses, are also provided by professional bookkeepers. Bookkeepers are frequently also BAS agents and can provide assistance with the preparation of your tax returns.

Other Bookkeeping Tasks for Small Businesses

When you maintain the books for a small company as a bookkeeper, you could also be responsible for the following tasks:

• accounts receivable (issuing invoices and making sure they’re paid)
• accounts payable (paying bills on time)
• payroll (paying employees)

Other services, including as assisting with financial reports (such as profit-and-loss statements, balance sheets, and cash flow reports) and assessing the success of businesses, are also provided by professional bookkeepers. Bookkeepers are frequently also BAS agents and can provide assistance with the preparation of your tax returns.

Outsourcing the Bookkeeping for Small Businesses

You have the option of hiring someone else to do the bookkeeping for your small business if you find that you simply do not have the time to do it yourself. Bookkeepers frequently provide clients the option to select a specific level of service to correspond with their financial constraints. You can begin with the most fundamental level of bookkeeping at a low fee and then work your way up to more advanced services as your company expands. The Xero advisor directory includes a searchable bookkeeping section for your convenience.

Selecting a Specialist to Handle Your Accounts

Finding the correct accountant or bookkeeper might assist you in increasing the profit your company makes. They are also able to assist you with your books and the overall health of your company's finances.

The following are some examples of qualified financial specialists to consider hiring:

• Accountants – can assist you with the preparation of financial statements, the management of your taxes, and the provision of financial and business advice, among other services that may be of use to your company.
• Bookkeeper – can maintain tabs on your day-to-day financial dealings, manage your accounts, track down past-due payments, pay your salary, and create some financial statements for you.
• A business activity statement (BAS) agent – may assist you in preparing and submitting your BAS to ensure that it is done correctly. They are qualified experts in their subject who have obtained professional registration.

Even if you hire a professional to take care of your books or accounts, you are still accountable for any decisions that pertain to your finances.

Check their registrations

Whoever you decide to hire to assist you with your accounts must possess the appropriate skills and experience for the position. They should also be members of a professional organisation that deals with accounting or bookkeeping.

On the website of the Tax Practitioners Board (TPB), you are able to check the registration status of your tax agents, BAS agents, and tax (financial) advisers.

There are two different methods that you can use to check:

• Search the TPB register.
• On their website, stationery, brochures, or business cards, you should look for the sign that indicates they are a licenced tax practitioner. The sign used by registered tax practitioners incorporates both the type of registration and the practitioner's registration number.

Tips for Small Business Accounting

1. Establish your accounts

After you have successfully registered your company, the next step is to establish the accounts necessary for conducting business. This gives you the ability to keep your personal finances and spending distinct from the finances of your company. Even though, from a legal standpoint, if you are a sole proprietor, you are not required to have a separate account, it will make your life a great deal simpler if you establish one.

To get started, visit a few different financial institutions. Compare the prices and other features offered by various banks for their business checking accounts. Some might charge greater costs, but in exchange they might provide you with additional perks that are more useful to your company.

After you have established your primary account, opening a business savings account is something else that should be considered. This will help you better manage your finances, including your taxes and bills, and even assist you in building up savings for future investments. If you work in a field that frequently experiences fluctuations in the amount of employment available, it may be beneficial to have a savings account that can serve as a "war chest" and rescue you in the event of an unexpected financial emergency.

You could also consider applying for a credit card designated for businesses. This can assist you get a head start on establishing good credit for your company for the future. On the other hand, in order to avoid any confusion regarding usage or bills, you should keep it separate from your credit card.

Before you can set up an account, you need to be sure that all of the necessary documentation has been completed. You should make sure that the procedure of obtaining an ABN has been finished before applying because you could be required to have one.

2. Examine a reliable bookkeeping system

Keeping good records of your revenues and expenditures on a daily basis is essential for any business. Recording transactions, keeping track of receipts, assigning categories to transactions, and reconciling bank statements are all required steps in this process.

In order to get the most out of your accounting, it is essential to have a solid grasp of the day-to-day happenings in the financial realm. We have written in greater length on the numerous significant reasons why you should begin bookkeeping as soon as you start your firm, and you can find that information here.

To get started, you need to choose the method by which you will keep your books. You have the option of purchasing reliable bookkeeping software, working with a bookkeeping service, or taking on a bookkeeper on a part-time or full-time basis. In terms of cost, amount of time, and output, each has its own advantages and disadvantages.

Employing a bookkeeper on a full-time basis is the most expensive choice, and it's possible that your company won't reap the full benefits of doing so. Although purchasing bookkeeping software may be less expensive, in order to get the most out of it, you will need to devote a significant amount of time to learning how to use it.

A reliable bookkeeping service is the optimal choice for those looking for something in the centre. It is less expensive than hiring an in-house book-keeper, yet it can still provide your company with the benefits of having one. To begin, you will need to give serious consideration to the type of bookkeeping system that would work best for your company.

3. Begin Bookkeeping

Now comes the part where things get exciting; we'll start keeping the books! To begin, select a technique of bookkeeping that best suits your needs and begin keeping a record of your day-to-day income and expenditures.

You will start to observe, on a day-to-day basis, where your money is coming from, which will enable you to make the necessary adjustments to move closer to profitability. This piece of advice is meant to urge you to maintain a close check on your bookkeeping and to be open to making improvements to the method in which your company is managed. You will derive the greatest possible benefit from the time that you invest in this manner.

4. Maintain your receipts

This is a speedy and easy piece of advice. Always hang on to your receipts! It will be helpful when it comes time to file your taxes as well as if you discover any anomalies in your expenditures. Even though this is a component of bookkeeping, its significance warrants that it be tipped separately.

5. Select your payment options

It is not as easy as it may seem to figure out what types of payment methods your consumers are allowed to utilise. It is possible to have so many different payment options integrated into your online store that the process can feel a little overpowering at times.

You should investigate the possibility of introducing additional online payment methods in addition to the conventional Eftpos and Credit Card alternatives in order to give your clients a wider range of choices. PayPal and Apple pay are two notable instances of such services. When a consumer pays using these methods, whether it be through PayPal, Apple, or any other online payment source that you employ, you will incur a modest transaction fee.

This may appear to be a negative thing; after all, you want to be getting the most money possible. The clients, on the other hand, anticipate receiving many of these services. Customers have confidence in the safe payment mechanism that they provide. It is up to you to determine what course of action will be most beneficial for your company.

6. Find out what taxes you owe

In a situation like this, the assistance of a qualified accountant will be quite useful. They are able to assist you in comprehending all of your tax requirements. For instance, are you aware of when you will be required to start including GST on your products? Or how much you may expect to receive in refunds when you file your taxes. Perhaps not, but working with a qualified accountant can help you get the most out of your tax return and steer clear of potentially expensive traps.

7. Create a payroll system

If you are just starting up and are the only employee, you probably won't need to worry about setting up a payroll system right away. On the other hand, when your company develops, you might discover that you require the assistance of a part-time worker. Now you will require a payroll system.

You will need to devise a plan for your payroll and check that you are deducting the appropriate amount of taxes from each paycheck. If you have engaged an accounting firm or an accountant, they will be able to assist you in setting up this system using modern software such as Xero. They will be able to do so for you. If, on the other hand, you are your own boss, you may want to consider using payroll software, which will automate and streamline the procedure for you.