Whether it’s your goal to grow a thriving business, it’s essential to truly have a safe pair of hands handling the accounts. Inaccurate bookkeeping could harm your business and may also lead to severe penalties – but having strong financial statements can save you in many various ways.
The bookkeeper’s job is to keep rigorous accounts of all financial transactions – everything the business sells, buys, owes and is owed. This is vital, and not just because you need accurate annual financial statements. Good bookkeeping can also assistance with a lot more exciting, forward-planning side of things – because knowing days gone by makes it much easier to predict the near future.
Here are some of the main element things a good bookkeeper should do.
Keep the business and personal finances apart
If you are a sole trader you aren’t legally obliged to have a separate business bank account – but you should have one nevertheless. Otherwise your books will be a nightmare to keep, if you don’t record every penny of personal spending too.
If your business is a restricted company, it is another legal entity from you, so its money is not yours to spend (except on business expenses).
Keep clear and separate records
Bookkeeping typically requires at least three ‘books’ (i.e. financial records): the cash book, sales invoices, and buy invoices.
Your money book records everything passing in and from the business’s bank-account. This record of cash flow makes it an invaluable planning tool, as you can make use of it to underpin forecasts.
Your sales invoice file keeps an archive of all of your sales. Keep unpaid invoices together in a separate section. Your purchase invoice file should record all purchases chronologically, see more at this site: bookkeeperco.com.au.
Control your credit
A full sales ledger is a lovely thing, but if your customers haven’t paid yet, that beauty is merely skin-deep. Set strict deadlines for your customers to pay their bills for you, and consider blacklisting repeat offenders if you believe they are really taking advantage. Chase every late payment, as each is actually an interest-free loan. Without rigorous credit control, a tiny business can quickly develop a cash-flow crisis.
Business expenses can be claimed against tax, so tracking them is vital for cutting overheard and maintaining healthy cash flow. Use a business bank card where possible and keep careful records of all other expenses, categorizing them by business activity.
The bookkeeper will categorize of expenses can prove especially important if your business happens to be audited. Numbers on tax returns are frequently estimates so it really helps to have the ability to provide supporting evidence for these.
One of the better reasons to keep track of where you’ve been is the fact it helps you work out where you’re going. Looking at days gone by year’s books, you can usually spot the days when a bit more forward planning could have saved you money and stress.
Identify the major expenses of the year ahead and fix them in your business plan. Anticipate likely business costs (e.g. insurance costs or IT upgrades) but always give priority to your tax obligations – you will not have the ability to delay these. There could be occasions when your business seems awash with cash, and you could be tempted to obtain more than usual – having a complete roadmap of future expenses will warn you to be careful.
A bookkeeper can care for your bookkeeping as well as providing an array of other valuable services for your business. Seek out one locally using our smart search. Read more.