Wednesday, 4 Dec 2024
Businesses cannot be run without bookkeeping. The latter is the heart and soul of a venture based on managing income and expenses. Constant financial tracking and management are critical parts of being an entrepreneur. However, due to the complexity of the task and the requirement of specific financial knowledge, it is outsourced to specialists. These professionals deal with all the tasks associated with business capital and ensure the entity is stable.
Still, many small businesses prefer bookkeeping on their own because of limited budgets and the inability to find an expert. They have to become financially literate, understand the state laws related to the business and keep track of the changes in regulations. They have several questions in mind when they start. Here is a list of FAQs on bookkeeping that can help small business owners reach their financial goals and prevent mistakes.
Every entrepreneur taking up the role of a bookkeeper must know the following process to progress:
Every small business must maintain financial records for five years, while some must preserve their employee and company records for seven years. Proficient bookkeepers in Melbourne can help maintain these records effectively. These include keeping records of salary receipts, tax returns, business activity statements, super contributions data, client invoices, and business expense bills. They can be saved electronically or as paper-based records.
Entrepreneurs doing bookkeeping for their businesses must understand that it is a time-consuming and complex task. It requires the completion of myriad undertakings and can make you overburdened with work. Thus, it is essential to use cloud-based bookkeeping software to reduce the workload. It helps automate repetitive tasks like payroll management, stock taking, invoicing, budgeting, preparation of financial statements, etc. Entrepreneurs must pick the best bookkeeping software that can be customised for the business and has all the features.
Budgeting is a specialist’s job and must be outsourced to bookkeepers in Melbourne because it requires predictive analysis. However, if you plan to do it on your own, you must calculate the total revenue and expenses and then forecast the expected sales and spending. The entrepreneur can prepare the budget for the next quarter or year depending on the cash flow forecasting. They must set goals for each period and compare the profits with previous records to determine progress.
Since entrepreneurs are not financial experts, they can make mistakes. These errors can affect all calculations and create an incorrect picture of the business’s financial health. Thus, it is essential to check for errors by reconciling bank accounts, which involves comparing the bank statements with the books to eliminate mistakes. Common blunders include duplicate entries, mismatched inventory records, recording personal expenses, and mentioning or wrong transaction dates.
The two common accounting methods used for recording all business transactions include cash and accrual-basis accounting. The cash-basis method involves recording revenue when payment is received from the customer, while accrual involves recognising income when invoices are sent to customers without waiting for payment. Melbourne bookkeepers usually prefer accrual-basis accounting because it helps them understand the actual cash flow and financial health of the business.
Small business owners can claim most of the business expenses as tax deductions. These include daily operational expenses, equipment costs, and depreciating assets costs. Entrepreneurs can also claim GST part of expenses as a deduction by claiming it as GST credit on the business activity statement. The expenses should be made for business purposes, and the entrepreneur must have the receipts to prove them.
The simplified depreciation rules can be used by small businesses with annual turnover below $10 million from July 2016 onwards and $2 million for financial years before this date. The rule covers instant asset write-off and offers entities three tax depreciation incentives, including temporary full expensing, increased instant asset write-off and backing business investment.
Effective bookkeeping can help improve profits by implementing cost-cutting measures and boosting sales through increased productivity and product pricing. It also involves looking at the financial statements to identify the business’s strengths and weaknesses and making adjustments to improve processes and offerings. An efficient and high-performing business can easily satisfy and retain customers, which increase revenue.
Professional bookkeeping in Melbourne has become automated with the help of software. However, it has also increased the risk of data theft and breaches because of the vulnerability of digital records. Entrepreneurs can secure confidential business information by implementing strict cybersecurity protocols, such as password protection, firewalls, multi-factor authentication, network security, anti-virus, software updates, employee training and using virtual private networks for remote work.
Bookkeeping is a labour-intensive responsibility that requires taking care of the financial aspect of the business and maintaining its profitability. Entrepreneurs planning to fit into this role can get some guidance through the FAQs above to hit the right notes.
