Monday, 3 Apr 2023
Every business needs bookkeeping to record its financial transactions, revenue and debts. The information is necessary for the business owner to make investment-based decisions. However, bookkeeping is wider than just data entry or maintaining updated books.
It encompasses a wide array of responsibilities that help to organise business operations. Amateur entrepreneurs in Melbourne do not understand the importance of good bookkeeping and thus suffer from failure.
Since the venture’s stability depends on its financial strength, it is essential to pursue effective bookkeeping. Here is a list of nine rules of good business bookkeeping that ensure success. Entrepreneurs must be familiar with these guidelines to maintain the highest industry standards and gain financial literacy.
The first rule of good bookkeeping is to keep business capital separate from personal. The business owner should set up a business bank account to effectively track the flow of money. It is vital for calculating the company’s income and losses and meeting the tax obligations in the state of Victoria. It is recommended that sole proprietors should also have a separate business account.
The accounting method determines how the business revenue and expenditure are mentioned in the books. The two types of accounting methods are accrual accounting and cash accounting. In the accrual accounting system, transactions are documented when they occur rather than waiting for the money to come into the account. Conversely, cash accounting records the transaction only when the money comes in or goes out of the business account.
A good bookkeeper Melbourne takes charge of recording all the transactions accurately. Whether it is a paper bill or a digital payment, it should not be missed. It ensures that the business has an account of all the expenses and income and can use the information to prepare accurate financial statements and file correct tax returns.
As a small business owner, you need to be aware of the applicable taxes and deductions for your company. The tax return must be calculated for every financial year and lodged with the ATO before the due date. Preparing in advance ensures that there is no last-minute rush and mistake that can incur penalties.
The business owner should provide all the related information while filing the taxes in Melbourne, such as income statement, bank account information and receipts of expenses to be claimed as deductions.
Efficient bookkeeping involves accounts payable management, which ensures the suppliers are paid the correct amount on time because it impacts profitability. Also, the payments from clients must be received by the due date.
Thus, the bookkeeper follows up with the customers and provides them different payment options and early payment incentives to get more money into the business. They make sure to pay the bills on time to avoid late fees and unnecessary losses.
The entrepreneur must determine a system for organising the financial information. Maintaining electronic records is better than following the time-consuming manual system. Thus, businesses must acquire cloud-based accounting software that can be customised to increase productivity.
It helps to update the records at anytime from anywhere and offers real-time data access. Businesses also need a Point-of-Sale (POS) system when sales go up and adopt automation to maintain error-free records.
Entrepreneurs must know about the financial health of their businesses to understand whether the entity is profitable or failing. To determine the bottom line, they must consistently look at the income, balance, and cash flow statements.
It helps them make informed decisions about budgeting, expenditures and business growth. It helps identify the problem areas and identify ways of becoming profitable.
Bookkeepers in Melbourne carry out bank reconciliation to compare the company bank statement with the general ledger. It helps to identify any errors in records and detect fraud by employees.
The business owner can identify issues like delays in cheque clearance that create discrepancies in the books. Businesses that complete a large number of transactions every day must do it daily, while others can opt for weekly or monthly reconciliation.
The business owner has a load of responsibilities that keeps increasing as the entity progresses. Monitoring the budget, inventory, payroll, income, losses and bank statements can become challenging. It is better to leave the job to qualified and experienced professionals to perform the tasks with perfection.
Besides keeping neat and organised records, they help with financial advice, debt management, following up on client payments, and much more. Thus, hiring a bookkeeper in Melbourne becomes necessary to free up your time for other important tasks.
Good bookkeeping requires time and dedication. Business owners must follow the golden rules mentioned above to master the art and create a solid financial foundation for their businesses.
