Wednesday, 24 Jun 2020
Starting a business from scratch is a huge responsibility which leaves the entrepreneurs burdened with an exceptional amount of work. Amidst all the client meetings, supplier negotiations, stock management, strategy development and daily operations, it becomes challenging to meet the bookkeeping requirements.
Unfortunately, the negligence of financial management leads to a deficit of working capital, which often results in business failure. Thus the significance of bookkeeping for start-ups cannot be overstated. It is the most basic requirement for running a business as it allows you to forecast the income and expenses for every month, prepare the budget for the year, allocate funds for various payments, records all transactions, file tax returns, and do much more.
Thus finding a professional bookkeeper in Melbourne becomes of utmost importance for start-ups which need their support to streamline the cash flow and develop the business. So here is a guide to bookkeeping for start-ups which will help you to understand the importance of their work.
The first step of bookkeeping for start-ups involves opening a bank account, which will be used to keep all the business income safe and separate from the entrepreneur’s finances. It will help in easy differentiation between personal and business expenses at the time of claiming tax deductions in Melbourne.
The next step is to decide on a bookkeeping system. The double-entry accounting system is the most common and widely used record-keeping system, which records both debit and credit entry for every transaction. It allows the balancing of the books at all times and helps in identifying the depreciation in profits immediately.
With automated systems becoming the norm, most bookkeepers use cloud-based accounting software to manage the record-keeping work, which saves both time and energy. The chances of manual error go out of the window with this system in place, and it can be accessed by the entrepreneur and the board members of an organisation whenever required.
It allows them to access the financials records at anytime from anywhere using their mobile phones to get real-time data updates. As a legal obligation, a start-up in Melbourne must store all the documents that showcase income, expenses, deductions, etc. These must be saved for five years or more depending upon the business record-keeping requirements.
The bookkeeper of a start-up matches the transaction records with the bank statement to ensure that there is no difference in the balance. It helps in finding any discrepancies in the data, particularly related to any fraudulent activity taking place in the Melbourne-based organisation.
It is either done monthly or quarterly to identify unauthorised cash withdrawals or deposits that are missing from the records. It helps in tracking bounced cheques from customers and outstanding cheques which need follow-ups.
Invoicing is another critical tool utilised by bookkeepers to send out bills on time and follow up with the clients to get the payments quickly into the company account. These days the invoices have payment options to allow the customers to pay up quickly without any delays.
To manage positive cash flow and have more income than expenses, bookkeepers offer incentives to clients in Melbourne for early payments and add penalties for late payments. Similarly, they take care of making all the payments to suppliers and vendors on time to avoid penalties, which can add to the expenses.
The bookkeeper makes the most significant contribution to the organisation by improving the flow of cash where the income is higher than the expenses. They help in cutting down the unnecessary costs which have been eating into the profits of the business and save money by claiming a plethora of tax deductions.
Besides, their negotiation skills aid in getting the payments quickly from suppliers and they make sure that the debts are not going overboard and affecting the bottom-line. Their financial forecasting assists in making informed decisions and keeping a check on the cash coming in and going out of the business in Melbourne.
Although most bookkeepers use accounting software in Melbourne, which generates all the financial reports, the compilation and presentation of these reports is a significant task. These statements are required by stakeholders, board members, the taxation office, and money lenders.
Thus they must be organised and managed accordingly. These vital documents include the balance sheet, profit and loss statement, and cash flow statement. These assist the entrepreneur in understanding the financial health of the organisation at any given time.
The bookkeepers are responsible for the management of payroll of the employees. It includes maintaining records of their salaries, tax deductions, bonuses, superannuation, etc. They also generate reports using payroll software which have to be submitted to the ATO in compliance with all the regulations.
All the updates made by the government are updated automatically in the software. The working hours are also calculated electronically, and there are no data entry errors. Thus you do not become liable to tax penalties. Although a start-up may not have many employees, tracking all this information for every person is a must.
Planning for the future is the key to success as it creates a roadmap where you envisage the profit levels and requirement of capital for the coming months. It is needed to get funding from banks and money lenders in Melbourne and set goals for every quarter.
Every start-up must begin the operations with this plan in hand to ensure that they continue to meet their objectives and have sufficient reserves to sail through the periods of low profits.
All entrepreneurs are not experienced and maybe running a business for the first time. Such people are not well acquainted with the fundamentals of bookkeeping and need the assistance of an expert to help them understand the basic concepts of cash flow and profit and loss.
Also, bookkeepers help in finding the best sources of funding, such as low-interest business loans. They provide you with trustworthy advice which aids in making the right decisions related to business investments.
They offer their expert opinion on expansion strategy and inform you about the right time to venture into new markets within Melbourne.
Launching a new business is an all-consuming and overwhelming endeavour which can make the entrepreneur confused and laden with tremendous work. Thus they rely on bookkeepers in Melbourne to stay on top of their accounts and maintain a financially sound entity which strives to reach the top.
