The 7 Bookkeeping Basics You Can’t Ignore

Friday, 3 Jul 2020

Bookkeeping is needed from the launch of a business, and its significance increases as the company makes progress through the years. It is essential to record all the financial transactions and keep the books updated.

It allows the entrepreneur to understand the financial stature of the business at any given point in time. Professional bookkeeping in Sydney helps in planning for company growth, filing tax returns, complying with the state regulations, saving the time wasted in maintaining the books and sustaining the entity through positive cash flow.

Business owners can easily qualify for a loan with organised records and financial reports and make informed decisions while working towards their long-term objectives. If you are planning to hone your bookkeeping skills as an entrepreneur, then here is some relevant information that will help you to get started. Take a look at the seven bookkeeping basics which should not be ignored by an entrepreneur in Sydney at any cost.

1. Keep Your Personal Account Separate

The first step towards financial management is to open a separate business account in Sydney or you will not be able to track which expenses are personal and which ones were incurred by your company.

The segregation will become challenging when you will the file tax returns since you will not be able to provide proof of business expenses to claim the tax deductions. If you are adding your personal funds to the business, then treat them as short-term loans which must be repaid to you.

Also, banks in Sydney will not give you a business loan until you have a separate account for your enterprise. A separate account will make sure that you will be spending much less time on organising books as there will be no ambiguity in the transactions.

2. Create A Bookkeeping System

Double-entry bookkeeping is the preferred form of recordkeeping, and it is also the ideal way of organising entries. It is more suitable than the single-entry system as it works best for growing ventures in Sydney, which have growing needs and demands.

Under this system, every entry is made twice as both credit and debit. Most bookkeepers rely on the cloud-based accounting software to manage the double-entry bookkeeping work. It ensures minimal errors and accurate calculations.

You must also choose between the cash or accrual accounting methods for bookkeeping. In cash accounting, the transaction is recorded only after the money has been transferred into the account even if the invoice was generated a week ago.

Under the accrual method, you will record accounts receivable at the same time when the invoice is generated. Similarly, accounts payable will be recorded when you get billed without waiting for the money to get transferred into your account.

3. Categorising Transactions

Bookkeepers categorise all the transactions, and the same must be followed by the business owner. It helps in identifying the tax concessions applicable to your business in Sydney and makes auditing easier.

All the transactions can be categorised under five types of accounts – assets, liabilities, revenue, expenses and equity. The cloud-based software comes handy in the categorisation work and makes your life easier. Make sure that all the payments are done using a credit card or a debit card because it can become challenging to keep track of the cash payments.

For instance, if you paid in cash for a ride to the client’s office in Sydney, then it will not show up in the bank transactions, and you will not be able to claim it as a business expense.

4. Reconcile Your Bank Accounts

Reconciliation is a pretty simple task where you compare the monthly bank statement with your internal records in Sydney. It aids in identifying any unrecognised transactions that may be a result of an accounting error or any fraudulent activity.

It helps in making the bookkeeping process more efficient through proper verification of every transaction. You can make this a daily practice instead of a monthly assignment.

Most bookkeepers get the online access of the business account and download the transactions daily to compare them with their records to prevent any issues from escalating into big problems. The accounting tools also help in completing this chore without any hassles on a daily basis.

5. Invoicing And Making Payments On Time

A huge part of improving cash flow depends on keeping the cash deficit at bay. Thus the bookkeepers are proactive with invoicing. They generate the bills as soon as the goods are delivered to the customers and follow up with them to get the payments as soon as possible.

Also, they make sure that the bills to be paid by the organisation are paid on time to keep the incomings and outgoings balanced. It is equally important because falling behind on payments can lead to penalties and loss of money.

A busy entrepreneur in Sydney can make use of the online accounting tools to automate invoicing so that there is no delay.

6. Payroll Management

Managing the payroll is a vital task which is carried out by the bookkeeper. Business owners must work towards making this process efficient and precise.

While conducting payroll bookkeeping, you must make sure that all the records of wages are maintained in an orderly manner, and the accounts are being updated in compliance with the wage and tax regulations applicable in Sydney.

You must evaluate the contributions made towards health and life insurance and superannuation of the employees. It helps in removing any discrepancies in data and streamlining the payment process.

You must be using the Single Touch Payroll system, which will give you real-time access to the payroll data and give structure to the tax and superannuation reporting processes.

7. Prepare Financial Statements

Every business in Sydney needs to generate financial reports which are usually done by the bookkeeper. If you are taking care of the task, then you need to be on top of the documents as they are critical for sharing the information with stakeholders and management.

They are required to get funding and check the financial status of the company and submit reports to the ATO. They help in enhancing internal decisions and keeping the data up-to-date. The basic financial statements that need to be prepared regularly are the balance sheet, the cash flow statement and the profit and loss statement.

Conclusion

If you are doing your books on your own, then you must consult a professional bookkeeping company in Sydney to get the things mentioned above right and reduce the chances of errors and losses. They will assist you in reducing the workload and stress and will make the bookkeeping process a smooth ride. 

 

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