Friday, 19 May 2023
Businesses thrive when the entrepreneur and stakeholders are aware of their financial health. They rely on data analysis to make all small and big decisions impacting the bottom line. Whether the entity needs new equipment or has to hire a talented team, the business owner must revisit the financial statements.
If they showcase ample cash, they can go ahead with the plan. However, if there are too many outstanding debts, they keep it on hold until the business stabilises. Financial statements provide critical business information, including cash flow statements, balance sheets and income statements.
Bookkeepers are responsible for the preparation of these financial statements, which makes them an indispensable part of the organisation. Let us understand their role in this process in detail.
Companies in Australia have to lodge their financial reports with the Australian Securities and Investments Commission (ASIC) for every financial year. These reports must be audited by a professional. A few companies are exempted from lodging reports with ASIC, but they still have to prepare these documents for internal examination of their performance.
Financial reports provide all the financial details of the business in Melbourne and are prepared by the bookkeepers while complying with the Australian Accounting Standards and Corporations Act 2001. It involves recording all transactions accurately and organising them under appropriate categories in the ledger.
It helps to determine the amount of money spent and earned by the business in a specific period to assess its accomplishments. The business owner and the stakeholders need this information to evaluate the financial status of their entity.
Bookkeepers maintain the integrity and credibility of financial statements because they follow industry best practices and applicable regulations. They help all the internal people to make sense of the vast amount of data collected systematically and updated to offer the latest and most accurate information.
Bookkeeping is a vital part of running a business because it keeps track of the finances. Here is how experts in the field take charge of financial reporting.
The foremost responsibility of bookkeeper Melbourne is to generate financial statements every month. It requires keeping a record of all supplier and customer invoices to update accounts payable and accounts receivable in the books. They must have logs of wages and salaries paid to employees and the value of inventory at hand.
They must reconcile bank accounts to check for missed entries, errors in calculations and fraud. All these tasks can be performed by specialised professionals who are committed to financial management. Thus, bookkeepers are hired by all small and big companies to maintain up-to-date records.
The income statement is also known as the profit and loss statement because it provides data related to the profits and losses made by the company in a specific period. The bookkeeper has to calculate the total sales or revenue generated by the entity after subtracting the discounts.
They determine the cost of goods sold, which is the total of all the direct costs incurred by the business to sell the products. Preparing income statements entails determining gross profits, which are generated from buying and selling products. It is calculated by deducting the cost of goods sold from total sales.
Other expenses incurred by the business in Melbourne are categorised under selling, general and administrative expenses. Besides these, the bookkeeper has to identify the operating costs, net income, funding costs and planning for taxes to complete the financial statement.
Bookkeepers are needed to prepare the balance sheet that describes the financial well-being of the business. It offers a description of the assets, liabilities and equity accounts of the entity. The assets include the capital, property, equipment and vehicles owned by the business.
These comprise current assets that can be easily converted to cash, such as stock and capital and non-current assets that take time to be converted to cash, such as equipment, vehicles, goodwill, etc.
The next step is identifying liabilities, which are outstanding debts. Current liabilities include those amounts that need to be paid within a year, such as salaries and wages. Non-current liabilities are debts that can be paid back even after a year, such as long-term business loans.
Finally, bookkeepers in Melbourne need to determine shareholder equity, which is the amount invested by the shareholder in the business after subtracting liabilities from assets. The balance sheet helps the owner identify the net worth of the company.
The cash flow statement provides information about the incomings and outgoings. It includes calculating cash flow from business operations, investments and funding activities. It helps the business owner check the cash available to the business. It is needed to avoid unnecessary expenses and increase profitable activities.
Financial statement preparation requires a wide range of financial data collection and calculations that expert bookkeepers can effectively perform. It gives an insight into how the business uses its capital and what can be done to improve its earnings.
If novices prepare them, financial documents can be flawed with miscalculations, inaccurate entries and skewed cash balances.
