What Are The Major Objectives Of Bookkeeping?

Thursday, 9 Sep 2021

Bookkeeping is the most vital part of operating a business smoothly and efficiently. While traditionally, it was restricted to manual data entry, today it goes way beyond merely recording the transactions. With automation coming into the picture, the jobs of bookkeepers in Melbourne have become less time-consuming and more pragmatic.

They are needed for making financial forecasts and crucial financial decisions. Besides maintaining up-to-date books of the business, they are responsible for a variety of other functions that make them indispensable. The financial management of the business is dependent on their recommendations and suggestions.

Let us understand the primary objectives of bookkeeping to gain an insight into this complex job profile that helps every entity in Melbourne to become financially stable.

1. Recording All Transactions

The foremost objective of bookkeeping is to identify all financial transactions taking place in the company and recording them accurately. The accounts payable and receivable must be noted in chronological order to maintain the order that can be showcased in the books of accounts.

Most bookkeepers use accounting software in Melbourne to track transactions as it reduces the risk of manual error in recording numbers and the time consumed to complete the task. These records are highly relevant for the business to understand the incomings and outgoings and to get the required information in the future.

2. Determining Financial Standing of the Business

They have the responsibility of informing the entrepreneur and the board members about the financial status of the company. The same information is needed by shareholders and investors and the bookkeepers have to present it to them so that they can make informed decisions.

For example, the professional can be helpful in suggesting whether the investment in a new project in Melbourne is a viable option for the business or it will lead to losses and financial constraints. They are the best judge of the financial health of the business and can provide the required financial advice at any given time.   

3. Maintaining Accuracy

Bookkeepers are focused on maintaining error-free and accurate records. For this purpose, they rely on the reconciliation of bank accounts in Melbourne. It ensures that if any inflow or outflow of capital is missed at the time of recording transactions, it can be identified and noted correctly.

Thus, they compare the monthly bank statements of the business account with the books to maintain precision. Besides bank statements, they also compare the credit card statements or money received from other financial institutions in Melbourne. It aids in recognising the inconsistencies and even acts of embezzlement to keep the business safe from fraud.               

4. Payroll Management

Bookkeepers have many added responsibilities when they are working in small organisations in Melbourne. Thus, they have to keep a tab on the payroll to ensure the employees are paid on time after calculating the taxes and deductions.

They disburse the payments in compliance with the state regulations. It is essential to do these calculations accurately as they are needed for reporting pay as you go withholding (PAYGW) and superannuation information to the Australian Taxation Office.

With the introduction of the Single Touch Payroll, the task of payroll reporting has become simplified and less burdensome.   

5. Generating Financial Reports

Besides preparing the financial budget, the other objectives of a bookkeeper include generating the financial reports and statements at regular intervals. These include cash flow statement, balance sheet, and the income statement.

They are needed to understand the profits made by the business and the losses it incurred in a given period. These give an insight into the income, expenses, net cash flow, debts, assets, and liabilities. They use them to understand the net profit and profitability of the business.

6. Inventory Management

Another objective of bookkeeping is keeping track of the inventory as it is needed to calculate the cost of goods sold. It can be determined by calculating the volume of stock sold in a defined timeframe.

Bookkeepers are also aware of the stock that is available for sale at any point in time through the amount purchased from the suppliers in Melbourne. They usually use two methods to check on inventory – periodic inventory, which involves manually counting the stock at regular intervals and perpetual inventory, which uses a computerised accounting system connected to the point-of-sale system.  

7. Tax Preparation

Preparing for the tax season in Melbourne is the most significant task of a bookkeeping company. They have to determine the tax liability of their client’s business through the analysis of the financial data. They aid in tax planning by understanding the applicable tax deductions and filing the tax returns on time to avoid penalties.

Typically, businesses have to pay sales, income and payroll tax and the bookkeeper helps in calculating the correct amount after the deductions. Thus, they help to save money as paying too much tax can lead to losses and too little can get the business in trouble.      

Conclusion

Many small business owners are not aware of the importance of hiring a bookkeeper in Melbourne. However, their significance in an organisation can be effectively gauged from their list of objectives. Without these business functions, it can be excessively challenging to run a venture successfully.    

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