If you’ve started your own business, it’s likely that you’re passionate about running it and concentrating on the tasks you love doing. But if you’re like most business owners, you might not have enough knowledge, experience or be so interested in recording all the details of every financial transaction. In this week’s post we take a quick snapshot of what bookkeeping can mean for small businesses.
It’s the process of recording and classifying business financial transactions. In other words, maintaining the records of the financial activities of a business or an individual. Bookkeeping’s objective is simply to record and summarise financial transactions into a usable form that provides financial information about a business. Modern Bookkeepers also advise clients on compliance issues and can implement systems to streamline your business.
What does it entail?
- Preparing and sourcing documents for all transactions, operations, and other events of the business
- Preparing and lodging Quarterly or Monthly BAS and PAYG-W liabilities
- Determining and entering the financial transactions of the business – transactions have financial effects that must be recorded, whether the business is better off, worse off, or at least “different off,” as the result of its transactions. The bookkeeping process begins by determining the relevant information about each transaction.
- Performing end-of-period procedures. These procedures are the critical steps for getting the accounting records up-to-date and ready for the preparation of management accounting reports, tax returns, and financial statements.
- Compiling the adjusted trial balance. This balance (a complete listing of all accounts) is the basis for preparing reports, tax returns and financial statements.
- Setting up Chart of Accounts. The chart of accounts should be tailored to your business to ensure reports have the level of detail required to inform business decisions.
- Setup accounting software. Using the right accounting software for your business will allow your business to grow without the need for changing later.
Let’s put this in a real-world context. For example, you own a small day spa. You might have:
- A simple business model
- A high transaction rate with lots of customers
- Many sales a day – perhaps dozens or more
- Supplier invoices for spa products
- Sales recorded through cash registers or other POS (point of sale) systems
- Staff wages to record and pay
Reviewing the list of what bookkeeping entails, that’s a lot of information to track and record and bookkeeping might not be something you enjoy or have time to understand. Without proper bookkeeping, it would be easy for transactions to go unrecorded or left to pile up until the end of a financial period. Mistakes could be made and important details could be lost or forgotten.
Without timely and accurate bookkeeping, transactions may go unrecorded.Shelly
Using software can help make small business bookkeeping easier and more accurate. At Shelly’s Bookkeeping Brisbane, we use Xero. Xero is a cloud based application that is available all over the world, meaning you can access your business’s finances using any device with an internet connection, anytime, anywhere. It connects with your bank account so each transaction comes up quickly and matches up. Working with a bookkeeper using Xero is also much easier. Whenever you need their help, they can just log in and review your accounts.
The bottom line is that it takes time to keep your own books; is time you could be spending on other areas of your business. If you are not an accountant, have no experience in bookkeeping/finance or have little familiarity with software that assists with bookkeeping, the time it takes you to enter transactions into your ledger will be much higher than what is necessary. Think about cost, not just in terms of the dollar amount you could save doing this yourself, but also how much more you could earn for your business if you were not spending precious time keeping books. You may find it makes financial sense to enlist the help of a certified bookkeeper.