B O O K K E E P I N G 1 0 1

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1 B O O K K E E P I N G A N I N T R O D U C T I O N C K C A C C O U N T A N T S

2 Overview What exactly is bookkeeping? Why is bookkeeping important? Bookkeeping tips and tricks.

3 What exactly is bookkeeping? Bookkeeping is all the recording and maintaining of the financial books of a business. These are crucial to the functioning and survival of all businesses. Some key functions of bookkeeping are: Processing purchases, sales, receipts, payments Processing payroll and maintaining entitlements and employee records Bank reconciliation Providing reporting for preparation of a BAS Producing reports for both client and accountant Record keeping Meticulous bookkeeping is what will hold your business together and make it run like a well oiled machine. If your records aren't in good shape, your business could fall apart. A healthy business is monitored through its records on a regular basis, so you can find problems and correct them, before it might become too late. 2

4 Why is bookkeeping important? Effective bookkeeping is critical to the success of any business. Not only is it necessary for the operation of a business to keep accurate and comprehensive records, but they are also required by law. Australian legislation states that businesses must have up to date financial records to ensure that they pay all necessary taxes and levies. These records must be kept for a period of at least 5 years, and payroll records are required to be kept for a minimum of 7 years. Bookkeeping will help ensure you meet deadlines and help you make appropriate payments of loans, rents, bills, taxes and so on. No business can survive without effective cash flow management. Accurate records will help you know when it s time to bring in an extra hand and if your business can afford the extra expenses incurred by bringing in new employees. 3

5 Bookkeeping tips & tricks Plan for Major Expenses. Be familiar with the expenses that could be coming up. Is it likely that you will need to upgrade your facilities? Is your office equipment on its way out the door? By making sure that you have forecasted for major expenses, or peaks in staffing costs, you will avoid taking money out of the company in good times and finding yourself short in slow cash flow months. Track Your Expenses. Expenses can be difficult to track, which means that you may be missing tax write offs that you could have benefited from. A credit card that you use solely for business can be an easy to set up basic accounting system. Most card statements categorise all expenses, so you can see which outlays relate to which business activities. If you always use your business credit card for business expenses, you're less likely to pay cash at, say, Office Works and lose the receipts, forfeiting tax time write offs. Record Deposits Correctly. Financial software like Xero will help make sure you keep track of what is being deposited into your business bank account. From loans, to sales revenue, to cash infusions from your personal savings. If you cannot account for where each of the deposits have come from you re leaving yourself open to paying taxes on money that isn t income. Set Aside Money for Taxes. You know that you re going to have to pay taxes and you know when. So put money aside for it! Unpaid taxes can incur penalties and interest from the ATO, so make sure the money is there when you need it. Keep an Eye on Your Invoices. Late and unpaid bills can hurt your cash flow. Put a process in place for if a bill goes unpaid. That can be issuing a second invoice, making a phone call and even levying penalties such as extra fees at certain deadlines. Make a plan for if clients are 30, 60 and 90 days late. Remember, every late payment is an interest free loan that hurts your cash flow.

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