As a business owner, there are already hundreds of things you have to deal with. From managing the day-to-day business operations to networking and marketing strategies, you have to take care of a lot of tasks to ensure that your business runs smoothly.
With so much on your plate already, finding time to analyse the financial spreadsheets and manage your cash flow becomes nearly impossible. However, in order to set your business for long-term success, you must manage your books and stay in control of your finances to make sure your business stays compliant.
So, to help you, we have put together some bookkeeping best practices that will make things easier for you in 2024. Let’s dive into it:
Separate Your Personal and Business Finances for Success
It may seem harmless at first glance, but mixing personal and business finances can lead to significant headaches down the road. Every business, regardless of size, should maintain a distinct bank account separate from personal finances.
In fact, depending on your business structure, having a separate business account may even be a legal requirement.
Why is this so crucial? Well, having a dedicated business account makes it a easier for you and your financial team to track expenses, sales, and overall financial health. This separation saves you valuable time and effort, ensuring that your finances stay organised and your business runs smoothly.
So, don’t wait until it becomes a problem – set up that separate business account today and build the way to financial success!
Use Cloud Based Accounting Software
In today’s digital age, we have the incredible advantage of cloud-based accounting software, putting the power of financial management directly into the hands of business owners like you.
Gone are the days of drowning in paperwork or tediously sorting through spreadsheets – modern software integration has completely changed the way we handle finances.
The best part? There’s a wide array of software options available so you can find the perfect fit for your business needs. If you’re unsure which software is right for you, don’t hesitate to consult with a knowledgeable bookkeeping expert who can provide invaluable guidance.
Keep Track of Important Deadlines
As a busy business owner, it’s common to juggle multiple tasks and deadlines. However, it’s crucial not to overlook important dates like GST payments, payroll, and regular business invoices. To stay on top of these deadlines and avoid penalties or disgruntled partners, consider setting reminders.
Establish a Simple Record-Keeping System
It’s important to have an easy way to track and organise all your business transactions. This helps you stay on top of your cash flow and plan for the future. Plus, keeping good records makes tax time less stressful and gives you peace of mind in case you’re audited.
Whether you prefer digital or paper records, the key is to keep things both secure and easy to access. If you’re sticking with paper, store your records in a locked cabinet and keep them organised. And don’t forget to make backups, just in case.
Alternatively, you can use cloud-based bookkeeping software, which makes it simple to scan paper receipts with your phone or upload electronic bills. This way, everything is stored safely online, and you can easily keep track of your finances without the hassle of paper clutter.
Understand Your Business Expenses
When you’re starting your business in Richmond, Melbourne, it’s hard to anticipate all the expenses you’ll encounter and which ones are deductible from your taxes. Expenses directly related to your business operations and income generation are typically tax-deductible. However, personal purchases don’t qualify.
Remember, just because you use personal funds for business doesn’t mean everything you buy is deductible. It’s essential to familiarise yourself with Australian Tax Laws to determine what expenses are eligible for deductions.
If you’re unsure, seek advice from your local accounting professional, who can help you claim tax deductions for which you qualify. At Clear Tax Accountants, we have helped multiple clients claim every single tax deduction they were eligible for, making them save a lot of money.
Generate Regular Reports
Maintaining a solid bookkeeping system isn’t just about taxes; it’s also about staying on top of your finances. Regularly tracking your incoming and outgoing cash flow allows for timely financial check-ups.
Using effective accounting software ensures that all invoices are paid on schedule, preventing any gaps in your financial reporting.
While monthly check-ups are beneficial, it’s wise to conduct more detailed reviews at the end of each quarter. Focus on identifying trends such as fluctuations in sales, significant expenses, or delayed payments from customers.
By thoroughly evaluating your financial data, you can better plan for future cash flow needs and opportunities.
Have a Budget for Tax Payments
Seeing your business turn a profit is fantastic, and reinvesting in growth is important. But remember, a part of your earnings needs to go towards taxes at year-end.
Keep in mind that a portion of your income will be allocated towards tax expenses at the end of the fiscal year. To ensure you have enough funds to cover these obligations, it’s wise to set aside a portion of your income, such as around 20%.
If it’s tough to keep this money in your business account, use a separate savings account for tax payments. This way, you’ll be prepared when tax time rolls around and avoid any financial stress.
Keep Tabs on Cash Transactions
Don’t overlook cash payments when managing your business finances. It’s crucial to document any cash received by the business, ensuring it’s deposited into the business bank account before any expenses are made – even for business purchases.
While it might be tempting to use cash immediately for supplies, doing so can disrupt your bookkeeping. When recording cash transactions, be sure to note which customer made the payment to avoid following up unnecessarily.
If you’re unsure how to handle cash payments in your accounting software, seek guidance from a bookkeeper who can assist in setting up and using the bookkeeping system correctly.
Understand the Fundamentals
It’s common for business owners to rely on professionals or automated accounting software to handle tax and accounting matters. While these resources certainly minimise the risk of tax issues, it’s still valuable to grasp the basics of your tax obligations.
Take the time to educate yourself online about the specific tax and accounting rules relevant to your business type. Keep in mind that registered companies, sole traders, and partnerships each have unique regulations to consider.
Assess whether you’re subject to corporation tax, registered for GST, or liable for other recurring fees.
Give Your Bookkeeping Due Attention
While it might not be the most thrilling aspect of business ownership, keeping track of your expenses is crucial. A single error on a tax report or a disorganised set of invoices can cause significant headaches. Therefore, it’s essential to prioritise your bookkeeping tasks from the start.
Ensure you have a strategy in place to keep your books organised and current. While balancing everything daily isn’t necessary, aim to review your financial records at least once a month. This regular check-in will help you stay on top of your finances and avoid any potential pitfalls down the road.
Dedicate to Better Bookkeeping
Whether you’re handling your accounting yourself or getting help, having a good bookkeeping plan is essential. By following the tips above, you’ll understand your business finances better, have fewer tax issues, and more chances to grow.
If this still sounds overwhelming, you can reach out to us. We are a team of experienced bookkeepers or accountants in Melbourne who help small business owners with their accounting and bookkeeping matters. Contact Clear Tax today!
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