Modern Bookkeeping: Is It Time To Make The Switch?

Modern bookkeeping has turned every business owner’s life around because it offers efficiency, speed and quality. A task that used to be done in hours can now be carried out within just a matter of minutes. The information becomes much easier to access and everyone can collaborate and contribute to make the system more efficient. It is indeed a whiff of fresh air for business owners who used to dread bookkeeping tasks.

Although most business owners have already turned to modern bookkeeping technology because of the benefits that remains unmatched by old-fashioned bookkeeping, there are still some who are still quite hesitant to make the switch. It is not just about the problem with switching to an unfamiliar bookkeeping territory, but ditching the old system and suddenly embracing the new approach.

If you are going to look at the big picture, you will discover the once untapped potential of bookkeeping back in the day when entrepreneurs settle for the sluggish and demanding manual generation that requires accuracy. Imagine spending gruesome hours for data entry alone and when details do not match the bookkeeper’s or the business owner’s data, you will have to redo the process. This bookkeeping ordeal had come to an end when modern bookkeeping technology became part of the picture.

Why would a business owner make the switch?

  • It simplifies daily bookkeeping tasks. One of the factors that make bookkeeping challenging is the accuracy that it demands. Business owners are dependent on the information they see on the financial statement and one wrong entry can affect the whole data. These days, the bookkeeping technology has come a long way, and this means that the tasks are simplified so the need for double-data entry is eliminated. Bookkeepers and business owners will notice a significant rise in productivity and efficiency.
  • Bookkeepers collaborate with client in real time. In the past, the only way a business owner could gather ideas and get updates on bookkeeping was during meetings since an integrated client portal was not yet available. With this approach, you need to dedicate your time and effort so all parties involved in the bookkeeping system will meet half way. By switching to modern bookkeeping, preparation and submission of reports are shortened. More ideas are also obtained because the clients and bookkeepers can access the portal.
  • The system is secure. Keeping important data secure and confidential is one of the problems that most business owners are facing. There are inevitable circumstances that can mar the bookkeeping process. For instance, computers become susceptible to hacking and virus infection and if the bookkeeping data are not secured, you can end up losing the important information. Modern bookkeeping technology has foreseen these possibilities. This is why a client is assured that data are safeguarded. Even with the possibility of data loss, you can have your data backed up so no time and effort are wasted.

Although it can be quite overwhelming to make that sudden switch, the benefits that modern bookkeeping provides are enough to convince even a small business owner to embrace changes.

Bookkeeping Mistakes A Business Owner Should Avoid

Being a small business owner is like walking on eggshells. You need to monitor your business closely to ensure its survival inspite of the tough competition among business industries. Unfortunately, there are instances when business owners lose track of the most important areas of business management. Your business is bound to fail if you take bookkeeping for granted. Aside from bad bookkeeping there are other reasons businesses fail. For instance, overlooking errors can take a toll on your record-keeping practices. If your data entries are incorrect, other areas of your business will also be affected.

1. Not tracking reimbursable expenses.

While small expenses may not hurt your business, habitually ignoring the task of keeping receipts can have a huge impact on your business. Small expenses are still part and parcel of budgeting and every item must be tracked so you know where your money has been spent on.

2. Not paying attention to backlog build up.

There is nothing wrong with focusing on the most important task that keeps the show on the road. However, constantly ignoring menial tasks such as bookkeeping may also get you into trouble and this can be stressful. Before the business opens, make sure you have a bookkeeping system so you can effectively keep track of other areas of your business without allowing a backlog to build up. Devote a specific day for reviewing both major and minor tasks.

3. Neglecting Bank Reconciliations.

Bank reconciliation is essential in bookkeeping process and just like other important tasks, this is something you cannot afford to neglect. Business owners should make it a habit to compare bank statements with accounting records to find out if there are errors that need to be corrected. Paying attention to bank reconciliation also prevent fraudulent activities that might be hurting your business if left unchecked. Business owners who fail to conduct bank reconciliation in a timely manner can lose thousands and make business suffer eventually.

4. Failure to learn the basics in operating bookkeeping software.

The idea of setting up a manual set of books for recording your business accounts can be a tiring process and be more prone to errors. Aside from the fact that the process is time-consuming, you need to pay close attention to details for you to make sure that the data you enter are correct. Every business should invest in a good bookkeeping software package that is not only easy to operate but can also minimise the amount of time you spend on the most important bookkeeping task. Business owners should make an effort to learn to operate basic bookkeeping software to gain deeper understanding of the information on the financial statement that a bookkeeper prepares.

5. Not having a separate personal and business account.

Your personal bank account needs to be separated from your business bank account because you can get everything mixed up if you do not kick the habit. A business owner may be faced with a tax problem if this issue is not addressed.

It is easy to overlook minor problems when you are too focused on the major areas of your business. However, bookkeeping is also essential because without it, your business will in chaos.

Three Financial Statements You Should Get From Your Bookkeeper

Bookkeeping may not be a business owner’s forte, but you still need to learn the ropes because the most important aspect of your business is at stake. When your finances are left unchecked, you can join the growing number of failed businesses due to the lack of knowledge in bookkeeping. While bookkeepers and accountants are the only ones that can survive number crunching, you can still prevent bookkeeping mishaps, but gaining basic understanding of how the system works. If you are completely clueless about the bookkeeping system, your head will be in the clouds every time you are presented with a pile of financial statements because all of which will look and sound Greek to you.

Start With The Basics, Know Your Financial Statements

Income Statement
If you want to get an overview of your business’ profit and loss, the income statement is going to be your guide. Your bookkeeper presents the losses, net profits and sales revenue for the current period. You will also get the details of your expenses from this statement. The net profit or net loss is taken from the difference between the income and the expenses. A net profit is always good news to business owners.

Cash Flow Statement
If you wish to find out about your asset’s movement over a period of time, the Cash Flow Statement will give you the details you need. The statement has several categories: financing, operating and investing activities. The financing activities have to do with generating or paying debt. The operating activities refer to the tasks your business performs on a regular basis including making a sale. The investing activities are the purchase and sale of assets and buying a new location is a perfect example.

Balance Sheets
The balance sheets are important to bookkeepers and business owners because this is where profit and loss are demonstrated. While the balance sheets do not necessarily reflect specific investments of business owners, it is a good way to determine the available money. The balance sheets can also be used for predicting which direction your business is heading. They are known as the building block of bookkeeping and accountants refer to this statement in creating or analysing data.

The Balance Sheets Have Three Elements:

•    Assets refer to the business-controlled items. Cash and machinery are examples.

•    Liabilities are the items that a company owes. Loans are an example of liabilities.

•    Equity is the capital left after the assets have been utilised for paying off liabilities.
Bookkeepers and accountants also refer to these financial statements to provide recommendations. This way, a business owner will have an idea whether the business is still profitable. Business owners may sit down with the bookkeeper to discuss these financial statements.

Bookkeeping For Tradies

 


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Are you a Tradesman or Tradeswoman?

It’s not deliberate. You had good intentions. Time runs away from you because you are busy running a business. Before you know it, it’s BAS time AGAIN and you know you’re going to have to spend the weekend getting it done.

  • Or maybe you had someone who you thought you could trust but got it all wrong because of their inexperience.Over time the problem becomes so big that:
    • It has taken over your office
    • It keeps you awake at night
    • You don’t know where to start
    • You’re fearful that the ATO will call
    • You have no idea how much tax or GST you owe
    • You are completely in the dark

    It’s what we call “The Bookkeeping Monster!”

Contact me today for a free consultation worth $100.

Now’s the time to free up your valuable time to spend on your business and not in your business.

Oh and also spend more time with your partner and family!!!