Have You Chosen The Right Bookkeeping Software For Your Business?

Part of digitising your business is choosing the right software that can help your bookkeepers get tasks done. Find the right software is comparable to finding a needle in a haystack if you do not have some criteria. Some software may have great features, but they come with a price tag. Others are less expensive, but they let quality take a backseat. The first thing you need to look for in bookkeeping software is its ability to offer the best of both worlds: affordability plus quality.

If you want to make an informed decision, you need to follow the right search process. The need for business transformation takes place as your grow your business. Can you still remember the day when you only had to deal with a few tasks? Now that your business is growing, you need to take bookkeeping to the next level, hence, consider the utilisation of bookkeeping software.

There is one thing you need to remember right off the bat: there is no such thing as the best bookkeeping software. You just need to choose the one that suits your needs.

1. Research

If you do not know much about bookkeeping software, doing a research is going to be your best bet. This means you need to start talking to your competitors to find out about the software they are using. You can also ask your bookkeeper or accountant for some suggestions. Once you have taken note of all suggestions, the next step to take is to search about the bookkeeping software. Learn more about the software’s features and functions. You may also opt for a trial version if it is on offer.

2. Decide which software suits your business

Bookkeeping software comes in two types: generic software and industry specific software. In choosing bookkeeping software, you need to know which one will be best for your business. There are features that your business may require so you need to know if you need to stick to generic software or move to industry specific.

3. Take your budget into consideration

Your budget is another criterion to consider when shopping for bookkeeping software. While your choice will depend on your budget, it does not necessarily mean you have focus on the price without checking the features of the software. Make sure you also take your needs into account. Some factors to consider when choosing bookkeeping software are your computer hardware and business requirements.

Bookkeeping software is meant to make your day-to-day tasks easier, but you should also choose the software that is able to provide increased security so you can counter data breaches and threats. Never rush into purchasing the software without doing a thorough research so you can get the most out of your bookkeeping software.

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How Is Your Relationship With Your Bookkeeper?

If you want to have a productive experience with a bookkeeper, you need to start with establishing a long-term relationship. It is essential for a bookkeeper and business owner to have a good relationship because a bookkeeper holds a long-term role. If you are not meeting half way, your bookkeeper can jeopardise your business. Here are five ways you can build a great relationship with your bookkeeper:

Communicate what you need with your bookkeeper

Whether you just need someone to help you with compliance or a person more familiar with your industry, it is important that your bookkeeper knows what you expect from them. If you want growth opportunities and potential partnerships, it should start with knowing what you need. Be clear with your bookkeeper so they have an idea how you are going to work together.

Create a business plan

You cannot expect your bookkeeper to know what goes on inside your head. You need to create a business plan as this will serve as your bookkeeper’s guide. A business plan also serves as an exercise that will help you anticipate problems and get the right solution. When you make it a habit to regularly discuss your business plan with your bookkeeper, you will keep yourself accountable and focused on your company’s key drivers.

Share your vision with your bookkeeper

If you are planning to expand your business or make a big purchase, do not let your bookkeeper be the last to know. Your bookkeeper should be involved when you are making decisions because they can recommend some great practices that can help you maximise your profit and take your business in the right direction. Your bookkeeper can also provide you some money-saving practices that can help you avoid tax penalties.

Collaborate with your bookkeeper in real time

How can your bookkeeper help you if they do not know your numbers? Real-time collaboration must be kept in mind because your bookkeeper also needs to know how your business is doing. Data-sharing and online collaboration tools are important for this process. These tools enable your bookkeeper to analyse data and provide helpful recommendations when needed.

Organise receipts and invoices

Organising your files enable a bookkeeper to know what is going on with your business. Your bookkeeper will be able to work efficiently if the paperwork they need is available. They will also have an idea how they are going to take care of your daily transactions and may remind you of your payment schedule to avoid penalties.

Tax Mistakes That Can Put Your Business In Peril

If you are afraid of incurring additional expenses, you will surely allow bookkeeping to take a backseat and carry every responsibility for your business just to save money. However, skimping on bookkeeping, would mean that your business is not immune to mistakes and it can certainly affect your business during tax time. There are many mistakes that small business owners often commit but these three are the most common.

Late payments

Some business owners make a payment when they file their tax returns but this is a common mistake many businesses commit. Owners are supposed to make quarterly estimated tax payments and should be mindful of the due date. When payments are not made in a timely manner, you can trigger an audit from the ATO and this will result in paying tax penalties and interest charges once you file your tax return.

Misclassifying employees

Determining whether an individual should be considered a contractor or an employee is not as complicated as some small business owners may think. You will need to take a few points into consideration because misidentifying a person can lead to interest for non-payment and penalties in terms of employment taxes.

Poor Record keeping

Although you might be tempted to make a mental note of every transaction for the belief that you can retrieve information instantaneously, this habit can do more harm than good. There are instances when businesses mix personal with business expenses and this can really spell trouble. When you rely on bookkeeping in a shoebox, it can have a serious effect on your business as there is no way to find out whether the numbers on your report are accurate. The numbers can either be lower or higher than the expenses you have incurred.

These mistakes can still be corrected by ensuring that you keep tabs on entertaining and travel expenses. So long as business was discussed, you can deduct the cost but you need to write notes on the receipt and indicate the people you were meeting with and the business that was discussed. When it comes to filing, you can also ask for an extension if you need more time. However, extra time to file will also mean extra time to pay. You need to set your expectations because you will surely owe money and you need to estimate the money you owe for the extension. It is quite challenging to keep track of your business but you cannot afford to make these mistakes as they can impact your taxes.

Is It Really Necessary To Hire A Bookkeeper?

For small business owners, hiring a bookkeeper is already considered an unnecessary expense because of believing that a bookkeeping task can be done without the help of a professional. A bookkeeper is known for taking care of necessary paperwork. Although not hiring a bookkeeper can save you money, not doing the task right can result in an expensive mistake. Financial report needs to be done accurately because it is where business owners check the performance of a business.

Reasons a bookkeeper is essential to a small business

You have difficulties growing your business: Growing your business is definitely one of the goals you wish to accomplish. A bookkeeper is responsible for recommending the steps that a business owner needs to take so business growth can be achieved. If a business owner does not have a bookkeeper and decides to grow the business, he may eventually suffer due to financial problems that he will face. A bookkeeper advises which direction a business owner should take. The financial report that they prepare will serve as an accountant’s reference for giving advice or recommendations.

You have no access to essential information relevant to your business: A bookkeeper provides valuable information to a business owner that will help them gain a deeper understanding of tax code. Due to the fact that the tax code is changing, a business owner needs an update of the changes.

You will have trouble tracking your personal expenses: Running a business can be a daunting task let alone monitoring your business expenses. When you are juggling multiple jobs at the same time, it seems difficult for you to determine where you are spending your money. A bookkeeper will advise you to have a separate business and personal accounts. This way, you will prevent mixing the two as it can trigger untimely audit from the ATO. When it comes to ATO audits, the burden of proof will definitely be on you because you need to prove that the expenses in question are business-related.

You waste your time and money: A bookkeeper puts things in proper perspective by helping you focus on more valuable aspects of your business while they keep your business on its feet. Time is money for business owners and this is why carrying out tasks efficiently is important. A bookkeeper that reminds you of your payment deadlines can help you avoid penalties and fines.

If you are still vacillating between hiring a bookkeeper and setting the idea aside, keep in mind that your business can be in chaos because you do not have a bookkeeper professional to prepare your financial reports or remind you of tax time.

Business Practices Your Bookkeeper Cannot Afford To Screw Up

When dealing with numbers, accuracy is very important especially if you are a bookkeeper. Financial reports are the lifeblood of every company. It is where business owners refer their decisions on growing their business. Before you can create a flawless business plan, getting your bookkeeping practices in place must be kept in mind. Committing too many errors on your financial report spells trouble.

Don’t pocket cash from clients

When it comes to securing a loan or seeking for investors, the profit margin plays a huge role. For small business owners, it can be tempting to pocket cash from clients considering the fact that it is your money. However, this practice can wreak havoc on your business in the long run because it undervalues your company. If the money you earn from clients is not on record, your financial report will appear to have a low profit margin and this will not qualify you for additional funds. It can also hurt your tax because when the cash is not reported, you will not be paying taxes on it and this practice is more likely to attract penalties once audit occurs. Make sure you deposit your business income into your business bank account if you want to increase your profit.

Don’t use personal bank accounts

Collecting your income in your personal bank account is not a good practice to follow because it denies you of getting a clear financial picture. How would you know if your business is making a profit if you have already mixed your business and personal bank accounts? You may not know your financial history if you have already fused two accounts into one. Knowing your financial history is a crucial step especially when ATO decides to audit your company. You can be held liable of paying additional taxes if you keep on following the practice.

Don’t ignore bank reconciliation

Make it a habit to check if your bank account is reconciled on a monthly basis. Bank reconciliation ensures that your bank account matches the amount listed in your bookkeeping software. Failing to reconcile regularly can end up overdrawing your bank account, which will result in shouldering bank fees.

Don’t underestimate the value of bookkeeping software

When tracking your financials, it is good to have bookkeeping software that will ease you into recording figures efficiently. Make sure you choose software that can give you real-time information and updates of your financial activities. Bookkeeping and accounting should be part of your routine. Avoid skimping on this valuable task because it allows you to monitor where your money is going. Tracking your expenses and income will give you peace of mind as you know you are not wasting money.

What Exactly Is A Cash Flow?

Although the cash flow definition is pretty straight forward as it is simply the money that flows in and out of your company, it is still considered as the most important aspect that every business owner needs to pay serious attention to. It can be compared to a checking account ledger where deposits and withdrawals of cash flows are reflected.

However, many businesses fail to keep track of their cash flow that it is already too late to discover they have negative cash flow during the first year of their business operation. Negative cash flow refers to the decline in the cash balance over a particular period of time. Although it differs from negative cash balance or bouncing checks, negative cash flow also has a deleterious effect on your business.

Although negative cash flow can happen from time to time, it is still essential to monitor it because when the time comes a business owner wants to grow the business, get loans and attract investors, there is an assurance that the business has a healthy cash flow.

Cash Flow Statement

A cash flow statement provides you details of the changes in the cash balance. This statement is used for recording cash flow projection, which is helpful in forecasting the future of your business’ financial aspect. When managing and growing your business, it is important to have an up-to-date cash flow plan. Even if you have a bookkeeper to take care of your cash flow, it is still important to understand cash flow so you will know the difference between cash on hand and the money you are owed. One of the reasons for bankruptcy is the delay in paying receivables. Delayed payments only mean that a company has trouble handling operating expenses.

Your business can increase the possibility of success with good cash flow management. Hiring new employees, making inventory purchases and spending money on office improvements are just a few of the benefits of a positive cash flow. A company will have trouble acquiring new leads due to managing cash flow poorly. This is why business owners must see to it that cash flow is monitored on a regular basis.

If there are future problems with cash, forecasting cash flow will help a business owner identify them. Both bookkeepers and business owners will have an ample time to make plans in advance so problems do not create an impact on day-to-day activities. Even when cash is tight, having a solid understanding of the best time make pay outs will make a difference.

What Is The Purpose Of Financial Report?

Financial reports are essential to every business because it helps you track and review the amount of money that your business spends and makes. It is also used to provide information to the shareowners and lenders of your business. Investors and lenders have the right to obtain information if their money is returning a profit or spent wisely.

A business owner must also take note of the elements that need to be present in a financial report. The report shows the profit and loss, but it should also indicate the profit your business is making and the loss it is suffering from. The assets must also be shown on the report so you will determine how your business is doing. Financial reports are not easy to interpret but there are businesses that may assume that the readers are knowledgeable about business and finance.

Although it is required for business owners to understand basic measurement methods and accounting terminology, it is important for readers to fairly interpret the reports to find out about the company’s financial standing. The financial report must also be kept legal by ensuring that it is governed by common and statutory law. The reports should be done based on ethical standards.

What companies should lodge financial reports?

•    the company with great sums of money involved;
•    the company that exists for charitable purposes and not for making a profit;
•    the general public that has invested funds with the company.

The following entities are also required to prepare financial reports according to Section 292 of Corporations Act 2001:

•    public companies
•    all disclosing entities
•    all registered schemes
•    all large proprietary companies
•    small proprietary companies that are foreign-controlled
•    small proprietary companies or small companies limited by guarantee
•    small companies limited by guarantee subject to a shareholder direction under s294a of the Corporations Act
•    small proprietary companies subject to a shareholder direction under s293 of the Corporations Act

How to lodge a financial report?

A copy of Form 388 of financial statements and reports must be secured, completed and lodged with the required documents. If a company holds an Australian Financial Service Licence, a business owner must also lodge a profit and loss statement, balance sheet and auditor’s report using a Form FS70.

The financial report must be lodged in accordance to Corporations Act. All other companies must see to it that the financial reports are lodged within four months after the end of the financial year. The company that has not made a profit or traded during the financial year will still be required to lodge their financial reports.

Good Bookkeeping Habits For Small Business

For small business owners, bookkeeping can be your least favourite task unless you are a fan of working with numbers. However, there are some good habits you can adopt so costly errors are prevented especially when it comes to record keeping. Once you are busy dealing with the financial details of your business, it is easy to overlook one of the most important aspects of your business. Although you might get tempted to tweak your budget, the problem may worsen once you lose track of your financial activity. It is important that you have a bookkeeping system in place so you can handle your money properly and prepare your records in time for audit.

Track your expenses

When you fail to track your expenses, you may encounter problems with missing tax write-offs in the end. When it comes to business credit cards, make sure they are tracked and kept together. Your payments must be kept up to date and the bill must be categorized into types of expenses. One way you can prepare for audits is to mark your calendars to keep track of important dates. This way, you will be able to substantiate expenses for your tax records. As a result, you will no longer have to worry about being audited.

Monitor deposits

Monitoring business bank account deposits can also help you determine if you are ready to pay taxes or grow your business. Having a separate bank account for your business will help prevent using your money for personal expenses.

Don’t ignore invoices

Another bad habit that can hurt your cash flow is allowing your bills to be left unpaid. A bookkeeper can track your billing and put a process in place so you can ensure that bills are paid in a timely manner. When there are unpaid bills, a bookkeeper can simply make a phone call and levy penalties. If clients are late in making payments, make a plan so you will know what to do.

Plan major business expenses

Analyse your budget before venturing into a big project and be honest about your financial standing. If you are always in denial about the expenses that your business incurs, you will not be aware that your spending habits are already hurting your cash flow. You also have to acknowledge that your business may experience seasonal ups and downs. When it comes to major upgrades, it is important that you forecast them so you will avoid taking money when it is not yet necessary. You may have enough money in good months, but you must also keep in mind that you should have enough cash in slow months.

Common Bookkeeping Problems And Their Solutions

Bookkeeping is often avoided because of the responsibilities that it entails, but in the long run, business owners consider bookkeeping a necessity. Everyday, business owners are plagued with too many worries, most of which is due to the issues with their finances left unchecked. When you intend to expand your business, its financial aspect is the first thing you need to check. Is it effectively managed? Do you have enough cash to grow your business? These questions are going to be relevant because they will provide you an insight on the direction you are going to take.

5 common bookkeeping mistakes and ways to deal with them:

1.Not reporting sales tax. It is a common effort in bookkeeping to neglect sales tax, but this oversight can create a serious problem in the long run because it is a common reason for penalties and fines. If you have incorrect data entry, your business can suffer from a higher total sales amount. Make sure you have accurate sales tax. Discuss these important details with your bookkeeper if you see any discrepancies in the financial statement.

2. Poor communication. Another reason your business suffers is when you and your bookkeeper do not have strong communications. It is necessary that you keep your bookkeeper integrated and involved with your business activities. This way, your bookkeeper will be able to create financial statements that reflect your business’ true operational needs. Discuss the means of communication which both of you can be comfortable with.

3. Inaccurately tracking expenses and income. A bookkeeper should have the knowledge of formal bookkeeping practices. If the person you hired knows nothing about these tasks, you will have difficulty identifying the category that your income and expenses fall under. When you have accurate records on a monthly basis, you are not only encouraging proper filing system but also ensure consistent and clean records.

4. Poor record keeping. Receipts and other important documents must be kept because they are going to play an important role to your business. When accurate records are maintained, there is an assurance that you are saving time and money on your income taxes. You will have proper documentation if your business will be audited by ATO. You will also have accurate records to present and prevent a possibility of tax penalty. The records must be checked on a regular basis to ensure that there are no irregularities. A bookkeeper should consistently provide a report that a business owner can check and interpret.

5. Mishandling petty cash. One of the reasons business owners have problems with keeping track of expenses is due to bad petty cash management. You can prevent losing track of your petty cash if you set up a system, which will allow you to track the cash. You can also buy a petty cash lock box, which you can use for keeping receipts.