Can Business Fail Because Of Bad Bookkeeping?

Bookkeeping may appear to be a small contributing factor to the success or failure of your business, but since keeping books involves keeping your cash flow in check, knowing you have enough money on bank to sustain the growth of your business gives you greater peace of mind. There are business owners who remain complacent about their business because of the profit obtained. However, a profitable business does not guarantee a steady flow of cash. Profit and cash flow are separate entities. So how can bad bookkeeping hurt your business?

1. It creates credit problems.

Small businesses need to borrow money from creditors to keep the company alive. Once approved, you need to make sure that you have the ability to repay debts in a timely manner or as agreed. Only a savvy bookkeeper will enable you to pay your debts without shouldering late fees and interest rates. Credit problems can cause you to settle for less favorable payment terms and suffer the loss of credit. It will be difficult for you to regain the trust of your suppliers and vendors if this happens because you failed to keep an accurate record.

Keeping track of your cash flow is also your bookkeeper’s responsibility. You should know when your receivables will arrive and when your bills should be paid.

2. It leads to legal problems.

Improper deductions and late or unpaid taxes are reasons why small businesses are faced with legal problems. If your funds are not enough to pay creditors, there is also a great possibility that you will be sued especially if your bookkeeper is not familiar with tax policies. A good bookkeeper provides annual bookkeeping procedures so you can handle your payroll, sales and income taxes.

3. It causes you to lose sales and profits.

If you always miss payments or fail to pay your bills on time, it results in losing access to vendors and suppliers. It is easy to lose sales when you cannot provide the service or products your customers are asking for. If it takes time for your company to deliver goods, this alone can cause your clients and customers to find other businesses that can provide their needs. It will be difficult for customers to go back to you if they have already used a new company.

4. It decreases opportunities.

When you need to reduce debt or increase your marketing, accepting opportunities to grow your business has to take a backseat. This happens when you have less money because your bookkeeper has failed to provide accurate financial reports. If you do not ensure accurate bookkeeping, you will also lose the ability to run your business efficiently.

Bookkeeping Made Easy: The 5 Essential Tools You Need

Business owners, both large and small consider bookkeeping as a major task in keeping the business on its feet. When it comes to numbers, accuracy is important because one wrong entry can result in bookkeeping catastrophe. In terms of making bookkeeping easy, one thing that comes to mind is using some high-end tools. However, with today’s technology, there are many ways you can operate your business without dreading bookkeeping, thanks to these 5 simple but useful tools:

1. Google Drive/Dropbox

These days, many businesses are using cloud technology because it provides freedom and flexibility to workers. Business owners have the ability to access and edit files on any device with Dropbox or Google drive. They do not need to set an appointment with the bookkeeper because the information they need can be accessed using cloud technology. As compared to using desktop programs, cloud allows you to back up your data safely.

2. Smartphones/laptops/ tablets

Since the technology offers more flexibility to workers than ever before, it seems easy to get things done without necessarily being physically present. With your smartphones and other mobile devices, you can manage your bookkeeping files anytime, anywhere and of course, on any device. In the past, these devices were only meant for playing games, texting and calling friends or loved ones. At present, many people consider these devices as a clever way to keep track of everything including your bookkeeping files.

3. Bookkeeping websites

You can come across a wealth of information if you are going to visit bookkeeping websites. The ATO for instance, will provide you dates you can lodge payments and file tax returns.  The website provides tools such as a tax calculator so you will know the amount you are going to pay. Forms are also available on site.

4. Bookkeeping software

If you wish to monitor your financial activities or track your business data, Xero, Quickbooks Online and other bookkeeping programs are the way to go. The software will make it easy for you to run your business. You can also minimise the risk of fraud as you can easily spot irregularities before they become a business nightmare. Any changes made to a financial statement can be traced within the software’s transaction history.

5. Project management software

If you want to collaborate with your workers regardless of your location, project management software will help you get things done. These tools enable you to track the amount of work done and when they are done. For business owners on the go, the software can help you keep things organised.

Is Automation A Threat To Small Businesses?

The common misconception of small businesses is that they are not required to adapt to technology changes in order to survive. However, no one is spared from digital evolution. In fact, changes happen at the speed of light. Before you can adapt to the changes, the fast-paced technology will unveil another innovation for you to embrace. As enterprise or large businesses continue to search for innovative ways to remain competitive and relevant in the business, small businesses keep on struggling with handling the workload.

This is because they require additional people to get the job done. When automation enters the picture, it seems that small businesses continue to avoid it. They are plagued by the fact that they have to change the way things are done. These businesses are focusing on the perils of this new technology without realising that the good still outweighs the bad.

The first thing that will come to mind when talking about automation is artificial intelligence. Small businesses fear that robots will replace humans when it comes to carrying out tasks. The truth is, automation is a breath of fresh air for these businesses. There are more reasons to love automation than despise it.

1. It eliminates repetitive task.

How many times have you found yourself doing the same thing over and over again? A task which could have been completed in just a matter of days, may still be the same task you will be doing in the next couples of weeks. These tasks include sending invoice to customers, managing inventory and managing accounting and payroll. If these tasks are automated, more serious tasks can be delegated to employees.

2. It easily manages your team.

Automation makes it possible to manage virtual teams as you no longer have to require their physical presence when collaborating with them. More often than not, small businesses have employees from other countries, involve working remotely. When you manage teams from across the globe, automation will help you keep track of your the task’s progress. They can easily check their smartphones or any mobile device for updates on assigned task or upcoming meetings.

3. It ensures employee satisfaction and retention.

A small business will never grow without its employees. Automation ensures that your employees’ level of workplace satisfaction is increased. Since automation reduces human errors, it will be easier for business owners to identify employee productivity. There are also some automated tracking tools business owners can use to promote trust and transparency in the workplace. These tools will enable employees to tally the total hours they have worked.

Signs Your Bookkeeping System Is On The Right Track

Many business owners consider bookkeeping as a stressful task because aside from dealing with numbers, you will have to make sure that you keep financial reports in check. Although bookkeeping is a least favorite task, it does not excuse business owners from ignoring this one essential task. For small business owners, it is easy to get sidetracked by the goals you want accomplished that bookkeeping often takes a backseat. Although hiring someone to do the job will do the trick, you still need to make sure that the job is done properly. There are 4 signs your bookkeeper is doing a good job.

1. You get regular updates of your financial reports

One thing that can get your business into trouble is when you are clueless about how it is doing. You may have thought it was doing well based on your predictions, but your high hopes vanish into thin air the moment you check your financial reports. It is easy to assume that your company is taking the right direction, but if financial reports are not delivered in a timely manner, you will never see the big picture. A trustworthy bookkeeper has the ability to provide you updated balance sheet and income statement.

2. You have time to focus on running your business

A good bookkeeper can take care of invoicing, record-keeping and other tasks associated with bookkeeping. As a result, you will have more time on your hands to focus on other things you deem essential to the growth of your company. A reliable bookkeeper will keep you worry-free as you no longer have to enter data. They will take care of this task for you.

3. You do not fall behind your payment schedule

Unpaid bills and taxes can pile up and take a toll on your business. It happens when your bookkeeper does not provide you detailed financial statement and records that will remind you when your bills are due. Aside from reminding you to settle your payment, bookkeepers will also track clients who owe you.

4. You gain peace of mind

Knowing the financial health and performance of your business is important as this can give you an idea of the goals you need to set. Is it time to move forward or reassess your strategies? When your bookkeeper does a great job of taking care of your financial reports, you will be able to have plenty of time to focus on other important things. You will never have to worry about missing a payment or chasing clients who owe you. Your bookkeeper can also give you recommendations based on your financial report.

Is The Future Of Bookkeeping Still Bright?

In the age of paperless where digitisation is as precious as gold, has traditional bookkeeping lost its luster? When the thought of streamlining your bookkeeping processes by going digital, it is easy to cringe at the thought that you will no longer need traditional bookkeepers. These days, more and more businesses are moving towards the cloud because of the benefits they reap from it. Sure it has its own flaws, but the range of benefits still outweighs them.

However, not all companies are ready to embrace cloud technology. There is still a small fraction of businesses more comfortable in using bookkeeping systems the old fashion way. Some business owners are also reluctant to learn about the modern advances in technology that they prefer to outsource the job to someone.

Even if you have not used cloud-based software, this does not necessarily mean you should shy away from it. In fact, it can be a new opportunity for bookkeepers because it reduces errors and promotes accuracy. Even if going digital provides convenience to most business owners, bookkeepers are still required to ensure that essential business information is recorded correctly.

The Role of Bookkeepers in the Age of Paperless

Business owners may have the tendency to join the digital bandwagon without thinking about its implications. While cloud accounting software may sound promising, it does not mean you should completely eliminate bookkeepers from the process. Bookkeepers are not just meant to carry out simple data entry, but clients may view things from a different perspective. As a bookkeeper, it is important to know the client’s pain points to find out how both of you can benefit from cloud technology.

Bookkeepers need to demonstrate how cloud accounting software works. They should also explain to business owners how cost-effective it is to hire bookkeepers instead of doing the process themselves. Training is required to understand the system. There are bookkeeping intricacies that a business owner may need to learn.

How Can Bookkeepers Survive?

  • Learn new skills that will enable you to adapt the changes. Start building on your IT skills and find out how you can learn about networking, solutions and other strategies as they can also be beneficial to your growth.
  • Get familiar with cloud accounting software by watching online training, attending events and attending local training sessions. It is also going to be a huge help if you are going to use the technology yourself.  This way, you will be able to know how each feature works.

 

Why Entrepreneurs Need To Understand Their Finances?

Many business owners find themselves diving into a dark cesspool of financial loss due to poor financial management. This is why engaging Perth bookkeeping services is deemed essential even for small businesses. When your business takes a turn for the worse, it means you are not paying serious attention to some of the financial aspects of your business such as bookkeeping, raising capital, accounting and cash flow management. These things are so easy to overlook if your business is enjoying its profits.

However, when bills start piling up, you will realise that you do not have enough to survive financial hardships. Even if you are the kind of business owner who is comfortable handling daily operations, overlooking the financial aspect can be bad for your business. Some may think that financial management is an intimidating task that requires special skills, but it can be learned.

Most business owners think that generating impressive sales is the most important aspect of every business. Unfortunately, you can have all the sales in the world and still fail at financial management. Sales do not necessarily guarantee business stability. There are still other factors that must be taken into consideration so your business will not take the wrong direction. Poor financial management should be taken seriously because it can lead to bankruptcy.

Signs your business has poor financial management:

Your money is not enough to cover all expenses.

Cash flow is essential in every business because it covers essential costs such as rent, insurance, payroll, utilities, phone and others. For you to pay fixed costs, you need to plan ahead and this involves analysing outstanding bills and accounts receivables. This is where your skills in negotiating with vendors and customers come in. When money comes in a timely manner, you will be able to cover your bills effectively. Cash flow gaps are also inevitable and every business owner should learn to manage them.

Unpaid Taxes

Paying taxes is part and parcel of managing a business. However, if paying your taxes is the least of your priorities, you will have more serious problems to face in the end. Never take your taxes for granted because it is as equally important as other factors that affect your business’ financial stability. Some entrepreneurs consider tax time painful, but when you know how to estimate your tax payments, you will have nothing to worry about.

Not keeping expenses as low as possible

Businesses that are going well are usually contemplating expansion. While business growth is a good sign of progress, the failure to anticipate expenses for future projects can hurt your business. You may have enough to sustain your business, but overlooking future problems can deter you from making new investments. In order to keep your expenses as low as possible, you need to learn the art of cost management. When you keep your costs low, your business is more likely to be more profitable.

For every business to prosper, it is essential that a business owner is good at financial management and this is where Perth bookkeeping services come into play. You can’t let others do this task for you because the success of your company will greatly depend on how you manage your business. While there are people that are responsible for doing the accounting and bookkeeping, you are still responsible for understanding what is going on. You will be responsible for making vital financial decisions that can either make or break your business.

Tips For Avoiding ABN Cancellation

If you are operating a small business, one of your responsibilities as a business owner is to make sure that it generates profit. Once ATO deems your business to be more of a hobby than an enterprise, ABN or Australia Business Number will be cancelled. If your business has also violated the terms and conditions of setting up a business and you are no longer operating your business you are most likely to have your ABN cancelled as well.

There are ways to avoid ABN cancellation and as a business owner, you need to make sure that you have a viable plan and effective business management. Even if you are running a small business, you can still make sure that it is going to be in good hands if you consider hiring a bookkeeper.

A bookkeeper prepares the financial statement and report so business owners will have an idea where their business is going. A bookkeeper also gives business owners peace of mind knowing that their business has enough to survive. Although having enough is not a proof that your business is going to be profitable, you will have an idea of the aspects that you still need to improve.

A bookkeeper prevents ABN cancellation by ensuring that you have a steady cash flow. While watching over your cash flow is not deemed be-all-and-end-all of running a business, ensuring that your cash flow is not in danger can help you maintain its stability. With the help of your bookkeeper, your assets and actual liability are going to be separated so you will know the sum of money that goes to your business savings account. It is also easy to determine whether or not you are making a profit or a loss once your financial statements and reports are organized.

You may also have to take various financial factors into consideration

• Reconnect With Your Associates
When it comes to networking with people, you need to make sure that you have a continuous or ongoing process. Consider reconnecting with your business associates as you can get advice from them especially when it comes to creating viable action plan.

• Build New Connections
Aside from reconnection with your associates, you should not also forget to build new connections. Make sure you have two or three acquaintances that you can build a good working relationship with. You should give importance to community as it can serve as your strong system of support especially for tough times.

• Assess Your Goals
If it has been a year since you opened a small business, make some assessment if you have achieved all of the goals you set. If there are goals which you have not accomplished, determine the factors that deterred you from accomplishing those goals.

• Re-Evaluate Your Spending Habits
Unnecessary purchases can also affect your business. Assess your spending habits and if you find out that you made purchases on impulse, try implementing new measures so you can prevent unnecessary spending. You may also speak to your bookkeeper for recommendations. With these simple changes, your business can make a difference.

Two Essential Financial Statements Every Business Owner Should Understand

If there are two essential financial statements that you would often receive from a bookkeeper, these are going to be the Profit & Loss Report and Balance Sheet. Business owners rely on these statements because they show the financial status of the business. Your bookkeeper interpret the figures and explain the how’s and why’s of the figures, but as a business owner, you remain clueless.

It is important that you know how to interpret these figures because they can help you monitor your business performance and make a sound decision. Your financial planners, bookkeeper and financial advisors will also have an idea of the business approach to use.

Balance Sheet

In a balance sheet, you can find the assets, liabilities and equity. Your assets include the items you own and the liabilities are the payments that your business owes. The difference is called equity or net worth. If you are looking for a comprehensive report that will help you tell the key performance indicators of your business, a Balance Sheet is a good financial statement you can refer to. With the use of a Balance Sheet, you will know the return on equity, financial strength, control of working capital and return on capital.

It may take a while before you completely understand a Balance Sheet because of all the technical terms you can find in it. When tracking liquid items, bookkeepers and business owners refer to Current Assets and Current Liabilities. You should be watchful of these amounts because they can help you make the right decision and manage your cash-flow. With the use of bookkeeping software, preparing a Balance Sheet regularly is easy.

Profit &Loss Report

If you want a summary of your business expenses and income, a Profit & Loss Report can provide you the information you need. It gives you an indication of your business’ performance. The report shows the sales, cost of goods sold, gross profit, expenses, operating profit before tax, tax payable and net profit. With a skill developed over time, you will be able to interpret the figures found in a Profit & Loss Report. The gross profit is one of the key elements of the report and it is expressed as a percentage. The Gross Profit Margin is important because it enables you to track your business’ profitability and compare figures with your competitors.

If there is a decrease in the Gross Profit Margin, it could mean an increase in inventory costs, heavy discounting or turning over profits with low margins. The Net profit Margin is measured as a percentage. A Profit & Loss Report must be prepared every month especially if your business is using bookkeeping software. If you practice regular analysis of your business, you will be able to unlock key business drivers. As a result, you will be able to determine the correct pricing, target shrinkage and even control costs.

It may take time before you can master interpreting these financial statements but once you know the significance of these figures, you can easily determine where your business is going. You can also create an effective business planning that increases the chances for success.

Why Is Time Essential To Every Business?

If you want to keep track of the time you spent on a particular task, time tracking is the way to go. Not only does it provide you greater peace of mind when it comes to estimating how much time you are actually spending on a specific task, you will also have the ability to adjust the pace in case you think your progress slows down. Time tracking is not just about getting the job done as fast as you can, it is also about accomplishing your projects in a timely and efficient manner.  A time tracker is beneficial to both clients and employees because aside from its effective way of tracking the amount of time spent on various projects, time tracking applications are also downloadable regardless of the device you have.

Reasons time tracking is a must:

•    You get accurate information of the time you spent.

Have you ever experienced losing track of time as you were engrossed in accomplishing a task assigned to you? As a bookkeeper, there are instances when you need to get the job done quickly so you can accommodate other tasks at hand. While most bookkeepers are compelled with multi-tasking, quality usually takes a backseat. With time tracking, you will be able to know the amount of time you need to finish a specific task without sacrificing quality. When you are keeping track of time, you can also pay attention to other crucial tasks such as invoicing, outsourcing and quoting. When you have an accurate account of your time, you will also improve your overall efficiency.

•    You become more efficient as an employee.

How many times have you caught yourself getting side tracked by social networking sites while letting an important task wait? When you are not focused on your task, you find it easy to check out post updates without realising that you are already wasting your time. However, if you have a time-tracker, you can stay focused on your task and set aside less important matters such as unnecessary web browsing. You can greatly improve your efficiency this way. You can also check actual time instead of ideal time. When you keep on challenging yourself, you are more likely to complete the task efficiently.

•    It is easy to outsource task to somebody else.

If you can easily identify where your time is allocated, you can determine whether or not you need to outsource the task to others. If you used to have difficulties completing certain tasks because you are unsure of the time you allocate, a time tracker can help you resolve such difficulties. You can also evaluate the time spent and determine if you are working efficiently. You can also use time tracking as a guide for booking other people to get the job done.

•    It reveals hidden time.

When you make it a habit to track your time, authenticity and integrity are ensured for both employees and client. No time will go unnoticed and you prevent multiple revisions and intensive project management.

Why Poor Bookkeeping Can Wreak Havoc On Your Business

When it comes to business management, your business’ financial aspect requires attention and while bookkeeping and accounting fees are quite high these days, ensuring quality is going to be the best practice to follow to avoid experiencing poor bookkeeping. Just imagine operating your business without paying attention to your financial activities. You had high hopes that your cashflow is still intact but when you received a letter from the ATO reminding you of your delayed or non-payment of GST and PAYG, everything will surely sink in that you need to recheck your bookkeeping task.

You worst fear has finally come true as the ATO forwarded the letter to your bank informing them of your non-payment. It was too much to take and you are well-aware of what is going to happen next. You panic at the thought of your bank receiving the letter from the ATO. You are restlessly waiting for the bank manager to call and demand of a good explanation for your non-payment.

Being in the business requires you to keep watch of your cashflow from a bird’s eye view. For the most part, business owners rely on bookkeepers when it comes to ensuring that their financial activity is kept in check. However, your business is doomed to fail if you do not take an active participation in the process of checking your financial statement. As a result of non-payment of GST and PAYG obligations, the ATO is left with no choice but to garnish the company’s bank account.

The sad truth about mismanaging a business is the failure to pay attention to their operating expenses and wages bill. It seems too easy to request the ATO to defer payments, but if this already becomes a habit, it is definitely difficult to catch up. Once a business is in financial distress, making a payment of debts is a challenge. If paying debts is not definite, insolvency is not far from happening and bankruptcy is inevitable.

Even the hardest working people are not immune to financial stress and there are things beyond a business owner’s control. If you have a business partner and he is not doing his part in managing the business, it can also take its toll on your business.

This scenario can still be avoided so long as essential questions are truthfully answered:

• Can you still meet the contractor’s bill and payroll?

• Are you making timely GST and superannuation payments?

Timely management reports should be prepared by your bookkeeper so you will be able to keep watch of your business. Bookkeepers should meet the following obligations for a cost effective way of handling your business:

• Create a system so invoices go out promptly and reminder notices are sent effectively to avoid falling behind payment schedule.

• Prepare a system that has the ability to highlight late payers once due dates are triggered.

• Terms on invoice should also be set up so it will be easy for you to find out about your collection costs.

As a business owner, it is also your responsibility to call the bank manager before he calls you, give the ATO a call, arrange payment plan that you can follow, prepare budget and reduce head-count if it is considered necessary.