The Importance Of Keeping Receipts

A receipt is just a small piece of paper where your purchases or transactions are reflected. Most of the time, these receipts find themselves inside the trash can because business owners prefer to take a mental note of the
transactions instead of diligently filing these receipts. While one purchase is easy to remember, you can get sidetracked by other obligations. That single purchase can easily slip your mind when you have many things to take care of.

As they say, you will never know what you got until it is gone. The same is true with keeping receipts. They may not seem to be valuable, but they are part and parcel of record-keeping. They play a part in monitoring your expenses. If you take the time to capture receipts paid with cash, it will be easy for you to know how much you are spending on a daily basis.

Capturing your business expenses is a daunting task unless you make it a habit to reconcile your bank account. One mistake that business owners make is mixing personal expenses with business expenses. This is a bad practice because it makes the monitoring process more difficult than you know. As your expenses increase, the process of assessing your spending habits becomes a challenge.

Keep in mind that the purchase includes GST and ignoring it can spell trouble for you. Miscalculating your expenses can also hurt your taxes in more ways than one. While the damage is reparable, you will need to pay for penalties and late fees. The payment for these fees are often taken from your cash flow. When your cash is spent unnecessarily, opportunities become limited.

Two ways to capture business expenses:

1. If you have paid your transactions by cash, be sure to collect receipts or even capture information. Using a smart phone app, you can take a photo of your receipts. This way, you will have an instant copy of every transaction you make. This is a smart habit for those who tend to forget keeping a record of receipts during lunch meetings and business travels. There are many apps you can download, which will enable you to snap a photo of receipts and send them in just a few taps.

2. Use your business account for paying business expenses. If you have made a purchase of your office supplies, never attempt to use your personal account for paying them. Pay for your purchases by transferring private funds into your business account. It is easy to monitor your expenses when you have your own business account.

Why Should Bookkeepers Adopt Cloud Technology?

In this day and age, cloud-based services are undoubtedly sitting on a throne, due to their positive effects on day-to-day tasks. In the past, businesses dread cloud technology because of the cost that it entailed. However, there are cost-effective ways to embrace cloud at reduced cost and this is when many businesses decide to make the switch. Perhaps, you are one of those who is still hesitant to move towards the cloud because for one, you fear the lack of control and cost unpredictability.

Since there are many service providers to choose from, you are not limited to expensive options. In fact, you can choose a cloud-based service that offers flexibility without the price tag. How is cloud technology going to help you with your bookkeeping task? Contrary to popular belief, cloud-based services do not necessarily replace human capabilities because they are designed to increase productivity so more tasks are carried out. Here are some additional benefits you can obtain from cloud:

Accessibility

Monitoring every business transaction is essential to keep your finances intact. However, real-time monitoring will not be possible if you are chained to your desk. With cloud accounting and bookkeeping solutions, being tied to your desktop computer is a problem of the past. Cloud-based bookkeeping gives you the ability to gain complete access to data anytime, anywhere and with any device. All you have to do is to use your smartphone to access the data.

Secure Sharing

Traditional bookkeeping can give you a headache especially when you need to share some information with your accountant, banker and business coach. Cloud technology provides you easier and more secure way of sharing the information without emailing reports or data. As a result, you save more time and ensure that people you want to share your financial report with obtain the information.

Work Online and Offline

Hybrid cloud services offer the best of both worlds. If you are connected to the Internet, you will be able to reap the benefits of online bookkeeping such as sharing with bookkeepers and accountants, centralised data and manage backups. When you sync your data, you will still be able to work offline and maintain productivity.

With the convenience that cloud service offers, business owners should not hesitate to tap into this technology. Aside from keeping your records safe, you will also enjoy full access to your files or data anywhere you go. Your business will also exponentially increase availability with the use of cloud-based software. Aside from saving time and effort, you will also enjoy accurate function that makes record-keeping a breeze.

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.

Bad Bookkeeping Can Definitely Wreak Havoc On Your Business

Bookkeeping is critical to your business and when your financial records are not handled properly, expect your business to take a turn for the worse. Perhaps you have already heard of business owners clamoring about their financial records because of paying less attention to this essential business aspect. A bookkeeper should not be the only person fully responsible for understanding your finances because as a business owner, you should also be involved.

Even in searching for a reliable bookkeeper, choosing someone who is experienced in the field is a must. You just cannot put your trust in an inexperienced bookkeeper and allow your business to fail. This is going to be unacceptable because you know for a fact that you could have been in control of the situation if only you had been keen on hiring a bookkeeper.

Professional bookkeepers are already acquainted with a wide range of tasks that their job entails. These are the people who are a valuable part of your business. Unfortunately, small businesses deem bookkeeper as an additional expense and to save money, business owners would rather rely on DIY bookkeeping. This cost-cutting practice can do more harm than good and instead of saving money, businesses can lose a great investment because the damage cannot be undone if bad bookkeeping practices are discovered a little too late.

You may appoint a relative to take care of your bookkeeping task hoping that you will get the same result as getting a professional bookkeeper, but when you review the financial record, you know that something is not right. There is no undo button once mistakes are committed and the sad part of bad bookkeeping is that you are often the last to know about your finances.

When a set of books are incorrectly completed, this is going to result in bookkeeping catastrophe. If you used to take cashflow for granted, later on, you will realise how important it is in managing your business. Aside from lack of adequate bookkeeping systems, business owners are also faced with problems with financial record-keeping. There are plenty of problems associated with bad bookkeeping such as missing out on identifying the money you owe to the suppliers and the bills that remain unpaid. When bookkeeping is not properly done, businesses can collapse. Aside from the inability to keep track of your finances, you will also have trouble checking your cash flow. You will never know whether or not you have enough cash.

The reason every business owner needs to hire an experienced bookkeeper is to make sure that the performance of your business is closely monitored. It is easy to overlook the most essential detail when your bookkeeper does not have substantial experience. Inexperienced bookkeepers will also have trouble understanding financial management’s importance in a small business and the critical role of accuracy when it comes to recording bookkeeping data. Not hiring a reliable bookkeeper is a costly mistake. Once the essential details are not recorded, it can bring devastating effects to your business that may be difficult to correct.

Record Keeping Essentials For Business Owners

As a business owner, it is important that you have the right record keeping system so your business can run efficiently. Aside from legal requirements, you should also meet the basic record keeping requirements. There is a plethora of benefits you can reap from complying with these requirements such as strengthening your relationship with staff and customers.

Based on specific laws, there are requirements that businesses secure before setting up a record keeping system. For instance, using an electronic record keeping system requires business owners to produce the record’s hard copy once the Australian Securities and Investments Commission (ASIC) and Australian Taxation Office (ATO) request it.

ASIC also has a roadmap-financial reporting which allows business owner to break down reporting requirements based on their business type. It is also recommended that business owners keep record for 5 years. However, there are records that should be kept for 7 years such as:

•    employee records

•    company’s financial records

•    all records of capital gains and fringe benefits.

As part of the basic legal requirements, the following must be kept:

•    bank accounts including deposit books, bank statements and cheque books.

•    financial accounting program or cash book used for recording cash payments and receipts.

•    employment records including benefits, remuneration, hours of work, overtime, leave superannuation benefits, termination of employment, type of employment, personal contact of employee, employment details and employee’s personal details.

•    sales records including receipt books, invoice books, cash register tapes, credit card documentation, credit notes for goods returned and goods used.

•    Work, health and safety (WHS) records such as chemical storage records, first aid incident register, workplace assessments, Material Safety Data Sheets (MSDS), risk register and management plan, workplace incidents and names of key WHS people.

End of financial year records are also very important and to meet legal requirements, a business owner needs to minimise tax bill or maximise tax return at the end of the financial year.

As a requirement, a business owner needs to keep the following records:

•    a list of debtors and creditors for the entire financial year

•    depreciation details such as depreciation schedule, tax invoices, purchase agreements, installation cost and the cost of transporting the items to your business

•    stock on hand details form the beginning and end of the financial year

•    expense records including receipts, cash register tapes, cheque butts, copies of statements, credit card documentation, payment details and log books

•    agreements such as loan agreement, rental agreements, lease agreements, franchise agreements, sale and lease back agreements, trading agreements with suppliers and legal documentation

•    basic accounting records such as accounts receivable, accounts payable and stock records

•    staff and wages details including employment contracts, tax deducted, sick pay, holiday pay, fringe benefits , superannuation

•    other documents such as contracts with telephone companies, deposits with utilities, business name registration certificate and capital gains records.

Keeping these records for 5 to 7 years is also one of the best practices to follow. Aside from the aforementioned records, certificates and licenses are also important. Make sure you also keep customer records, customer complaints, details of any disputes, employee resumes and job applications, insurance policies, quotes given and won and advertising campaigns and success details.