Bookkeeping Basics

Starting you own business can be exciting and at the same time daunting, especially when it comes to numbers.

But being able to understand your own bookkeeping can be a major plus ++ cause it gives you financial insight into your OWN business.

Without bookkeeping, it would be like driving without navigation and you never know where you are or where you need to go. Unless you have a great sense of direction, of course.

We’ll walk you through the basics of what bookkeeping is, why it is important, and the key steps to getting your own bookkeeping process started.

“Bookeeping is the activity or occupation of keeping financial affairs of the business”

— Siri

Why Bookkeeping Matters

1. It ensures that you don’t miss out on deductions

   If your bookkeeping is done well, then every transaction will be categorized for your Accountant and when it comes to tax time, your accountant will have all the information and supporting documents to properly prepare your tax return. There will be more deductions you’ll be able to claim and your tax return will be more accurate (possibly a larger return!)

2. You can check for errors quickly

   Don’t wait until the end of the year to reconcile your bank transactions. It can be more difficult to reconcile transactions later. By tax time, you would have forgotten what that transaction was for. There could be all those recurring transactions like subscriptions and direct debits payments that you thought you had cancelled, or even duplicate payments!

3. Want to get a loan or apply for a government grant?

   If your books are done well, it can help you get bank loans to expand your business and grow your business. Financiers look at your books to assess if you are able to pay off your loan and may even request for updated financial information from time to time.

   Government agencies provide various grants to businesses and for you to apply for such grants, you need to be able to provide the relevant financial information that may need to be provided.

4. Know where you are heading

   Do you know exactly how your business performed in the last week, month or even in the year? Have you compared your business to industry benchmarks (industry benchmarks available from ATO)? Not sure if you you are employing too many people? Is your business sustainable?

   All these questions can be answered if your books are in order. It can provide you with valuable information to make strategic decisions for your business, like looking for new suppliers, training existing staff or hiring new ones, and find areas of your business that can be more cost efficient.

Bookkeeping Basics

1. Separate your business and personal expenses

   Have a separate bank account for your business and NEVER NEVER mix your personal and business transactions under one account.

2. Choose the accounting software

   There are great software out there that can help you with your accounts, like XERO, Quickbooks, MYOB, etc. Learn to use the software if you can and this will go a long way.

3. Connect your bank feed

   Now that you have a separate business bank account and the accounting software, connect them via a live bank feed. If you are unsure how to, check out the resource guide on how to connect your bank feed to your accounting software.

4. Store your documents (invoices, receipts, etc) digitally

   If you can digitally upload your receipts and invoices to your accounting software, this can save you heaps of time in manual input. If you use the right apps like, Expensify, Dext (Receiptbank), or even the some of the add-on software in Quickbooks or XERO can capture the details of your invoice or receipt via OCR.

5. Reconcile your transactions to your supporting documents

   Now that you have automated bank feed coming into your accounting software and you have the supporting documents on the other hand, your reconciliation process can become so much easier. If you get this right, doing your monthly bookkeeping will take a matter of minutes and not hours.

6. Most importantly, make it a habit

   And most importantly, make it a habit of reconciling regularly. A system is only as good, if you maintain it.

   Give it TLC always.