Bookkeeping is one of the main accounting services. It ensures your taxes are done properly and your finances are in order in the event you’re audited.
But maintaining your books isn’t something you should do solely as a tax savings strategy. If done right, it can also prevent you from losing your sanity and help you manage your company’s finances. Bookkeeping can be a great way for small business owners to maximise how far their money goes.
Sure, bookkeeping can help you stay out of tax trouble and ensure you have an idea of where your funds are going. This is selling bookkeeping short, though. It can do so much more.
If you’re still unsure about the necessity of a dedicated bookkeeper, here are several significant reasons for maintaining a separate chequebook and set of books for each of your businesses.
Maintaining a separate chequebook substantiates the corporate veil, which is one of the primary reasons for incorporation. Having a separate chequebook shows that you recognise the company as its own distinct entity. Furthermore, separate chequebooks and bank accounts will encourage you not to commingle personal and business funds. (That’s bad, in case you were wondering. Not only can it lead to a financial mess, it could also make your personal assets vulnerable in the case of legal issues.)
Separate banking will improve bookkeeping procedures, prevent payments from being missed and provide better records to improve your tax return. We all know that “bad books” will cost us on our tax return, so why not stop that cost from being incurred in the first place? Not to mention that good bookkeeping makes tax preparation much easier.
In the event of an ATO audit, having a separate chequebook and financial reports will improve your chances of surviving the audit without major repercussions. The ATO will often disallow a number of expenses when personal and business expenses are commingled in a single chequebook. (See, we told you it was bad.)
When your books are disorganised, you’ll feel constant stress to take care of it, and this can ultimately cause you to come undone. Running a business is stressful enough. Complicating your finances unnecessarily will only make it harder.
Having a separate transaction account and hiring a bookkeeper for a new company could save you time and money in the long run. Plus, consider the price and value of having a clear head. Those who rely on your decision-making skills will thank you. Not only this, it will make the lives of your accountants easier as well, as a great bookkeeper can supplement the job of your accountants.
As alluded to above, having a separate chequebook starts the process of better bookkeeping, expense tracking and budgeting, which leads to quality decision-making. How can you expect to be a successful business owner without accurate records? Furthermore, how can you project future success without being able to see your business clearly today? When you have a clear idea of where you are, you have a clear idea of where you can go.
Business analysis is the practice of inspecting the various pieces of your business to see how it’s performing overall. Proper bookkeeping can result in a more accurate analysis, which translates into an easier time assessing your business needs. If your finances are a disorganised mess, it’s hard to tell where your company needs to improve.
Investors can be pretty stingy and for good reason: investing in any business is a risk. If you’re looking to attract investors, clear and concise bookkeeping makes your company’s current and projected financial standing easier to show. Few investors will be willing to invest in a company that has messy finances.
Bookkeeping goes well beyond filing your bank statements and monthly financial statements in the right folder. With a solid bookkeeping team, you have a better idea of which invoices have yet to be paid, if any suppliers or customers owe you money and so on. As a result, you can look at your own processes and find areas where you can improve.
As an added bonus, your overall cash flow will improve simply because you’re more aware of where money needs to go and are spending less time sifting through your messy finances.
The perks of bookkeeping go well beyond those listed above. In short, bookkeeping plants the foundation for near and end-of-year financial success. You wouldn’t launch a business without a business plan, and you shouldn’t run a business without bookkeeping services.
Now that you know why bookkeeping is so important, the next step is implementing a system for tracking income and expenses. It almost goes without saying that we recommend small business bookkeeping software like QuickBooks, but even with that, managing the accounting is the other half of the battle. Here are some ideas on getting the help you need to set up your bookkeeping system.
We know this strikes fear in some of your hearts. In fact, this may be why your books currently aren’t getting done. Nonetheless, you still may want to hold off on delegating any part of the process until you—yes, you—put in a few hours a week to learn the basics, like data entry. If you realise you’re totally in over your head, at least you’ll have a better understanding of what goes into your bookkeeping process and how the financial planning process works.
If you don’t have the funds for an entire accounting department, hiring one or two family members can be a great alternative. This is also a great way to have the teenagers or young adults you’re financially supporting earn their keep, while teaching them entrepreneurship in the process. Even more importantly, however, they’ll learn about the heart and soul of small business by doing the books. Adding them to the payroll can also be a great tax write-off.
The downside of this route is that it’s possible none of your family members are a great fit for the role. Bookkeeping is a serious job with serious skills required, and if you don’t have a family member that’s passionate about the business and comfortable with numbers, you’re better off looking elsewhere.
A local bookkeeper could be a college student wanting internship hours or a seasoned bookkeeper with affordable rates. You could even look at hiring a freelancer that specialises in bookkeeping. Just make sure you ask them about prior bookkeeping experience. Whichever route you take, putting a bookkeeper on your books can free up your time so you can do what you do best: make money for the business.
You’d be amazed how quickly you can find a local college student or bookkeeper wanting to pick up some part or full-time work for an hourly wage. This person could come in daily or a few days each week to input data and print reports. Even a few hours each week with a dedicated bookkeeper can do wonders for your finances. You might need to provide some supervision, or you could have your outside CPA train and supervise your in-house bookkeeper. Just remember: a part-time bookkeeper is better than no bookkeeper.
A virtual bookkeeper, or remote bookkeeper, is a great way to get professional help with your books without needing to leave your office. You can contact companies offering virtual bookkeeping services online and discuss your needs with them. When you’re ready to have them review your books, you can speak with them over the phone or video chat, and they can log into your accounting software to make sure that everything is accurate. These online bookkeeping services can be particularly great if you live in an area with few professional bookkeepers nearby.
Many business owners like the comfort and security of knowing they not only have highly skilled accountants doing their books daily, but also have the benefit of one-stop shopping for tax filing and quarterly and annual reports as well.
It may seem more expensive, but the value of better long-term planning and a higher quality of books can far exceed the cost of a reliable accounting professional. Your CPA or tax professional will already be familiar with your income statements and payroll services, as well as other business expenses, meaning they can make especially great bookkeepers.
When looking for professional bookkeepers, there’s a lot to consider. After all, this is someone that will be largely responsible for the financial well-being of your business. To ensure you hire a good bookkeeper, consider the following when reviewing candidates.
You don’t necessarily need a highly experienced bookkeeper, but you also don’t want someone that’s never tackled it before. (Unless you’re willing to have your CPA work closely with them, as in the case of hiring a family member.) Ideally, you’ll find a bookkeeper with experience in your industry, as they’ll be more familiar with the terms used, the types of expenses and so on.
A full charge bookkeeper will own the entire bookkeeping process, from banking needs to filing to handling accounts receivable and accounts payable. These types of bookkeepers can be more expensive than regular bookkeepers, but they can also reduce the amount of oversight you have to provide.
If your company is already using any accounting software, try to find a bookkeeper that has experience with the same software. While they can learn whatever bookkeeping system you use, that previous experience with the software can make their early weeks run much smoother.
Keep in mind this is a person who will handle your finances on a regular basis. You want to be able to trust this person, as they will ultimately impact your ability to make business decisions, your susceptibility to an audit and beyond. If possible, find someone that’s been personally recommended to you, or ask to speak to the candidate’s previous employers.
Bookkeeping isn’t all sunshine and numbers. There will be times when problems need to be solved and quick thinking is required. Your ideal bookkeeper should be someone that’s great at solving problems and comfortable making decisions when necessary.
Bookkeepers are the unsung heroes of the financial world. They make your money go round, keep your finances from becoming an unmitigated disaster, and ultimately help you manage your business with a clear head. The bottom line is that you need a bookkeeper if you want to run your business properly and see it grow.
Take the advice from this article and think about what your business needs. Do you need a full-time bookkeeper? A contractor that helps out a few times a week? Or do you have someone in-house who you can transform into a bookkeeping guru? Ultimately it’s your business and your decision, but rest assured that a great bookkeeper will only serve to elevate your business operations.
TAKE A NO-COMMITMENT TEST DRIVE
Our customers save an average of 9 hours per week with QuickBooks invoicing*
By entering your email, you are agree to our Terms and acknowledge our Privacy Statement.
Intuit helps put more money in consumers’ and small businesses’ pockets, saving them time by eliminating work, and ensuring they have confidence in every financial decision they make.
3x WeMoney Award Winner
