You may have a great idea and a marketing plan to launch your business, but keeping it going is a different ball game.
Performing Health Checks
To stay in business, you need to be on top of your bookkeeping so you can monitor the financials regularly and not fall behind on your taxes. Bookkeeping is simply the process of recording financial transactions into your books.
Given its importance, it is worth investing the time to consider the following when setting up your books:
1. Business Bank Accounts
Bookkeeping is easier if you keep business transactions separate through a business bank account. Your books should show the amounts you receive and pay, as well as why they have occurred.
2. Cash or Accrual
You need to choose a method to record transactions into your books. With the accrual method, you add events like sales and purchases to your books immediately, even if money hasn’t changed hands. However, under cash accounting, you capture them when you receive or pay the cash.
3. Receipts and Payments
The ATO prescribes the details you need to note down when sales and purchases take place. If you use accounting software like QuickBooks Online for bookkeeping, you will be asked to enter the required information automatically.
Keeping track of expenses is often referred to as accounts payable. You should add an invoice to your books as soon as you receive it, and update it for any payments.
Inventory is the goods you intend to sell. For bookkeeping, you are primarily concerned with tracking purchases and sales as well as stock value.
These are business costs that can offset income to reduce the final tax on your profits. Not all costs are tax deductible. You can claim most deductible costs in the year you incur them, but some are claimed over a longer period.
Payroll involves paying employees, keeping track of details for each person, filling tax forms and keeping up with payroll tax changes. A frequent source of headaches, business owners often manage this process through payroll software.
Bookkeeping is vital to every startup. If you develop a system that works for you, you can make better business decisions and stay in charge of both your financial and tax affairs.