The ABCs of Bookkeeping

Why is fast and accurate bookkeeping so important? And what are the main bookkeeping tasks that your business should be getting right?

The financial importance of good bookkeeping

Bookkeeping is a fundamental part of your operating processes as a business. Without it, your accounting software has no financial data to work with, your decision making can’t use the most current numbers, and your accountant can’t see the current financial health of the business.

Inputting your financial transactions into some form of record keeping system is also an indication to the Australian Taxation Office (ATO) that you are keeping proper records, particularly if you are involved in the goods and services tax (GST) system. Bookkeeping is what provides you with an understanding of your finances – allowing you to track your cashflow, revenues and profits.   

How to maximise your bookkeeping

Bookkeeping is therefore a vital part of your financial management. It is also the key to having your business transactions recorded, available for reporting and accessible whenever you need them.

But how should the bookkeeping process work, for best practice? Let’s walk through some key bookkeeping steps to help you get the most from this essential process.

To keep on top of your bookkeeping:

• Scan relevant records – the initial part of the bookkeeping process is to scan and record all receipts, invoices and remittances. This gives you a digital copy of the paperwork that relates to your income and expenses – important for filing tax returns or if you are subject to an audit.
• Record all transactions immediately – getting your transaction recorded in your system straight away is vital. This includes recording both your income and expenses, as soon as they occur, and matching them with the scanned paperwork. This not only helps you stay organised but also means your financial data is always up-to-date and can provide real time reporting and numbers. This can be a huge help when running the business.
• Categorise transactions accurately – when recording transactions, make sure you are accurate and categorise each item correctly. Not only does this remove the potential for errors and miss-keying in your books, it also helps you track your spending and income more accurately, so your reports are a better reflection of your financial health.
• Reconcile your accounts regularly – reconciliation is the process of matching your transactions (both income and expenses) against your bank statement and other financial statements. It’s a key part of your bookkeeping and should be done regularly, to ensure that your balances are correct and that your records are totally up to date. Some accounting systems allow your bank statements to be imported directly into the accounting system. You should seek out a system which provides this facility and then ensure the reconciliations are done at least weekly and, preferably, daily.  
• Use a cloud-based accounting system – bookkeeping doesn’t involve actual paper books anymore. In the digital world, you can use cloud-based accounting software, like Xero, to record your transactions and access your financial data in the cloud from anywhere, at any time. This makes it easier to keep on top of your numbers when out of the office (and Xero even automates the reconciliation process too). A cloud based system also allows your accountant direct access to your financial records at any time. You no longer need to provide printouts or a thumb drive or a floppy disk just to provide information to your accountant for the preparation of a business activity statement (BAS) or income tax return.
• Outsource your bookkeeping to a professional – While you can do your own bookkeeping, there is a lot of benefit in delegating all the hard work to a professional. If you don't have the time or expertise to manage your bookkeeping yourself, outsourcing is a smart move. Our outsourced bookkeeping service will take on your bookkeeping tasks and look to streamline the whole process. We can introduce you to automated data-entry tools like Hubdoc, that make snapping receipts and scanning invoices a breeze.

Our preparation of the bookkeeping allows you to focus on winning and servicing your business’ customers. It also flows directly into our other services like outsourced payroll and preparation of your BAS.

Get in touch to discuss our outsourced bookkeeping solution for your business.