01 August 2019
Bookkeeping is an integral part of running any business regardless of its size. Your taxes, financial standing and profits are calculated with this information, so having access to detailed financial records gives you a better sense of how your cash flow is being managed. This allows you to make better decisions in the future, which will allow your business to prosper.
When done diligently, bookkeeping gives you more control over your cash flow and gives your business a much better chance of surviving and thriving. Here are 5 bookkeeping tips that will be useful to every business owner.
1. Track All Your Expenses
Tracking your expenses lets you have a bird’s eye view of how money is being spent, allowing you to cut back wherever necessary and avoid missing any valuable tax deductions. Keeping meticulous records of receipts from all expenditures including expenditures that occur during business meetings, trips and other events will be helpful during an audit, where proof of these items is required for your tax records.
2. Record Your Deposits Accordingly
Business loans, sales revenue and cash infusions from your personal funds are all deposits that must be recorded, to help you avoid paying taxes on money that is not income. Using a system like MYOB or Xero is the most effective way to track deposits. If you still aren’t using one of these software platforms, keep a record of every deposit in a dedicated notebook. Be sure to label them correctly to avoid the mistake of you or your bookkeeper recording these deposits as income, which can result in you paying more tax than you should.
3. Allocate Money for Taxes
Mark your calendar with tax deadlines, and always set aside a sum of money solely for taxes to avoid late payments. Not filing taxes on time can see you run into issues with the ATO and can even cost you money in the form of penalties. Allocating an appropriate amount of money for tax payments will help you avoid these problems.
4. Get on Top of Debtor Management
Late or unpaid invoices affect your cash flow. The best thing you can do to tackle this problem is to implement a formal process for debtor management. This is something the team at AR Advisors can help with to make your life easier, but at the very least you should have an internal resource responsible for this. Consider setting up a process where a reminder invoice is issued, followed by a phone call and maybe even charging a penalty fee for late payments.
5. Plan Ahead for Major Expenses
The best thing you can do to future proof your business is think beyond basic bookkeeping to proactive business management. Every now and then your business will require an improvement, upgrade or form of maintenance that will involve a considerable cash outlay. Being prepared for these expenses ahead of time (up to three to five years in advance) lets you plan out all your expenses leading up to this event. This will go a long way to helping you manage your cash flow and avoiding the risk of making your business insolvent.
Diligent bookkeeping can give you fantastic insights on how your business operations impact your cash flow, enabling you to make better choices. If you want to focus on your work not your paperwork, we offer a range of bookkeeping packages, plus related services such debtor and creditor management as well as payroll solutions. We can partner with you to ensure your cash flow is effectively managed and that your business stays on the right track. Get in touch with us today to find out more.