For entrepreneurs, coming up with an idea and starting a new business can happen with a blink of an eye.
The challenge comes when money starts heading out the door for expenses such as office rent, internet costs, paying employees or contractors, when revenue starts coming in the door and staying up to date and compliant with the ATO.
A very small business may get away with living off spreadsheets or free online accounting tools to get you by but from my experience working with a number of startups, there are some very clear differences between the businesses that fail and the ones that get past year one.
What challenges will you experience in bookkeeping?
Here are some of the most common challenges small business owners face with bookkeepng:
- Not invoicing your customers correctly or on time leading to lost income and poor customer experience.
- Losing important receipts or not allocating then to the correct expense accounts, which could mean paying to much tax or not being able to justify the expense to the tax department.
- Incorrect preparation of your BAS. You will pay either too much or too little to the ATO. Both will result in you being out of pocket somewhere down the line.
- Wasted time being spent by yourself or an employee on record keeping, data entry mistakes and liaising with external groups like the ATO. Surely, your time is more valuable doing other things like selling your products or services.
- Unable to correctly reconcile business loan accounts. Very costly when your accountant needs to come in and determine what is right or wrong or worst case you are audited.
- Money down the drain when an external bookkeeper or accountant needs to fix up your mistakes when it could have been down correctly the first time.
How can I get bookkeeping right from day one?
Here are five tips to get your bookkeeping right from day one.
1. Educate yourself
If you are going to do it yourself, then educate yourself. Find a bookkeeping course or pay for some training from people who know what they are doing.
2. Get the right software
Find the right online accounting software program. It can only cost as little as $29 per month to have a complete accounting package that can do all your invoicing, tracking expenses, attaching important files like receipts and BAS preparation.
3. Set up a chart of accounts
Set your chart of accounts up correctly. Have a chat with your accountant if you have one. You will be charged by your accountant at years end to make changes if you just go with what you think is best.
4. Prepare your BAS correctly
Prepare your BAS correctly. This will save you time and money. Don’t take it for granted that your revenue and expenses have the right tax code associated with each transaction.
If your accounting software allows it, run some detailed general ledger reports to make sure everything is in the right place before lodging with the ATO and setup matching rules when importing your bank transactions to save yourself time.
5. Set aside time to review your accounts regularly
Find time each month to actually sit and review your profit & loss reports, balance sheet, and cash flow. A great way to keep on top of how you are performing and it will also highlight issues in your bookkeeping that you can have someone fix straight away.
If you have any other tips that would also help please feel free to leave a comment.
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