Melbourne Wealth Money
26-Jun-2021 By - team

Your business’s accounting department is the driving force behind all decisions. Any choices you make regarding inventory, payroll, risk, or reporting come back to your books.

Naturally, it’s a business area ripe for optimization, and even smaller companies can boost their back-office efficiency with the right tweaks to their accounting and bookkeeping operations.

1. Develop a detailed budget

Naturally, you need detailed records of all business expenses and what kind of funding you’re working with. You might be surprised at how many small business owners bootstraps this process without getting everything down on paper.

Get your budget on paper and start combing through the details, looking for cost-saving opportunities in your record-keeping, payroll, or sales operations.

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2. Choose the proper accounting method

Small businesses need to choose between cash and accrual accounting as they start. Cash accounting is more accessible, but it’s difficult to sustain at a certain point in company growth. Make sure you understand the advantages of each option and how you can transition from one to the other effectively.

3. Separate business and personal expenses

Most accounting for small businesses involves dipping into personal accounts to cover business costs, but be careful about making this a habit. It’s a good practice to keep confidential, and business expenses separate in the interest of proper tax filing and legal liability. And if this isn’t possible, at the very least, document all personal contributions thoroughly so you’ll have accurate records for your business tax return.

4. Watch accounts receivables like a hawk

Your accounts receivables (AR) tell you plenty about customer performance, behaviour, and long-term payment trends. Run accounts receivable aging report regularly and pay attention to any discrepancies in how your customers make payments.

5. Follow up on invoices

Armed with your AR aging report, you’ll be able to see which customers are best at making payments on time and which are chronically late. Look at your underperforming customers and reach out to them to confirm invoices. Just because you issued a bill doesn’t mean you’ll get paid—and your financial data can tell you which customers need more hands-on attention.

6. Master your accounting software

Few small businesses manage their books by hand. Accounting software is the name of the game these days, streamlining data entry, reporting, and analysis. But not just any software will do the trick. You’ll need to know the ins and outs of the platform, including how to tie it to your accounts, how to set up automated alerts for reporting, categorising financial data, and more. This is one of the single best improvements you’ll make to your accounting workflows.

7. Set up a schedule for bank reconciliations

Bank reconciliations show you how closely matched your bank statements are with your accounting records. This is an essential part of understanding your company’s cash flow and how much liquid capital is available to you at any given point. It’s recommended that you run this report monthly, though different companies will need to set up their reporting schedules.

8. Set clear financial goals

Financial management is like any other aspect of your company—you need goals to keep yourself on track. Work out metrics that offer insight into performance, such as cash flow, labour efficiency, or minimum monthly profits. Establish these benchmarks early and keep detailed records on how well they’re met.

9. Be ready for tax season

If your company is just starting, you’re likely still getting used to preparing your business books for each tax season. Naturally, you’ll want to tread lightly here. Tax liabilities and expectations are quite different for businesses than individuals, and depending on how your company is structured (LLC, sole proprietorship, general partnership, etc.), your tax needs will change.

10. Watch for changing regulations

Is your firm prepared to handle changing regulations set forth by the Financial Accounting and Standards Board (FASB) and SEC? Accounting practices evolve over the years (revenue recognition saw a significant change just a year ago). If you want your company to stay compliant with the FASB’s guidelines for Generally Accepted Accounting Principles (GAAP), you’ll need to keep pace. This is an ongoing goal for most small businesses, but it’s crucial to the long-term success of your company.

11. Consider your customer credit policy

It’s common practice for businesses to extend lines of credit to trusted customers (mainly when personal relationships are involved), but be careful about being too generous here. Customer credit can quickly spiral into bad debt. If you’re giving your customers this flexibility, take a look at your credit screening process and make sure you’re trusting the right people.

12. Consider specific outsourcing tasks

The above tips can help business owners manage their books—but why manage everything on your own? Outsourced bookkeeping services are becoming viable for small businesses of all sizes. Suppose you’ve identified bookkeeping inefficiencies that you can’t control (such as knowing how to analyse financial reports). In that case, you can outsource these tasks to experts who can walk you through the details.

Small Business Accounting Tips

This is just an overview of the different ways that small business owners can optimise their accounting and bookkeeping processes, and it’s by no means the limit. With the right financial experts in your corner, you’ll find that even your working bookkeeping processes can be upgraded in some interesting new ways.

Top 10 Tips – Accounting Advice For Small Business

Small business makes up the most significant quantity of Australian companies. Spanning many industries, locations, and ideologies, small businesses are essential for the Australian economic puzzle. Consequently, competition is fierce. It’s necessary to allocate the majority of your time towards business growth and development. To do this, the accounting aspects of the business must first be organised.

We know growing a business can be tricky without proper guidance. So, as business advisory specialists, we’ve put together ten pieces of accounting advice for small business to follow for clarity and efficiency.

1. Cashflow is King – Prepare Cash Flow Forecasting and KPIs

Time and time again, the hot topic of cash flow is discussed. Without cash, we cannot pay our creditors, employees, or ourselves!

Our advice? Request that your accountant provides a complete financial analysis of your small business. By tracking and understanding your expenses, you can set goals and align KPIs to achieve growth and ensure you have enough cash to meet all your obligations.

2. Open a Second Bank Account for PAYG Withholding Tax, Superannuation and GST Obligations

Something as simple as opening an additional bank account for your tax obligations can ensure that you always have enough funds present when debts fall due. The best practice would be to transfer the payroll obligations immediately into this account after each pay run to prevent the usage of funds unnecessarily.

3. Accounting Software – Utilise Cloud-Based Software

By partnering with accounting software such as Xero or MYOB Live, you can ensure that you, your accountant or anyone of importance will always have access to your financial information wherever you go. Whether that may be playing golf on the weekend or travelling interstate, having access to your data is crucial.

This will result in a smooth process for tax compliance as all the information is readily accessible. It will prove incredibly useful for applying for finance as your financial information is always kept up to date.

4. Google Reviews! – Never Underestimate the Power of Reviews

One of the most underrated and beneficial sources of reputation. Every one of us has used Google to assess the quality of a business. The reviews’ quantity and quality will often be the defining factor for new customers/clients searching for a company to deal with.

As a small business owner, take pride in asking your customers for honest reviews! Considering your review platform as a further avenue for revenue, this piece of accounting advice for small business is one that you want to follow to see organic growth.

5. Goodness Me, It’s STP!

Single Touch Payroll (STP) has changed the way payroll is prepared. Being up to date with the changes and ensuring you are constantly reporting accurately will prevent any business audit conducted by the ATO. Stay on top of the changes and don’t fall behind!

6. Superannuation – Pay It On Time

bookkeeper job

If you fail to pay your superannuation on time, it cannot be claimed as a tax deduction, and you may be liable for the Super Guarantee Charge (SGC). The consequences include possible fines and fees/interest on top of the initial amount unpaid. 

Whether you use a Government Superannuation fund or a Self Managed Superannuation Fund, you must prioritise paying superannuation obligations over other debts such as bank overdrafts, small loans or any other debt with flexibility surrounding repayment (within reason!).

7. Trade Terms – Improve Your Receipt of Cash

If you are invoicing for work completed or services provided but not receiving the funds within a reasonable timeframe, perhaps it is worth reviewing your trade terms. For example, if you have 14 days for a client to make the payment but are generally paying in 21-28+ days, perhaps you should look to receive a percentage upfront to improve your cash flow?

A brilliant software to consider is Practice Ignition which can make invoicing smooth and straightforward. It is worth speaking to your accountant/accounting specialist for more information as it is a game-changer.

8. Accounting Trends – Keep Updated on the Latest and Greatest

Avoid wasting time using outdated and inefficient software. If the latest software can do payroll in 2 steps and yours currently does it in 4 steps, then you are losing time, which is arguably your most valuable resource.

Keep up to date on the latest trends and changes in the industry to ensure you not only save time maintaining your financial information but remain the most resourceful.

9. Record-Keeping…

With the hustle and bustle of running a small business, there is a possibility that receipts may be misplaced in the glovebox of the ute or finance documents vandalised by the younglings. Thankfully, there is software available to alleviate this stress. Receipt Bank (RB) offers an excellent function where you can simply take a photo of the receipt, upload it to RB and then have the bill sent to your respective accounting software (ideally Xero or MYOB).

10. Make Time for Family and Yourself – Don’t Get Lost in the Accounting Madness

Because why did you get into business in the first place? Happiness is essential in life. By making the necessary changes to improve the accounting functionality of the company, there will undoubtedly be additional time for the ones you love, including yourself. Investing in an accountant whom you can trust is a wise decision.

By following our ten tips of accounting advice for small business, you’re on the right track to achieve all your small business goals and, ultimately, grow your business to its full potential. If you need help getting on the right way, view our list of services to see what we offer. With four office locations in the South-East, we are easily accessible and ready to assist. 

How Accounting Can Help Your Small Business Succeed | How-To Guide

Accounting can help your small business succeed by giving you insights into the overall financial health of your company, offering a detailed report of your cash flow, demonstrating opportunities for growth and keeping you organised and accurate when filing your taxes.

As a small business owner, you can choose to oversee your business accounting on your own, or you can hire a professional accountant to help you set up your business, prepare financial documents, manage payroll processes, file taxes and more.

You don’t need to be an accounting expert to run a small business, but you’ll want to have a few basic accounting skills in your back pocket to make sure your business runs smoothly and is on track to make money. This guide takes you through the essentials of small business accounting and offers some time-saving financial tips to set your company up for success.

How Can Accounting Help Your Business?

Accounting doesn’t just make life easier at tax time and give you a better idea of how your business is doing financially. Accurate accounting can also make you more attractive to clients. Here are some common ways proper accounting can help make your business more valuable for your clients:

1. Financial Stability

When your business finances are in order, you have an accurate view of how much money is coming and going. You can also create more accurate forecasts for future revenue and expenses, so you can make sure you have enough cash reserves to float you through any tough times.

With stable business finances, you can offer your clients a consistent, positive experience. You won’t need to cut costs unexpectedly because money is tight, so you won’t suddenly cut down on employees or take on so much new business that the quality of your work suffers.

2. Greater Efficiency

Proper accounting offers you up-to-date financial data about your business. And that can help you make crucial decisions about the need for, and timing of, new business investments. Could new equipment make you work faster? Could it mean you deliver better service to your clients?

Accurate financial data helps you decide whether it’s the right time to invest more cash in your company and how those expenses will affect your cash flow.

3. Smarter Marketing

Financial records offer you insights into your expenses and cash flow, which in turn can help you make better decisions about marketing your business.


Accurate accounting information can help you decide the right time to launch a marketing campaign and understand whether your marketing efforts deliver the results you want.

What Are the Basics of Small Business Accounting?

Now that you’ve got a handle on how accounting can help your business, you’re ready to dive into the basic principles of small business accounting. There are three main areas of practical small business accounting:

1. Master Basic Bookkeeping

Don’t let the name intimidate you: bookkeeping just refers to keeping track of your business transactions, from revenues to payments. One of your primary business goals is probably to make money and do that, and you’ll need to know how your income compares to your costs. Proper bookkeeping can help by:

  • Letting you know if you’re making a profit or if you’re on track to do so
  • Telling you whether you’re in danger of running out of money
  • Simplifying tax season by recording information you’ll need to file taxes

2. File Your Business Tax Returns

Tax season can be a stressful time for freelancers and small business owners, and for a good reason: filing taxes becomes more complicated when you’re self-employed. But with proper accounting throughout the year, you can lessen tax-time headaches.

There are different types of business taxes, and they vary by industry and by state, but some of the most common include:

  • Income Tax: Which requires you to pay a portion of your income to the government.
  • Sales Tax: Depending on the type of work you do for clients, you might add sales tax to your invoices that you later payback to the government.
  • Employee Taxes: If your company has staff, you’ll collect taxes from your employees’ paychecks and pass that on to the government.

3. Create Financial Reports

Accounting reports can help guide important business decisions. You probably face tough choices often—whether to buy pricey equipment for your business, what specific services to offer clients or whether to hire contractors to help with your workload.

Several accounting reports can help you make these decisions. Some of the most common words include:

  • Cash Flow Statement: This shows you all your financial activities, from the money flowing into your business (earnings from clients) to the expenses moving out (for rent, utilities, staff and more). This is a critical report to get right. A study by US Bank found 82 per cent of businesses fail because of cash flow problems.
  • Profit and Loss Report: This shows your total income and your total expenses for a specific period. It’s not quite as detailed as your cash flow statement, but it offers a helpful overview of where your business stands financially.
  • Balance Sheet: This shows what your company owns versus what it owes for a specific period. In other words, it gives a snapshot of your financial position at any point in time.

How to Get Your Business Finances in Order

To put all this information into practice, this step-by-step guide walks you through a basic plan for getting your accounting in order. Consider it your financial to-do list.

1. Open A Separate Business Bank Account

You’ll want to keep your business income separate from your finances. The easiest way to do this is to set up a different bank account for your business. It pays to do your homework before signing up for an account: shop around to see what company reports are available at different banks and compare the banking fees charged.

It might make sense just to open a business checking account when starting as a freelancer, but as your company grows, you might want to add a savings account to stash away money for taxes and other expenses.

2. Develop An Expense Tracking Method

Good record keeping will help you get a handle on the overall health of your company and help ease the pain of tax season. Tracking your expenses is an integral part of that. Make sure you’re looking at all costs related to your business, including:

  • Meals and entertainment related to business meetings
  • Travel for work
  • Living expenses that overlap with your home office (if you have one) including rent, internet, phone bills, etc.
  • Costs related to your car, if you use it for work purposes

You can track these by physically filing receipts, or you can sign up for cloud-based accounting software that digitally tracks all your expenses and can even do it automatically.

3. Create A Bookkeeping System

Much like with expense tracking, there are accounting tools that can help you manage your bookkeeping. But if you’re looking to handle bookkeeping manually, you’ll need to develop a system and stick to it.

There are two basic ways to oversee bookkeeping:

  • The cash method involves recording revenues and expenses at the time they’re received. So a freelancer would record their invoices at the time they receive payment from a client.
  • The accrual method involves recording revenues and expenses at the time of the transaction. So you would record a payment when the invoice is sent, rather than when the income from the client lands in your bank account.

4. Learn Your Tax Obligations

The tax obligations of your business will depend on the legal structure of your company. In many cases, self-employed workers (like freelancers) can claim their business income on a personal tax return.

As a freelancer, you should be sure to withhold taxes from your income, as you’ll need to pay taxes to the government that an employer would typically withhold.

5. Review Your Methods To See What Works

The needs of small businesses evolve as your company grows and your services evolve. The accounting methods you start with might not serve you in the longer term.

As your business expands, be aware of the time you spend on accounting and reflect on how much that time costs your business. If the burden of handling all your accounting needs becomes too great, you might want to seek the help of a professional accountant.

Do Small Businesses Need Accountants?

A good rule of thumb to follow: if managing your business accounting starts getting in the way of completing projects for your clients, you should consider hiring an accountant. Or you might feel better working with an accountant at tax time or to address specific questions related to your small business. Ultimately, the decision is yours.

Accountants can help small businesses in many ways, including:

  • Finding the best business structure to suit your needs, from a sole proprietorship to a corporation.
  • Preparing the financial documents included in your business plan
  • Providing advice on opening business bank accounts
  • Managing payroll processes
  • Preparing your tax returns and finding tax breaks that apply to your business
  • Close your books at the end of the year and create financial reports
  • Help you navigate a tax audit if that problem ever arises


Guest post by : team Form -

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