Bookkeeping is essential for assessing the financial position of the company. Some business owners know how to manage their business books but some business owners rely on bookkeepers. It is up to business owners whether they need help from bookkeepers or not. However, it is suggested to receive support from a bookkeeper when you need to manage your business finances.

Small Business Bookkeeping Steps to Follow

Running a business successfully means keeping your business finances organised. Professional bookkeepers ensure to follow the steps given below to manage your business books:

• Set Up a Bookkeeping System
First and foremost, bookkeepers will set up a bookkeeping system for your business. For bookkeeping software, it is important to consider choosing a tool that is compliant with the ATO. You can look for the following features in bookkeeping software:
◦ Single touch payroll (STP) reporting
◦ Payroll management
◦ Goods and services tax reporting
◦ Integration with ATO systems for filing tax returns and business activity statements

• Make Categories for Transactions
A chart of accounts makes a list of all the categories to track your money. These include assets, expenses, income, and debts. The chart must show the specifics of your business.

• Accrual or Cash Accounting Methods
Now the question arises, how do you track your money flow? You can have two options:
◦ Cash accounting: In this method, you need to keep track of the income that you receive and the expenses you pay. It is a simple and popular method. If your business earns $10 million annually, then you can use the cash accounting method for GST reporting.
◦ Accrual accounting: You need to record income that you earned (even if it is not paid) and expenses when you pay them (even if not paid yet). It is useful for representing the financial performance of your business over a specific time period.

• Record Financial Transactions
Make sure you have all the required financial documents ready. This includes purchase orders, receipts, invoices, and bank statements. These documents will help you know the cash flow of your company. You must review them daily or weekly, noting how much you paid and when.

• Manage Accounts Receivable
Your bookkeeper will be responsible for setting up a process to issue invoices for delivering goods. They will schedule follow-ups to encourage clients to pay on time.

• Manage Accounts Payable
It is money that your business owes to others. You need to keep sufficient cash to pay bills on time to avoid penalties.

• Conduct a Bank Account Reconciliation
Preparing a bank reconciliation statement makes sure the financial records of your business match your bank’s records. Here is how to conduct a bank account reconciliation:
◦ collect your bank statement and records
◦ compare each transaction to check if they match
◦ mark all the financial transactions and record them
◦ check the ending balances to make sure they match the records and bank statement
Check everything and ensure your records match your bank’s records. It helps keep your business finances correct and helps you spot errors early on.

• Create Financial Statements
Now you can use reconciled records to create reports like cash flow statements, income statements and balance sheets. These statements are an important part of bookkeeping for small businesses. These show the financial health of your company. In addition to this, the bookkeeper will also prepare a report according to ATO guidelines. To control cash flow, it is vital to keep an eye on accounts receivable and accounts payable. Use the records to manage relationships with suppliers and clients.

• Meet Regular Tax Requirements
The best way to prepare for a tax season is to maintain your business book and organise each record. You can easily report expenses, income and other ATO standards. It includes GST, tax, and pay-as-you-go (PAYG) for contractors and employees. Tax accountants in Melbourne can use these records when preparing and filing tax returns for you on your behalf.

Bookkeeping is crucial for running a successful business. With accurate bookkeeping, you can make the right decision for your company and grow your business. You can also receive support from a Reliable Bookkeeping Services provider so you can focus on other important tasks of your company.