As a business owner, if you are managing your business books, then you must know the common principles of bookkeeping. If you are not aware of those principles, it is suggested to take help from a reliable bookkeeper because bookkeepers follow bookkeeping principles to manage business finances. You can also search for a bookkeeper in Melbourne to hire the best one. Bookkeepers keep track of the money flows in and out of the business in the form of expenses or income. In today’s blog, we’ll discuss how a bookkeeper can help you manage your business finances by following bookkeeping principles.
Common Bookkeeping Principles Followed by a Bookkeeper
The primary principle of bookkeeping is to keep a record of each financial transaction. The bookkeepers ensure that all financial transactions are updated and comprehensive. The following are some essential rules that every bookkeeper follows:
It defines a point in time at which the bookkeeper will enter a transaction as an expense in the business books. It implies that an expense occurs when the company accepts services or goods from another party.
The revenue principle indicates a point when a bookkeeper records a transaction as revenue in the business books. It implies that the revenue is earned at the point of sale.
Preparing Profit and Loss Statement
Generally, a profit and loss statement or income statement is considered a brief of your business’s expenses and income over a specific time period. A profit and loss statement allows a bookkeeper to:
- Analyse all expense and income categories
- Identify areas where more analysis is required
- Take action before a small problem becomes a bigger one
Preparing Cash Flow Statement
A cash flow statement helps in checking the flow of money that flows in and out of your company. Most often, it is prepared on monthly basis and at the end of the financial year.
Preparing Balance Sheet
With the help of a balance sheet, business owners can know the financial situation of their business on a given day. You need to have an accounting bookkeeping service to manage your business finances successfully. The bookkeeper generally prepares a balance sheet at the end of each month, and or financial year. Once a bookkeeper has already prepared a profit and loss statement and cash flow statement, then a balance sheet can be easily created. A balance sheet includes:
- Assets such as land, cash, buildings, stock, equipment, and money owed to the company by third parties
- Liabilities such as money owed to the tax department, suppliers, credit card debts, loans
- Net worth is the value of the business after the deduction of what the business owes
How a Bookkeeper can Manage Your Business Finances?
Bookkeepers help you with the following methods to manage your finances:
Maintain Personal and Business Accounts Separately
If you have a proper record of each transaction within your business, then it would be easy for a tax return accountant to prepare and file for business tax. Hence, bookkeepers always suggest maintaining business and personal accounts separately. It helps in avoiding confusion when record keeping. If you have a separate business account, then it will be easy for you to understand the cash flow of your business. It helps you keep your business finances secure without spending your personal finances.
Keep Track of Reports Regularly
Good bookkeeping is not only helpful for tax purposes, but bookkeepers keep track of cash flow inside and outside of the business, then it can also help in checking the financial status of the business. Proper cash flow management will be helpful for you to plan for a better cash flow. Thus, it would be beneficial for you to opt for small business bookkeeping in Melbourne.
Don’t Forget about Tax Deadlines
Missing tax deadlines can result in penalties, fines, and time-consuming audits. Bookkeepers can help you by setting reminders. They can help you prepare everything on-time or in advance to avoid unnecessary stress.
Reconcile Bank Accounts
If you are not reconciling your bank accounts on time, then you may get into a problem. Therefore, if you have a bookkeeper, then he/she will be responsible for bank reconciliation.
Bookkeeping can often seem a time-consuming task, but if you take help from a reliable and professional bookkeeper, then it will become easy for you to focus on other aspects of the business and let a bookkeeper focus on your business books. You can get professional bookkeeping services by contacting the Reliable Bookkeeping Services provider.