Bookkeeping is an essential part of running a successful business. Knowing how to keep your books in order is key to your business’ survival, and it’s never too soon (or too late) to brush up on your knowledge. Our essential guide to bookkeeping tells you everything you need to know.
A bookkeeper needs to be a BAS agent to provide BAS services. You can easily check if they are registered, as Kristy mentioned. This is only if you are outsourcing your bookkeeping to a third party. If you are preparing and lodging BAS statements yourself, you don’t need to be a BAS agent.
A bookkeeper needs to be a BAS agent to provide BAS services. You can easily check if they are registered, as Kristy mentioned. This is only if you are outsourcing your bookkeeping to a third party. If you are preparing and lodging BAS statements yourself, you don’t need to be a BAS agent.
In short, you can use an accountant or a bookkeeper who is a BAS agent. Accountants may not do it themselves. They and accounting firms typically have bookkeepers who will work on the BAS statements and lodge it for them. The cost should be around a few hundred dollars for a small business.
I don’t live in Adelaide but I usually use the service provider and location keyword, for example, “bookkeeper Adelaide” or “accountant Adelaide”. I may also use task or project specific keywords such as “tax return Adelaide” or “BAS preparation Adelaide”.
I don’t live in Adelaide but I usually use the service provider and location keyword, for example, “bookkeeper Adelaide” or “accountant Adelaide”. I may also use task or project specific keywords such as “tax return Adelaide” or “BAS preparation Adelaide”.
You can do a keyword research, if you haven’t already. There are many SEO tools that can give you popular keywords people search for. It can also help you discover related keywords and questions people generally ask that you may not have thought of. These keywords are great not just for SEO but to use in your content and ads too.
I find the best SEO tools are usually paid ones such as SEMRush, Moz and Ahrefs because they will give you rich and detailed data and other features if you are serious about improving your SEO. Otherwise, you can try free ones such as Google Keyword Planner, Google Trend and Keyword Tool for basic research. They should be good enough. All the best.
Did you know that 60% of small businesses stop operating within the first three years of their startup journey (The Australian Bureau of Statistics)?
There are various reasons why over half of new businesses fail, but a lack of good bookkeeping and financial management is certainly a contributing factor.
We get it, bookkeeping isn’t the most enthralling part of running a business. But it’s true when we say bookkeeping is one of the fundamental building blocks of running a successful business.
As a business owner, you need to have a solid understanding of how bookkeeping works (even if you decide to outsource) if you really want to drive your business forward.
Let’s get into the basics of bookkeeping.
What is bookkeeping?
Bookkeeping is the practice of recording, tracking and storing the financial transactions of a business.
There are two bookkeeping methods:
Single-entry bookkeeping Single-entry bookkeeping is when only one entry is made for each transaction. The single-entry method does not track accounts payable or accounts receivable and is generally only used by very small businesses that do not have many accounts and mainly deal with cash.
Double-entry bookkeeping Double-entry bookkeeping works on the principle that every transaction is a transfer of money from one account to another e.g. if you paid $20 for stationery, your “Cash” account will be debited (decreased) by $20, and your “Supplies” account will be credited (increased) by $20.
A question we often hear is, “Are accounting and bookkeeping not the same?”
Understanding the difference between bookkeeping and accounting is tricky, especially as many accountants also perform bookkeeping duties.
What is the difference between bookkeeping and accounting?
An easy way to distinguish the difference between accounting and bookkeeping is that bookkeepers record the day-to-day financial transactions of your business, whereas accountants analyse and report on the records that bookkeepers have gathered.
Think about it like this: a car engine is designed by an engineer to achieve specific goals, e.g. minimal fuel usage and fast acceleration. The engine is then built and maintained by technicians and other engineers.
Bookkeeping is the process of building and maintaining the financial engine of a business, while accounting is the process of designing and improving the financial engine to work optimally and achieve its goals.
In bookkeeping, you record all financial transactions of a business, ensure they are accurate and generate reports such as cash flow and profit and loss statements.
In accounting, you devise financial strategies such as tax, funding and payroll, based on your goals.
You can find out more information aboutaccountants and BAS agents here on SavvySME.
What are the basics of bookkeeping?
It’s good to know some of the basic lingo that is essential to good bookkeeping.
General ledger/accounts: The “books”
Ledger:The place where you record and categorise business transactions
Accounts Receivable/Assets: Things which a business owns e.g. inventory or money that is owed to a business
Accounts Payable/Liabilities: Money owed by a business e.g. unpaid invoices, tax and loans
Payroll/Wage Expense: Money paid to staff members
Income: Money that is received from selling your products and /or services
Expenses: Money spent on running your business
Shareholder/Owner Equity: Money that is provided or withdrawn by an owner or shareholder.
When people talk about “the books”, they are referring to a general ledger or a set of accounts.
These accounts are where all the transactions that your business makes will be recorded and are often referred to as a chart of accounts.
What is the chart of accounts?
A business has a set of accounts to track its finances. Below are a few examples of common accounts you may have:
Accounts receivable: Money you receive
Accounts payable: Money you pay others
Payroll/wage expense: Money to pay staff members
Sales account: What you get from selling your products and services
Purchases account: For things needed to run your business
You must decide whether you will be using the cash or accrual method of accounting.
What is the difference between cash and accrual accounting?
Cash accounting means you need to record the transaction when actual money changes hands, is received or transferred.
Accrual accounting is recording the transaction when it happens, instead of when actual money changes hands, is received or transferred, which could happen at a later date.
Should I use double-entry or single-entry bookkeeping?
Most businesses use the double-entry bookkeeping method. It works on the principle that every transaction is a transfer of money from one account to another.
For example, if you paid $20 for stationery, your “Cash” account will be credited by $20, and your “Supplies” account will be debited by $20.
The total amount of credit must equal the total amount of debit for both accounts to be balanced. Overall, your chart of accounts must follow this rule:
Assets = Liabilities + Equities
However, smaller businesses may use the single-entry bookkeeping method because they do not have a large chart of accounts, or they mostly deal with cash.
Do I need to keep evidence associated with these accounts?
Every transaction you make will be associated with evidence, such as an invoice, bill, receipt or electronic transaction.
These financial records are important for you to prepare your tax return and trace any errors or fraud when they arise.
The Australian Tax Office (ATO) requires businesses to keep evidence of their financial transactions for up to 5 years prior.
How does bookkeeping work?
You need just a few things to set up a bookkeeping system. Good bookkeeping has a few essential moving parts: software, storage, a good bookkeeper and standard procedures.
1. Software
Most businesses use bookkeeping andaccounting software for bookkeeping because of the convenience, accuracy and time-saving benefits they get.
You can opt to use the old school pen and paper system instead, but we highly recommend using computer systems.
Pen and paper will increase your workload tenfold and there's a higher chance of recording inaccurate information or losing data.
2. Storage for your financial records
Keep your paper records in a filing cabinet and then scan them to your cloud software. You can opt for physical filing only, but this won’t give you a backup if you lose or damage the files (it's really not worth the risk).
Most accounting software offers a cloud storage system that can link all of your accounts to keep things nice and easy.
3. A good bookkeeper
You can choose to hire an in-house bookkeeper, outsource or do the bookkeeping yourself.
4. Standard operating procedures and rules
It's Important to establish proper processes and rules to maintain your books. You should schedule regular reviews and audits to ensure everything checks out.
Can I do my own bookkeeping as a small business owner?
If you have the knowledge, time and good systems in place, you can certainly manage your own books.
However, if for you (like many other business owners) time is of the essence, then outsourcing to a professional bookkeeper is likely one of the best decisions you will make for your business.
A bookkeeper takes the burden out of bookkeeping and has the professional expertise to ensure your books are in tip-top shape.
If you’re thinking about hiring a bookkeeper, we’ve put together some practical information on how to hire a bookkeeper for your small business.
Or, simply tell us what you’re looking for and we’ll introduce you to thebest bookkeepers in your local area.
You can also browse our Q&A section to get expert advice from bookkeepers right here on SavvySME.
FAQ
How do I find a good bookkeeper?
If you’re wondering how you can hire a good bookkeeper and how much bookkeeping services cost, you’ve come to the right place. Chat to our network of bookkeeping experts who we’ll introduce to you based on your business needs and receive up to five quotes
Can a bookkeeper call themselves an accountant?
A bookkeeper may call themselves an accountant, but it’s important to note that not all bookkeepers are accountants. A bookkeeper’s work is usually overseen by an accountant or the business owner.
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