All you need to know about DIY bookkeeping and much more
So you just open your own business and realized that recording transaction is part of the deal. you decided to go solo, and DIY bookkeeping. for any business owner, this is the best option overall, as money is the name of the game. you must be able to understand how money flows to and from your business in order for you to grow and become successful. as your business grow, you may want to focus your time on what gives you the highest ROI. until then, I recommend you DIY bookkeeping and help yourself understand the business on a financial level as well as operational. you can see this in the big listed companies, where you can see that most CEO’s are Accountants. Managing money and profits is the most important function of the organization.
There is one thing which is very important to understand. every business need to be reviewed at the end of the year by an outside Auditor (Qualified Accountant). this service is usually not cheap, and as such your goal in your business is to minimize their work to the bare minimum, and in order for you to be able to do that, you must have “clean books”. So what do you do? how do you make sure your books are clean when you have no experience with Bookkeeping and want to go: DIY Bookkeeping? well, it comes down to simplicity, and luckily for you, today’s bookkeeping software is easy to manage and operate. you do not need to be a qualified bookkeeper to use them, and use them well.
here are a few guidelines that you must follow in order for the DIY Bookkeeping to work:
Manage your accounting Data:
You see Bookkeeping is the language of recording the business operation. in order for to be able to go to any point in time and “read” what is the outcome of our business efforts. But in order for us to do that, we need to make sure we are keeping the right records. Sorting the business transactions from our personal day to day activities. because those activities are not part of the business efforts and as such are not allowed to be recorded as part of the business records. The best way to go is to create a filing system that will record ALL your activities, and every time you are not sure regarding a transaction you will put that in the “not sure” pile, and you will be able to consult your accountant, or do the research yourself later. You must make sure you know at the time of the transaction what is it for: to prevent you from going back in time and trying to figure it all out, on any invoice that you have (both from your business and to your business) write down: what is the transaction for, when, and who is its recipient. that will save you a lot of time later. a good practice is to request a visit from the ATO, and they will advise you regarding all the things you must do in order for you to be compliant.
Find a good accounting software:
When your knowledge of bookkeeping is limited, you must use a tech aid that will overcome that deficiency, so it will minimize your overall mistakes. you must understand, bookkeeping is cheap where accounting is expensive – so make sure you invest in a good bookkeeping solution, that will help you simplify this task, rather than make it more tedious. (I will create an article covering your options here and how to choose the right one for you).
To GST or not to GST:
As a rule, of thumb, you must register for GST when your annual revenue reach $75,000 (will change from time to time), but if you are just starting your business chances are you won’t reach it right away. so now you need to think if it’s a good idea or not. if you have a lot of expenses that incurs GST and your overall income is small (you need to invest first and then you will see your reward) then it is a good practice to register for GST – because you will be able to claim this GST – but you must understand that you must report for GST, and that complicate your bookkeeping duties a bit. (here the previous step will be your saver).
Be a Happy TAX Payer:
In order for you to achieve this, make sure you are on the right side of the tax law. and the best way to achieve that, is to communicate with the ATO, and they have many communication channels including twitter and Facebook, and customer service and they even happy to visit you and give you a free consultation.
Do not use cash:
When you start your business the best option is to open a business account, if you don’t want to do that, the next best thing is to go to the bank and sign up for a credit/debit card, and ask specifically to get a statement for this card. make sure you use this card only for business use. this way even if you use your private account you can follow your business transactions. do not use cash, as cash as no Audit trail, and that may cause an expense to not be allowed when you are missing the paperwork.
Know all the important due dates:
When dealing with the ATO, it’s important to be on time, because there is a price for being late: fines! so make sure you know when are the due dates for every communication needed from you to the ATO.
The golden rule:
Last but not least, you must record all your business data, as not only it is a requirement by the ATO, but also, it will be the starting point for your business growth phase, and if you want to grow, you must first analyze your business actions compared with the raw data, and without a good data which is complete you won’t get the results you’re after in the long run.
DIY Bookkeeping is a very good step when you are just starting your business, this is the phase that you learn a lot on the way your business generate cash, you learn the fastest path for cash, and you understand the expenses side of the equation and what does it do to your overall profitability. but you must understand one very important thing, when you grow and your business start to be more complicated, with heavy lifting, you must stop and ask yourself this question: what is the best use of my time right now? if the answer is not managing the books, you must outsource this task so you will focus 100% of your effort on what you do best, this way you will maximize your business efforts, and see outstanding results.