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The obvious aim of every business is to make money. The key here is to maximise income while minimising costs. In the wake of the 2020 pandemic, this has become so much harder for many businesses to achieve.
One way to begin reducing costs is by looking at your bookkeeping. Sadly, you can't do away with it altogether because you are required by law to provide details of your financial status to the ATO each year. The good news is that there are ways to keep your bookkeeping costs down while staying compliant.
Business accounting software can simplify your life as a business owner. From companies with more complex finances through to relatively simple sole trader or small partnership businesses, anyone can benefit from accounting software. In fact, it is equally beneficial to those who are sole traders, tradies, or people who are setting up a business at home as it is too much larger businesses.
Having online accounting software such as Xero, MYOB or QuickBooks can go a long way toward reducing your business costs. When you are working by yourself or with only a few people, you want to spend as much of your time and energy as possible focusing on your work. With bookkeeping software, you can free up time by automating some of your business's more routine bookkeeping tasks. Some accounting software even comes with an app. This will usually allow you to create an invoice, pay a bill, or store receipts from your phone. The beauty of this is that the software can store electronic invoices in real-time. An app also makes it much easier to keep up to date with your paperwork. It also allows you an instant financial snapshot of your income, expenses and your account balance any time you want.
Accounting software vastly reduces the amount of time you have to spend face-to-face with your bookkeeper. By allowing your bookkeeper access to the software, they can examine your financial record. They can then download transactions directly from your bank account to compose accurate financial statements. They can see how your business is performing at any given moment. Accounting software also integrates bank feeds in real-time so that your bookkeeper can also view, edit and add notes to statements whenever necessary.
Software such as Xero and MYOB come with various options or add-ons, so they are flexible enough to handle the more complex needs of a growing business. As your business thrives, your software can keep up with the higher demands.
Of course, even if you are keeping up with recording your invoicing and expenses, it is still a huge advantage to have a bookkeeper. The bookkeeper’s primary role is to ensure your records are kept up-to-date, accurate, and in compliance with tax laws. They record incomings and outgoings, prepare and lodge BAS statements and other financial reports, reconcile reports to bank statements, and more.
A good bookkeeper understands the compliance requirements of your business and ensures paperwork is recorded correctly and lodged appropriately. They are up-to-date with the ever-changing Australian tax laws and have expertise in which are the most effective and efficient accounting systems. They also provide improved business reporting to assist you in making the best decisions for your business.
More than this, a bookkeeper can help you in areas of financial management such as job costing and budgeting. Budgeting for fixed costs is relatively easy because these always fall into a predictable range. In terms of budgeting, the bookkeeper’s real value lies in budget variance. When your budget forecast and your actual expenses and income are at odds, your bookkeeper can analyse variances and help to explain how and why they occurred. Identifying the causes will help you to make the necessary changes and so increase profitability.
Learn more about budgeting with our how-to budgeting blog.
Unless you have a very large company, a bookkeeper or accountant will not be needed every day, so it does not make financial sense for most small to medium businesses to employ a bookkeeper on a permanent basis. The solution is to outsource this work.
You can save a lot of money by contacting your bookkeeper when needed. This may be once a month, or quarterly, depending on the size, structure and complexity of your business. Your bookkeeper will help you with items such as monthly, quarterly or annual profit and loss reporting, general ledger and GST reconciliation, payroll, balance sheet reporting, and accounts payable and receivable.
This way you enjoy the benefits of having a qualified professional with the appropriate expertise do your books without the expense of employing them on a permanent basis. They are up-to-date with the latest tax laws and will ensure your business complies with all the requirements of the ATO.
It is easy for small and medium businesses owners to become complacent in some areas when running a business. Most time and effort are focused on the day-to-day running of the business. Without proper financial management, business owners may not be able to identify the exact causes of reduced profit margins. They may simply put it down to being a natural shortcoming of their type of business. In such cases, they have been losing money unnecessarily.
However, as a result of the 2020 pandemic, many businesses have had to examine their businesses in detail and even re-think how they do business. They have been forced to carefully evaluate what old practices still work and which ones don’t. People have had to be creative and innovative in adapting their business in order to survive.
While this has been relatively easy for a few, for most people it is difficult to see exactly how to do this. This is another area where a bookkeeper can help you. Your bookkeeper understands where and how your income comes from and what expenses you have. They can also see how your business changes over time and how it is coping with the changes going on around it. What was successful last year may not be successful this year or the next. By analysing your figures, your bookkeeper may alert you to changes, both positive and negative, before you have even noticed them. Providing you with this insight, allows you to navigate ahead and keep your business relevant and profitable.
Not sure what a bookkeeper is or if you need one? Here’s our beginners’ guide to all things bookkeeping for small businesses.
