Over the next 7 blogs, I will outline the steps and things you need to think about when opening a business.
3. Accounting & Back Office Needs
Bookkeeper VS you doing the books
1. My recommendation is if your sales are less than $150,000 then do your own bookkeeping. If they are greater than $150,000 then hire a bookkeeper.
2. You doing the books:
Set aside a few hours a week to keep on top of things
Regularly invoice your customers to ensure cash flow remains steady
Regularly reconcile your books so you know exactly your to date sales, expenses and profit figures
In Sydney, a bookkeeper can charge anywhere between $40-$80 per hour. Usually around the $70 mark.
Generally, this would equate to around $200-$1,000 per month depending on the number of transactions to reconcile.
The good thing about a bookkeeper now is that the bookkeeper does not need to go to your premises to reconcile the books.
Generally bookkeepers just reconcile the bank account and allocate the bank transactions accordingly. At the end of the financial year, the accountant picks up the file, makes the necessary changes and this usually results in quite a large variance. Why? Because accountants reconcile the balance sheet. Without a reconciled balance sheet, the profit & loss statement can never be right. Make sure your bookkeeper reconciles the balance sheet so you know that you are getting correct profit & loss figures.
Accounting software like Xero will generally always save you or the bookkeeper time! Why? Xero links to your bank accounts so that your bank transactions (date, description, amount) will automatically flow into Xero. This means that all you need to do is allocate them to an already setup income or expense account (basically).
Invoicing - instead of invoicing your customers through word or excel, Xero can do this for you. It can:
Prepare a professional looking invoice
Send it to the contact straight away from Xero via email
Record and track whether the invoice is sent, outstanding or paid.
Payroll - Xero has a full payroll suite where it can:
Calculate gross wages, tax withheld, super, net pay
Send payslips to employees
Track leave entitlements for employees
End of year payroll administration like payment summaries
Receipt storage (dropbox, Xero, paper)
When it comes to storing receipts, generally for GST purposes you will need to keep receipts for any transactions over $75 (GST incl.)
You can store them in paper or online
Scan and store them in Xero itself
Scan and store them in an online storage spot like dropbox (free for up to 2GB or storage) or box
Scan and them store them in an external hard drive
If you have scanned copies available, you can bin the physically receipt, no paper!
The beauty about scanning receipts is you don't need to worry about keeping them for 2-5 years for ATO purposes, when they are scanned, you can keep them forever!
The other beauty about scanning is the receipt doesn't fade in colour. A paper copy of a receipt will generally fade over time. If the ATO audits you in the future and your invoice is faded and you need to prove the purchase of that item, the ATO could disallow this.
5. Receipt Bank
receipt bank is a great program if you have lots of paper receipts that you don't want to deal with yourself. It does the following:
You send in the receipt to receipt bank via paper or email
Receipt bank extracts the key information from the receipt
It then publishes the data into your accounting software with a scanned copy of the receipt attached
Pricing - 50 invoices a month will cost $21.95 (GST incl.) per month
6. Separate bank accounts (Cheque, savings, credit card)
A big tip for reducing bookkeeping time is to have separate bank accounts for business and personal. When all your personal transactions appear on your business account, you will need to sort through your bank statements (whether in paper, excel or in an accounting software) and determine which are business and which are personal. If you have a bookkeeping, the bookkeepers fee will be higher if you have lots of personal transactions running through the business accounts.
Change your business direct debits to your business bank account. Things like mobile phone, internet, tolls, motor vehicle direct debits, change all of these to your business bank account. If they come out of your personal bank account, you might run the risk of forgetting about the tax deduction at year-end or when you do your BAS.