As a business owner, it will not be a good idea to handle bookkeeping. You have to keep track of all the receipts, understand the cash flow, and file tax returns. Instead, you should hire a professional bookkeeper or an accountant. But, before that, you should know the key differences between bookkeeping and accounting. So In this blog, we cover the fundamentals of small business bookkeeping and accounting.
Both jobs involve recording financial transactions and tracking the company’s financial condition, but there are differences between the two positions.
Bookkeeping serves as the basis for accounting. Various administrative tasks involved such as daily expense tracking, bank account reconciliation, keeping financial records, and expense categorizing . Bookkeeping services Perth also involve payroll management, invoice management, and paying the suppliers. Thus, bookkeepers take care of many other business aspects. But, fortunately, you can automate small business bookkeeping that can save ample time.
The method of accounting gets built on the foundation of the financial information that a bookkeeper supplies. In Perth, various accounting services will involve preparing financial statements, cost analysis, and also ensuring if the business is ready for filing tax returns.
An accountant also provides valuable suggestions about the budget and helps to plan future investments. If you want to handle the accounting duties for your small business, you can also choose to automate the bookkeeping tasks or select outsourcing services for it.
One point to note here is that as the business owner, it will be better to become familiar with GAAP or Generally Accepted Accounting Principles. It is not a law but will help you to measure and present the finances of your company.
Before setting up an accounting and bookkeeping method for your Perth-based small business, you should focus on doing the following tasks first.
Opening a separate bank account for the business will simplify your accounting to keep the personal and business finances separate. Otherwise, it will be very challenging to keep monitoring the cash flow of the company. To open a business account, you have to apply with an EIN or social security number, a good standing certificate, and other information.
You have to keep your tax-related records at least for five years, as per the ATO recommendations. For insurance providers or creditors, you may have to keep them even longer. So, you should keep receipt copies, copies of bills, invoices, tax returns, and payment proofs.
There are some basic accounting terms that you must know, which includes:
There are three types of financial reports you should be aware of.
With your company growing, you will come across more challenges. So, it will be better to know different ways that you can choose.
In the case of cash-dependent accounting, you will record monetary transactions only when you receive payment. It is more suitable for small business inventory management as it gives a clear idea about the cash flow. While, in an accrual-basis method, you have to record the transactions whenever an exchange occurs. It can be suitable for managing inventories in start-ups.
For balancing books, accounting software will be beneficial. In this digital period, there is high competition, and it is better not to use manual data entry methods anymore.
You can think of two ways that can make your bookkeeping simple.
Receipt scanners can catalogue the receipts for your convenience, but you should be aware of their occasional malfunctioning.
This service will send you timely reminders about uploading the receipt.
If you cannot afford to keep a bookkeeper or accountant in your company, you can also think outsourcing services. So freelancers can do the job for you at a lower rate. And if you are determined to do the job yourself, you should categorize your accounting tasks into four segments – daily/weekly, monthly, quarterly, and yearly. For guidance, Bookkeeping Perth is there for you.