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Why You Can’t Afford to Be Bad at Bookkeeping

Why You Can’t Afford to Be Bad at Bookkeeping

Maintaining your books isn’t something you should do solely as a tax-savings strategy; it can also prevent you from losing your sanity and getting dragged into a potential lawsuit over commingling your funds. Here are five significant reasons for maintaining a separate chequebook and set of books for each of your businesses:

  1. Corporate veil .First and foremost, maintaining a separate account substantiates the corporate veil, one of the primary reasons for operating under a company. Having a separate account shows you recognise the company is its own distinct entity. Furthermore, separate accounts will hopefully encourage you not to commingle personal and business funds.
  2. Tax savings. Separate banking will improve bookkeeping procedures, prevent payments from being missed, and provide better records to improve your tax return.
  3. Audit protection.Having a separate account will improve your chances in an ATO audit. The ATO will often disallow a number of expenses when personal and business expenses are commingled in a single account.
  4. Less stress and more sanity.One might think having separate accounts and bookkeeping for a new company is cumbersome, unnecessary, and possibly even a waste of time. In fact, this procedure saves time and money in the long run. When your books are disorganized, you’ll feel constant stress to take care of it, and this ultimately can cause you to feel undone.
  5. Improved decision making.Having a separate account starts the process of better bookkeeping, expense tracking, and budgeting, which leads to quality decision making. How can you expect to be a successful business owner without accurate records? You owe it to yourself and your business to keep good books.

The next step is implementing a system for tracking income and expenses. It’s absolutely critical for small-business owners to at least consider one of the many software packages available. Most are affordable, user-friendly, efficient, and effective. Here are just a few things that the right software can do to help you become a better, smarter business owner:

  • Keep essential information at your fingertips. Generate reports that allow you to easily stay abreast of your business’s most important financial information, like profit and loss by product or property, accounts receivable by customer, sales reports, or expense reports.
  • Better use of your online banking system.  Most software coordinate with most banks, even lesser-known ones, to provide instantaneous information so you can download transactions and reconcile your data with ease.
  • Collect more of your accounts receivable. Generate professional-looking invoices that can be delivered via email and offer your customers the option to make online payments. You can also generate statements and create various reports to determine who your high-risk customers are for collection purposes and to help you make better decisions regarding your accounts receivable.
  • Delegate your accounting services with ease. If you are the type that hates bookkeeping, once you understand the basics you can delegate tasks, from reconciling to overseeing financial reporting. Most software will even allow your Accountant to log in online to access your financial data while doing your accounting.
  • Pay your business bills efficiently. Track your accounts payable so you can better manage your cash flow and pay bills when it’s most convenient for you. 
  • Access your financial information anywhere. Most packages allow you or your accountant to access your books anywhere you have an internet connection.
  • Use scanning software to track receipts. Scan in receipts through a service like Receipt Bank, which immediately records and categorizes the information in your software. You can then keep a copy in your cloud storage of all receipts and contracts for audit and legal protection.

Get help implementing your accounting system

Be honest with yourself: Do you want to do the bookkeeping for your business ? If so, great. But if not, who’s going to do it ? Have a plan !  Look at yourself in the mirror and assess your level of dedication, knowledge, and available time to implement and maintain your books. However, while it’s fine if you have someone else do the dirty work, you still need a general understanding of the process and accounting system so that you, as the captain of your team, can oversee the process.

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