Bookkeeping Basics #1
3 Tips to Making the Most of your Software
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1. CHART OF ACCOUNTS
Your Chart of the Accounts is like the spine of your business. You should have your Chart of Accounts set up by a professional BAS or Tax Agent so that the following can be seen easily: -
a. Your income - this can also be broken down to exact goods or services. However, you should only break down your income into categories if you need this information to grow or direct your business. For instance, you may be a construction company that does both commercial or residential construction. It would be beneficial for your Chart of Accounts to reflect both sources of your income so that you could determine where the majority of your income came from.
b. The same theory applies to your expenses. You should try to separate only the items that you need to track. Again, if you are a construction company, you would not need to split your stationery into categories as you would not need this information. However, you may like to record your expenses against a ‘job’ so that you could track your expenses in relation to certain jobs. This makes certain that your quoting the right price for the job and not losing money.
c. Some of the common mistakes, that we as BAS Agents see, is clients that make their own Chart of Accounts and do not understand the differences between Assets, Liabilities, Income and Expenses. Getting these wrong can greatly affect your Balance Sheet, Profit and Loss and therefore your income tax obligations.
2. KEEP IT UP TO DATE
Keeping your software updated is a safe way to ensure that no-one can steal your money through this platform. The government (ATO) already have the authority to check your bank accounts and records, so not utilising this technology is only affecting you and/or your business. Up to date information can help you to make better business decisions!
For example, you own and run a hairdressing salon. You sell hair products and have two staff members. Do you know when you need your staff members at the salon? Do you know which of your products you make the most money on? This is not really dependent on volume, this is dependent on margins. If you have the ability to connect your business bank accounts to the accounting software, make sure to do so!
3. AUTOMATE AS MUCH AS POSSIBLE
This is the fun part! Depending on what industry you are in, you can utilise the right accounting software with ‘add-ons’ and take advantage of all the artificial intelligence that this will provide to your business. For example, you are in the food and beverage industry. Your ingredients will be a portion of GST FREE and GST included. It can take hours to go through each receipt and invoice to make sure that the GST is portion is correct. Using an app, such as Receipt Bank, this part of the data entry can be automated and pushed straight through to your accounting software.