Drowning in
Business Paperwork?
Get bookkeeping packages to keep your finances organized,
so you can focus on growing your business
Vi Nguyen, CA (ANZ), CPA (USA)
Avoid a world of pain by getting your bookkeeping done right.
What is bookkeeping?
Bookkeeping is quite simply recording what happens in your business in a set ‘accounting’ format, known casually as ‘doing the books’.
Let’s say you’re running a business.
As part of this business you deliver video production services for weddings and events. But for extra cash, you also sell some camera equipment through a marketplace, like eBay. To get that equipment to sell, you buy equipment at wholesale prices.
Also, during the week you purchase subscriptions to software to do some video editing. On the weekend, you have been booked to capture video for a wedding. You travelled to the venue by car with all your equipment in tow and hired some contractors to help you out for the two days. Phew, it was a long weekend!
These are business activities and every one of those activities needs to be recorded in a format that’s suitable so that later on, you can calculate your taxes and more.
This is where accounting records come in…
The activities that you’re doing in your business need to be capture into records and this is generally achieved through the use of accounting software (not a spreadsheet!).
Accounting software can typically generate invoices, but also has a record keeping system that means things like dates, description, amount etc… can be categorized.
Let’s see how this works with the activities shown above:
Video production services for weddings and events → invoice for services, that’s proof of the sale. Then receipt the money when it comes in, that’s proof of payment.
Selling camera equipment through eBay → like the above, invoice for the sale.
Buying equipment at wholesale prices and purchasing software subscriptions → record the cost (you should have the invoice when you buy the equipment). This spending needs to be recorded, so you record the details of your bills for payment. When you make the payment, you record it against the bill as proof of payment.
Weekend wedding shoot → there’s a lot going on here, so let’s split it up. The invoicing and payment for the sale of your video capturing services for the wedding. Recording your car trip – the odometer start and end, recording your fuel costs, and if you’re using your car for business and personal, you’ll need car costs for apportioning so other car details like rental or purchase cost, insurance costs etc… The bills from your contractors also need to be recorded.
We’ve only gone a week and there’s already a lot that needs to be captured in records!
Why bother with all this record keeping?
This does look tedious and looks like a lot of work. Do I really need to maintain records for my small business?
The answer to that is absolutely “Yes”. Why? It’s legally required – see here: ATO record keeping rules.
Think of bookkeeping as regular maintenance, like keeping a lawn tidy. If you regularly maintain and cut your lawn, it’ll be neat and tidy. But if you leave it for months, there might be problems that you don’t see and it’s more difficult to get it back to a nicer level rather than just keeping it in check regularly.
Plus, it would be crazy to run a business without records as it would be hard to know if you’re making a profit!
If you price your services or products incorrectly, you could unknowingly be working for a tiny margin that you might be better off working as a baby sitter and earning more!
Records in your business are boring sounding, but you’ll be relieved when you get your powerful intel from them.
What does a bookkeeper do?
The bookkeeper captures these records in an accounting system – usually by using accounting software. They may:
- Take your bills and enter in the information from the bill that matters e.g. date, amount, description, due dates etc…
- Generate invoices where needed (or in some software, you might actually generate the invoice yourself)
- Account for the GST component in your bills and invoices
- Do a bank reconciliation – this is where you match up what’s come through your bank account with your invoices and bills. Why? Sometimes, someone might underpay or overpay… or not pay. These require you to act further so it’s important to pick this up and this can often be done through a bank reconciliation.
- Categorize your transactions into accounts – this sounds easy but it can be done in a messy way and incorrect account allocation can be a real mess to fix up!
In a nutshell, they’ll record and categorize the goings on in your business into one source of truth.
Can you do your own bookkeeping?
Yes, I’ve seen many people successfully do their own bookkeeping. A long time ago, bookkeeping software was very technical and difficult to understand and use. However, in this day and age, with much of the accounting software being quite user friendly and cloud-based, with some help, you can manage to do much of the bookkeeping yourself.
Doing the bookkeeping yourself can save quite a bit of money but you also have to factor in your time and commitment in doing the books at a regular schedule.
The risks of DIY bookkeeping
However, if you do your own bookkeeping, and you do it incorrectly (psst… there are many ways it can be done wrong!), it can be costly.
I’ve seen instances where people didn’t know how to use bookkeeping software correctly and doubled up on income, resulting in them paying more in GST. And, if you mess up your books, when it comes to tax time, your accountant may charge more as they spend time fixing up your mistakes.
If doing your own bookkeeping is the way you’d like to go, we do have online bookkeeping courses for small businesses available to help you do your books correctly and avoid the newbie mistakes.
Why many businesses choose professional bookkeeping
Some people prefer to get their bookkeeping done for them. Especially when they’re time poor.
It’s one of those jobs that most people find tedious and easy to procrastinate… leading to paperwork and transactions that pile up until you’ve got 1000s of receipts to catch up on. At this point, you may risk penalties and fines if you have to lodge BAS etc…
Getting a bookkeeper means that you’re more likely to be on top of this.
And typically, the bookkeeper would have the skills to do the job more thoroughly. For example, you know how to clean your teeth, but a dental hygienist, who also cleans teeth, may be able to clean your teeth more thoroughly with the right equipment.
Monthly Bookkeeping Packages for Freelancers, Contractors and Small Businesses
Need Your Business Activity Statements (BAS) Done Too?
What is the difference between accounting and bookkeeping?
An easy way to think about it is the distinction between the dental hygienist and the dentist.
Getting a clean at the dental practice is something you do to maintain the health of your teeth. A clean is a dental service but is performed mainly by the hygienist as they do it often and charge less than the dentist.
The bookkeeper is like the dental hygienist, but instead of maintaining your teeth, they’re maintaining your ‘books’ – the records of your business in your accounting system (housed in your accounting software). The bookkeeper will enter in the financial information needed to keep those records that you’ll need to later figure out if you’re making a profit and the calculation of your taxes. The accountant will use the records that your bookkeeper keeps to do those calculations for your taxes or other calculations.
So, if you have good bookkeeping, it makes the later processes of calculating taxes easier!
Useful Money Stuff Accounting’s Bookkeeping Services
Where we work
Useful Money Stuff Accounting’s business address is in Brisbane, Queensland but we can do bookkeeping throughout all of Australia i.e. Melbourne, Sydney, Perth.
What software we use
We typically recommend using accounting software when doing bookkeeping.
The question I hear a lot is “Can I use Excel to do my accounting/bookkeeping?” Excel and other spreadsheet tools like Google Sheets, is great for when you need a spreadsheet tool to analyze data, but it is not dedicated accounting software!
So while you can technically set up an excel spreadsheet to do an accounting function like a bank reconciliation, it is quite a manual process that is better handled with accounting software.
Useful Money Stuff Accounting uses QuickBooks Online to do bookkeeping because of its value for money. However, if you prefer to use another accounting software like Xero, MYOB, etc… they have experience with a range of software and can typically do your bookkeeping in your own nominated software.
Fees
Our fees can be found in the package descriptions above and depend on the size of your business.