Articles on best practice bookkeeping.

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Your company is thriving, and you are putting all your effort and hard work to achieve your business goals and your customers are happy. But by the end of the financial year, you also need to make sure you have a balance sheet that also makes you happy as well.

Nothing is worse than finding out that your activity statements haven’t been submitted properly and now the tax office is asking questions you can’t answer. This is exactly why you need someone who can be trusted with your business’ finances.

Bookkeeping is so much more than simple data entry. It’s also checking that everything has been entered correctly and is compliant.

You can either hire bookkeepers, accountants or registered BAS agents. Each option comes with its own benefits. Depending on the needs of your business, you can either hire bookkeepers or BAS agents or bookkeepers who are registered as BAS agents.

For that, you need a bookkeeper who is registered as a BAS Agent. A BAS Agent is the only person who is legally allowed to charge you to prepare and lodge Business Activity Statement.

Why you need to hire a a registered BAS Agent

While a bookkeeper can process, reconcile and report transactions, a BAS Agent can ascertain, advise and represent your company to the Tax Office in relation to a BAS Provision which includes payroll related advice and certainty. A BAS Agent can design the compliance system for your company around GST, as well as the other indirect taxes on the BAS and payroll matters.

A BAS Agent can also thoroughly review the reports of your business and provide certainty to the business about the obligations, entitlements of that business. While your Bookkeeper and BAS Agent can both process” transactions according to the compliance system that applies to the business. A BAS Agent can also design, advise and review your compliance system that sets up a series of precedents or guidelines for how to process or “code” transactions that come into a business.

A registered BAS Agents can handle all bookkeeping responsibilities. BAS agent has proper schooling and qualifications and they strictly follow guidelines and rules. Whereas, anyone can call himself bookkeeper or an accountant.

Bookkeepers can handle a handful of tasks while BAS agents are able to execute plenty of tasks. BAS agents are able more assistance, advice and services when it comes to the ATO, as compared to bookkeepers.

Bookkeepers are good at looking after the book, they can also do things that are related to business finances. Whereas, a registered BAS agent can present, advise, and assist you in a variety of matters due to his knowledge and expertise in the business field. They can help you deal with GST, Tax Payments, FBT Payments, as well as, all other aspects of payroll related to withholding tax amounts.

Next Steps

As a registered BAS Agent Alexilum can help your business ensure you are meeting your compliance obligations and our expertise can help you ensure you are using best practices for your bookkeeping. Contact us today to find out more.

Bookkeeping is more than meeting tax obligations every year. It is a fundamental part of running a business. With your books in a mess so then are your finances. A good bookkeeper makes life easy. Accurate, up-to-date financials means you can plan and make wise decisions.

The bookkeeping world can be a minefield, with not all bookkeepers created equal. The challenge is to find one who exceeds your needs to become an integral part of your team.

So, how do you pick a good bookkeeper?

Registered BAS/IAS Agent

The single most important thing is whether they are a registered BAS/IAS agent. This is easy enough to check. The Tax Practitioners Board (TPB) has a searchable register of all registered Australian bookkeepers.

Anyone who charges to provide BAS services must be registered with the TPB. This ensures they understand tax system compliance, and have the qualifications and experience to do a good job.

The last thing your business needs is for there to be mistakes in BAS/IS reporting for it can cost you if the Tax Office imposes penalties.

More than a Data Entry Monkey

A good bookkeeper is more than a data entry monkey. They can think for themselves, provide analysis and comply with tax legislation. It is important they have the experience to back any claims they make.

Can they answer your questions? Understand and use different types of accounting software? Ask questions when you do not provide enough information? Know where to find the answers to complex situations?

Question and Check Qualifications

To become a BAS Agent, a bookkeeper must have an accounting or bookkeeping qualification. Ask any potential bookkeeper about their qualifications. Do they have any specialist skills? Will these be useful to your business now or in the future?

You need someone who understands debtor control, profit and loss and balance sheets to start with. You may also need someone who can deal with payroll, superannuation and WorkCover.
Services offered

The first thing to do is write down what you want a bookkeeper to do. And, if you are not sure, a good bookkeeper will guide you to ensure you cover all your basic needs. But you may need more than just the basics. For example, you may want them to analyse your data to provide insights on a quarterly basis so you know exactly how your business is tracking. Check they offer a full range of services so you do not need to find someone else to cover specific areas.

Integrity and reliability

Check your potential bookkeeper has integrity. Check their reviews and ask for references to see if they do the right thing for their clients. You want to work with someone who shows you respect, and you can respect and trust in return.

Question their reliability. Will they do the work when you need it done or when it is convenient for them? You do not need the stress of your books getting behind. It can cause all sorts of problems with regular reporting and come tax time.

These are the most important things to keep in mind when picking a good bookkeeper.

Next Steps

Alexilum are experienced and qualified bookkeepers who can assist you in your business. Contact Us Now to find out more.

There are too many people who think bookkeeping is just data entry and figure calling themselves a bookkeeper is an easy way to make a quick buck. The reality is that bookkeeping is much more than this. A bookkeeper should have a good understanding of your business and daily needs. You need someone who can bring experience from their work in the past. Someone willing to become an invaluable working partner for your business.

Your bookkeeper is the keeper of your finances, compliance and tax office reporting. They need to meet company policies as well as local government regulations. You want them to become an important part of your business. Bookkeepers analyse, interpret and code your transactions for compliance with reporting requirements.

When a bookkeeper does a good job, it makes life easy. You can make wise financial decisions as you have an accurate picture of the health of your finances. They can even provide good advice based on the state of your books. But when a bookkeeper fails to complete your books on time or makes mistakes, this can be disastrous for your business.

A good bookkeeper is aware of the principle ‘garbage in, garbage out’. Something that a cheap bookkeeper who only does data entry may not understand or, even know about. You may not provide adequate or correct information at times so need someone working with you who knows when something is not right. Someone who can analyse the situation and knows what questions to ask you to get the information they need. A bookkeeper who ensures your financial records and transactions are always correct.

Australian Tax Office Reporting

Cheap bookkeepers who only do data entry may not have a clue about anything else and may not know the complexities for creating Business and Income Activity Statements. This is not a good thing as these are time consuming and you cannot afford for someone to make mistakes. This can bring trouble with the tax office and cost you more in time, money, worry and stress.

Then there are Taxable Payments Annual Reports which is affecting more and more businesses. These are to report the total payments made to contractors for their services. Someone who can only do data entry cannot complete these with accuracy.

You may make Pay as you go (PAYG) instalments to the tax office towards your annual tax burden. So, you need someone who understands the system to keep an accurate account of PAYG summaries throughout the year.

It is unwise to leave tax office reporting and payments to someone who can only do data entry. These take complex calculations and someone who knows exactly what they are doing. The last thing you need is for your business to fail compliance. This can get you in trouble or behind in payments with the tax office.

When small business owners and solo operators take on bookkeeping themselves, this can be a poor use of time. Hiring a cheap bookkeeper who may only be a data entry monkey can be a disaster. You need an experienced bookkeeper to keep your financials in line to give you peace of mind.

Next Steps

Alexilum is a registered BAS Agent, Xero Silver Partner & Certified, MYOB Partner & Quickbooks Certified – We have the experience to take care of your bookkeeping needs from Brisbane to anywhere in Australia. Contact Us Now to find out more.

In your business, it’s important to make smart financial decisions. Many include finding ways to cut costs, increase your margins, and ways to make sure you are maximising your profit while adding value to your customers.

It can be a temptation to find cheaper services for your business. It might even be a good decision, like a more affordable cleaning service for your office. If the service does not meet your expectations, you can easily find another service that provides good value for a good price. It’s a small risk. But clearly, there are certain services that can be perilous if you try to save money on the short-term but suffer bigger losses in the long-term. Bookkeeping is one of those services and this article explores why cheap bookkeepers are not a better value.

Valuable Bookkeepers Get the Job Done Right the First Time

Bookkeepers organise and keep track of the expenses and cash flow of your business. A good one will make sure everything is accounted for, that every expense gets directed to the right account, and prepares financial information to make sure you are informed of the finances of your business.

A cheap bookkeeper does not have the same experience and value as a seasoned and trained bookkeeper. Because of this, you may risk the chance that financial information is processed incorrectly. This will ultimately raise the prices of your accountant to fix these mistakes. In the long run, you may lose money on the “cheaper” service.

Good Bookkeepers Ask Great Questions

One difference between a valuable bookkeeper and a cheap one is their questions. A valuable bookkeeper will do his/her homework about your business, learning the ins and outs of your finances, cash flow, and industry standards. They will ask questions that will improve the way you run your business, encouraging innovative ways to record, interpret and process financial information. If you hire a cheap bookkeeper, you run the risk that they will do the minimum required for your business, eliminating the opportunity you have to grow.

Cheap Bookkeepers Won’t Add Input

Cheap bookkeepers are focused on getting the job done quickly with a quality that reflects the price you paid for. A good bookkeeper will understand your financial reports and find ways to improve the business.

Cheap Bookkeepers Can Be Unreliable

Cheap bookkeepers tend to be unreliable with communication, with no timely responses to your emails and vital questions. They are often behind on the books and at fault when payments bounce, neglecting the cash flow of your business. Your bookkeeping software might have a significant amount of old transactions. All this inconsistency can prevent your business to adequately record financial information and can ultimately hinder your business.

Cheap Bookkeepers Cost a Lot of Money

Ultimately, with the possibility of a higher accountants cost, expenses accrued from late bills or mishandling finances, and inaccurate financial reports and data, cheap bookkeepers can cost you a lot of money and headaches. It’s worth getting a quality bookkeeper. It’s one area in your business that you don’t want to skim. After all, would you chose the cheaper doctor or the quality doctor when you get sick?

Great bookkeeping will always add value to your business. That’s why at Alexilum, we are committed to providing quality to all our customers. We work with countless industries, endless system implementations, and provide outstanding communication to find your need and opportunities. Through needs analysis, process design and loyal confidentiality, we would love to partner with you to provide an outstanding bookkeeping service.

Contact us today to find out more about how we can help your business.

We’ve previously discussed why you should keep your business and personal finances separate, now there’s another reason.

The Australian Taxation Office (ATO) has announced that they will target business owners with unexplained wealth. In an attempt to recover and minimise lost revenue, it warns careless reporting is not acceptable. Making incorrect small claims can add up to more than $2.5 billion a year in unpaid taxes. While the small cases may not seem worthwhile on an individual basis, it adds up to a huge gap in revenue every year.

The ATO’s data matching tools are unparalleled in Australia, now the ATO is using social media to track people’s lifestyles. New systems allow it to see discrepancies between claims and what it sees on social media. An example is someone claiming a low income, but when checking social media the person has photos of their expensive toys online. Claiming a family holiday as a business expense may also have the ATO questioning your unexplained wealth which could lead to a ‘please explain’ letter.

No longer will it be so easy to claim a spouse and child joining you on overseas business trips as a tax write off. While the business completed on the trip may only take a few days, family are not involved in this. Some people use a business account to pay for everything or claim the whole family trip as a business-related expense. The ATO sees these as opportunistic claims and people need to keep clear records that separate personal from business expenses.

Use Business Bank Accounts Only for Business Expenses

We’ve discussed why you should keep personal an business finances separate before and this is the easiest way to draw a clear line between business and personal expenses.

The ATO is focusing on travel claims so it is important to use business bank accounts only for business. Many fall into the trap of using a business account when mixing business with pleasure, while some intend to pay back the business from a personal account, it can be difficult to reconcile. When this happens, you need the services of a good bookkeeper to reconcile bank accounts according to the receipts. If not, it is easy to forget the difference between business and personal claims when it comes to doing your tax.

Beware of posting photos having fun on business trips on social media. It is not known how the ATO plans to track social media accounts to look at business owner’s lifestyles. But people have a habit of posting everything they do for the world to see. Everything you post becomes public knowledge.

An example the ATO uses of unexplained wealth is a family business with the parents claiming only $65,000 and $55,000 taxable earnings but their children attend private schools and the family goes on holiday overseas every year. If the ATO thinks something isn’t right they can check Facebook for more information when it suspects business claims do not add up.

People need to make sure any business expenses claimed are actually business-related. If not, they may receive a letter from the ATO asking for an explanation. The letter will include a schedule containing the information from your tax return, data it has and any discrepancies.

The best way to keep business accounts up-to-date is to have a good bookkeeper to keep business accounts updated.

Get Compliant

If you would like us to check your books to ensure compliance please contact us now for a free consultation on how we can help you.

We’ve previously discussed that sometimes the three core financial reports are not always enough to understand your business.

If you want to know where various departments in your organisation currently stand or you want to focus on specific aspects of your business, you need proper custom reporting.

Custom business reports are an important tool to increase efficiency and effectiveness in you day-to-day business operations. It supports organisational decision making and tells you the right questions to ask, by providing you access to the right information. When data is laid out in detail for each department, it is easy to understand, and it give you the information you need at a glance without going into the details or meeting with the department head every day.

By giving your staff the tools to monitor their performance on a weekly or monthly basis, you are able to make informed decisions at all levels of the organisation.

Custom business reporting improves the quality and transparency of information for key stakeholders in the company and allows them to make better informed decisions for the company. When you switch your focus from historical financial information (acquired from Balance Sheet, Profit and Loss Statement, Cash Flow Statement) that often fails at providing a more detailed picture of your business to incorporating relevant value drivers, management’s strategy, plans, opportunities, and risks, financial and non-financial performance measures, you are in a better position to make decisions for your business.

This improved custom business reporting model delivers a broader view of you organisation’s current performance and greater understanding of an entity’s future and what lies ahead for it. By looking at key aspects of your business you can create custom reporting to give you insights into what’s going on. You can look at using industry ratios as a starting point, such as the cost of wages per unit produced, total sales, total expense, etc.

Bookkeeping Charting

Custom business reports save you a lot of time. It helps you get exactly the information you are looking for in exactly the format you require it. Custom reports lay out information the way you want to see it. You can draw information from other databases into one place for you to assess the performance of your business and what steps are necessary to take in win future leads.

So, if you are looking for an efficient, quicker and reliable way to analyse your organisations’ profitability, custom business reporting contact Alexilum now to help you out.

Giving bonuses can be a great tool as an incentive for employees’s to improve performance or even reduce costs. It’s important to establish a measurable guide that the bonuses will be based upon otherwise they may see it as just another part of their pay and expect it without any effort.

Motivation

The most common types of bonuses are based on sales made, but you can be creative with what you base your bonuses on to achieve specific outcomes. If you are tying bonuses to a specific outcome remember that it should be something the employee has control over otherwise there will be no motivation to do things better.

  • If you are aiming to improve sales, bonuses could be calculated either as a percentage of those sales or a fixed amount for each sale made.
  • If you are looking to reduce wastage, bonuses could be calculated based on the weight of material saved.

Start by identifying what the outcome should be and work out how that could be achieved. Then look at how staff specifically contribute to that outcome and how you could measure that contribution. From there it’s an easy step to work out how you could tie staff bonuses to that outcome.

Calculation

For example your goal might be to increase profitability. Using our examples above we have identified that this can be done in two ways, firstly by increasing sales and secondly by decreasing wastage. Sales people might be rewarded with a 5% bonus on all sales above last years figures. Production staff might be rewarded with 10% of the cost of the reduced amount of product wasted compared to last year. As staff are motivated to either increase sales and reduce wastage costs the overall profitability will be improved.

While most bonuses tend to be monetary you could also offer non-monetary rewards such as shares, weekends away, free dinners etc.

Bookkeeping New Staff

Compliance

Keep in mind that bonuses should be shown on a separate line on employee payslips over their normal wages. Also check that while most bonuses are not considered normal hours they can be considered as normal wages for the purposes of calculating superannuation.

Communication

Ensure you communicate clearly with staff about who is eligible for each bonus type, how it is calculated and when bonus payments will be made so there is no confusion or disappointment when bonus time comes around.

Bonus plans that are poorly communicated seldom motivate your employees. Employees consider bonus programs that are not clearly stated as suspicious.

Bonuses can increase productivity, motivation, and hard work among your employees. They can really drive a team to excel; but if it is poorly managed, they can actually make employees feel discouraged and dissatisfied. If your aim is to drive employee behaviour, you must pay bonuses promptly. Show your employees the emotional connection between their behaviour / performance and the reward. Make sure your employees receive bonuses bonus within the agreed time frame. By paying the bonus promptly, you make it easier to publicise the win that led to that bonus.

Next Steps

Contact us today if you need help with calculating your staff bonuses or any obligations that go with that.

The Standard Financial Reports

Recently we wrote about looking beyond the profit & loss report and understanding the role of the three core financial reports:

  • The profit & loss report shows the financial performance of the business over a period of time
  • The balance sheet shows the financial position of the business at a set point in time
  • The cash flow shows cash movement of the business over a period of time

Custom Reporting

While these provide a good overview of your businesses financial situation the structure of your accounts might still be hiding unseen issues or might not give you the answers you need to make the right decisions.

When you need to find the answer to a specific question or you need to focus on a single aspect of your business the three core financial reports may be too high and may not give you the answers you need.

This is where we need to start digging deeper and start getting into custom reporting that allows you to focus on certain aspects of your business. For example you may look at a profit and loss report that only shows:

  • Data within a specific time frame. For example you may have had a sale on and you need to check the performance of sales in that period compared to a similar period to see what the impact was.
  • Data for a specific division or department. You might have different departments, by looking at each department individually you can see how they are performing independently of the others.
  • Data for a specific region or store. If you have multiple stores one may be making a loss without you knowing it unless you can run reporting that focuses specifically on that store.
  • Data for a specific product. Check the performance of a given product by focusing on those sales only.

Knowing how you may need to ‘slice and dice’ your reporting means you can set everything up from the beginning to allow this. Most bookkeeping systems will allow you to categorise your transactions which you can then use as filters later on and focus on a given aspect of your business.

Bookkeeping Charting

Flexible custom reporting allows you to focus on the relevant information without the need to sift through huge amounts of data you don’t need, or accidentally exclude important information. You are able to drill down into fine details and discover possible insights you would not see otherwise. When you can break your data down into metrics that matter for your business, you can make smarter decisions and eliminate guesswork.

Key Requirements for Custom Reporting

Custom reporting relies on a few key requirements:

  1. Understanding what you are looking for – By either knowing the specific question you want answered or by at least specifying what particular aspect of the business you want to focus on we can determine what data to include or exclude from the report.
  2. Setting your data up for success – The reporting you can get out of a system is only as good as the quality of the data going into it. If you are not categorising your data entry or using the correct information there is no way to answer the first requirement above without manually sifting through the data to find what is relevant.

Running the Report

Most bookkeeping platforms like Xero, MYOB and QuickBooks have the ability to customise reports to a certain degree. Most will also allow you to filter your data based on categories you’ve set up.

If you’re stuck about how to set up your bookkeeping to get the most out of the information you’re putting in contact the team at Alexilum to help you use your data to answer the questions you’ve been looking for.

We can also create custom reports that are as individual as your business by using your data with our specialised tools and dig even deeper than what your bookkeeping system can do.

Making sure you have captured all the right information when starting a new staff member can save a lot of headaches later on and it’s easy to miss those details during the hectic first days and weeks when a new staff member begins.

The process begins before you even hold your first interview. Obviously by this stage you’ll have an idea of what kind of role you will be hiring for but have you written a position description? Having a well thought out position description can be helpful through out the entire process. Firstly it will help you define exactly what the responsibilities will be for that role so you have a good understanding of what to expect and what kind of applicant might be suitable. It can then be used to help you put together a thorough advertisement that will inform new applicants exactly what the position is about. If the new employee will be working under an award it can help you select the most appropriate minimum pay level by comparing it to the award classifications. The position description should then be provided to the employee as part of their employment agreement. Later on it can also be used as part of annual reviews as responsibilities may change or you want to gauge performance against their duties.

The next thing to consider is the employee agreement. You won’t be able to have this completed before hiring but you should have it mostly complete with the exception of some specific details. The employee agreement works hand in hand with the position description to give the employee a really good understanding of the expectations within the work environment and their role. The agreement should stipulate the employees details, their start date, the terms of their employment, remuneration and finally it might also lay out additional obligations like confidentiality.

Bookkeeping New Staff Interview

Starting a new job is stressful for most people so the first day is a good time to go through paperwork and gathering all of the required information rather than trying to go through job integral tasks.

As part of your welcome pack you should make sure you are getting the following information:

  • Employee Details – including legal name and address which is required for proper display on pay slips and end of payroll year reporting. Additionally you will want contact details such as a home or mobile number and a personal email address can also be helpful.
  • Tax Declaration Form – this is important for the preparation of pays and the calculation of tax withholding.
  • Bank Account Details – so you know where to transfer funds to, your system may also allow employees to have their pays made to multiple accounts.
  • Superannuation Fund Details – as there are regulated dates superannuation needs to be paid by you should get this information as soon as possible.
  • Emergency Contact Details – in case there is an issue you have other contacts you can call.

Depending on your work scenario there is other optional information that could be helpful:

  • Uniform Sizes – if your work provides these
  • Availability – for part time or casual employees

You might put together a hard copy pack of forms to capture the above information or you might be able to capture it online.

Our payroll system we use with our clients allows you to send out an email with a link to new employees so they can fill in all of this information online, straight into the payroll system. This reduces the chance of information being mistyped and saves you time as the employee puts their details straight into the payroll system. Once the employee has entered their information into the payroll system you can then double check everything and submit their tax declaration straight to the ATO online.

 

If you would like to find out more about how to capture the right information with your staff contact us today so we can help simplify your payroll process while you take care of business.

When I ask business owners about how things are going they generally say their profit and loss looks pretty good. The problem is that’s the only financial report that they look at and while it’s an important indicator on your business performance it doesn’t tell the whole story.

If you want to properly understand how your business is faring you need to look at three core financial reports:

  • Profit & Loss – also known as profit & loss report, statement of profit & loss or income statement
  • Balance Sheet – also known as a balance sheet report or statement of financial position
  • Cash Flow – also known as a cash flow report or statement of cashflow

All three reports are actually related and while each one focuses on a different aspect of your financial situation they work together to help you understand the overall picture.

Below we discuss all three reports and find out the reasons why business owners and managers need to look at them regularly.

Profit & Loss

The Profit & Loss report shows your financial performance over a period of time. It is made of two core sections, your income (also called revenue) and expenses. Depending on the type of business you have your expenses might be split into two sub-sections, cost of goods sold and general expenses otherwise it will just be one section called expenses.

  • Income/Revenue represents sales you have made
  • Expenses represents costs you have incurred
  • Cost of Goods Sold is a sub-type of expenses and is generally a type of expense when you sell physical goods
  • Profit is calculated as Income less Expenses and will give you either a Net Profit or a Net Loss figure

While this report is good at telling you what your sales and expenses have been it doesn’t tell you everything about your business, for example it doesn’t tell you if you owe someone money. It also doesn’t necessarily tell you how much money is coming in and out of your bank account.

Bookkeeping Analysis

Balance Sheet

The Balance Sheet represents the current financial position of your business at a fixed point in time. It’s generally set out in three sections:

  • Assets – This is anything that the business owns or is owed ie: your cash at the bank, furniture and equipment, sales you’ve made but haven’t been paid for yet
  • Liabilities – This is anything that the business owes someone else ie: a loan to a bank, superannuation you haven’t paid yet, purchases you haven’t paid for
  • Equity – This is the difference between Assets and Liabilities and represents the value to the owners

By understanding your Balance Sheet you can see what your current financial position is. For example generally if you have more assets than liabilities that would be a good position because it shows you have the capacity to pay off your debts while if your liabilities were higher than your assets you could have problems looming up ahead.

Bookkeeping Calculation

Cash Flow

The Cash Flow report shows what money is coming in and out of a business over a period of time. A lot of people think that the Profit & Loss report shows how much money is coming in and out of the business. This is not necessarily correct depending on how your bookkeeping is set up ie: if you buy some goods but don’t pay for them it might show as an expense on your Profit & Loss but in actual fact the money hasn’t been paid out yet, the same would go for sales made but you haven’t received payment yet.

The Cash Flow report specifically only looks at what cash is coming in and out of your business irrespective of what sales and expenses are appearing on the Profit & Loss report.

There are many different Cash Flow report formats and they tend to vary depending on your bookkeeping software. Generally though it will show how much money you have at the beginning of the period, what money has come in, what has been spent and how much is at the end.

Bringing it all Together

By understanding not only how each report looks at a different aspect of your business but by also understanding how they work together you can get a much better understanding of where you are financially.

If you would like some help on better understanding your own business contact us today and we can show you how to get the most out of your bookkeeping.