Keeping proper tax records means you’ll save on accounting bills and be able to claim the maximum deductions. These bookkeeping tips will help get you organised!
Use a dedicated business bank account and credit card
If you don’t already have a business bank account, I suggest you open one and pay all your expenses through it. Make sure you don’t use it for personal expenses, because going through personal statements and trying to find the business expenses is very time consuming and costly.
Always use the business account or business credit card to pay your work expenses. Try not to pay for anything with cash, because it’s harder to track and cannot be reconciled to your bank statement. If you do pay for goods with cash put the receipts together in a folder.
If you end up paying for some of your business goods or services with a personal credit card, you need to note these on your credit card statement and attach the receipt.
Use numbered invoices and purchase orders in sequential order so you can track and investigate any potential problems. Create a filing system and start new folders each financial year. File your accounts into the correct folders on a regular basis. The tax office requires you to keep certain records for a minimum of 5 years.
It’s really difficult to remember how and when you paid for goods or services after some time has passed. Make sure you keep copies of invoices for bills paid and file them together, either in alphabetical or payment date order (attach the bills to the purchase orders). Do the same for the invoices you send to your clients, and keep a hard copy on file.
Keep a written log for any travel expenses, noting the dates you were away and the meetings you attended, as the tax office may request this information.
Have a logbook of any business mileage incurred whilst driving your personal vehicle. There are various methods that the tax office advises you can use and you need to investigate which method best suits your business.
If you have a home office you can claim part of your cleaning, rent and utilities as a deduction, so you need to keep these records as well.
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Put systems in place
A good accounting computer system will save you time and money in the long term. Use a chart of accounts to enter your transactions into the bookkeeping system. You might also like to get some help with your bookkeeping; it could save you many hours of work and free you up to be more productive.
Once you have a great system in place, make sure you review your financials each month so that you understand how your business is going. If you’re unsure about how to do that, seek help from an accountant or bookkeeper.
Are your accounts organised, if so how did you get them that way? Do you have any other questions or bookkeeping tips to share?