Save money with accurate record keeping
Avoid unnecessary costs from your accountant or bookkeeper by getting these ten basics of accurate record keeping right.
1. Year end rollover: Do your figures tally with your accountant’s? At each financial year end, you may need to process a general journal entry to adjust your figures so they match your accountant’s financial reports. Adjusting incorrect balances means you’ll have an accurate starting point for the current financial year.
2. Bank reconciliations: Clear all transactions that are not genuine outstanding deposits or payments. These may include duplicate transactions or those paid from another source such as with cash or credit card. Reconcile all bank accounts, credit cards, bank loans and clearing accounts to ensure data accuracy.
3. Accounts receivable: Review your accounts receivable report regularly and ensure the report amount reconciles to the total balance sheet account. Investigate and correct any anomalies. Check all outstanding receivables are correct and write off any bad debts.
4. Accounts payables: As with your accounts receivable account, review your payables report regularly to ensure its accuracy and check all outstanding balances are correct.
"Getting the basics of your record keeping correct ensures the integrity and accuracy of your accounting data … [and] will help inform decision making for the future development and growth of your business."
5. PAYG withholding liability: Ensure the balance of this account matches the PAYG Tax Withheld figure on your BAS for the same period. This account should clear to nil on payment of the Business Activity Statement at the end of each month/quarter.
6. Superannuation liability: Ensure the balance of this account matches the amount sent for payment each month/quarter. It is important to pay the correct amount as any late super guarantee contribution payments are no longer tax deductible and could possibly incur penalties.
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7. GST liability: Again it is important to review your general ledger balances and ensure the account is clearing to nil on payment of the Business Activity Statement (non-cash basis only). Consider running a full-year report on completion of your final BAS each year to ensure any prior period adjustments are included.
8. Expense accounts: Review a year-to-date general ledger (detail) report for all expense accounts. Ensure monthly payments for regular expenses, such as telephone, internet and rent are recorded. Check for duplicate entries and ensure adequate memo descriptions are included on all entries to reduce accountant queries.
9. Private use adjustment: Adjust data on expenses for private use, such as telephone, internet and mobile, on a single, monthly or quarterly basis to ensure GST is not over-claimed and your profit and loss report is accurate.
10. Lock the period: Once you have completed your reconciliations, reviewed your data and are relatively confident of its accuracy, lock the period to prevent errors or adjustments.
Getting the basics of your small business record keeping correct ensures the integrity and accuracy of your accounting data, which will not only enable the production of timely and meaningful financial reports, but will help inform decision making for the future development and growth of your business.