Yes, this is another boring article on record keeping. But know this, poor record keeping can be costly, that’s why you need a five star record keeping system.
How much does poor record keeping cost?
- Thousands of dollars in missed tax deductions.
- Thousands of dollars in fines if audited by the ATO.
- Poor business growth as you struggle to monitor your cash flow.
- Insanely high accounting fees.
- Unpaid invoices and mounting debt.
- Business failure, and in extreme cases bankruptcy.
Good record keeping is an investment
As a small business owner it’s imperative that your record keeping is up to scratch. If you haven’t got time to do it yourself then you need to hire someone to do it for you. Don’t worry about the cost, it will pay for itself through a more efficient business.
Top tips for a five star record keeping system
1. Keep your business and personal transactions separate
Many people just starting out in a small business often think it’s not worth getting a separate bank account. But it’s always worth having a separate bank account no matter how big or small your business is. Not only will it make your life easier, but it will make your accountant’s life easier too, potentially decreasing your accounting bill.
Even if you have no sales in the first few years and are using personal funds, still run separate bank accounts, and transfer personal money into your business account as needed.
2. Consider getting separate credit cards
Rather than using your own personal credit card for business expenses, get a separate business credit card. Believe me, your bookkeeping will be so much easier when all your transactions relate solely to your business.
3. Do your bookwork regularly
Manage your time so that you get into a routine of doing bookwork on a weekly basis. It’s important to monitor your profit and loss statement regularly, and this can’t be done if you’re behind in your bookkeeping.
4. Use appropriate accounting software
Depending on the size of your business, your bookkeeping experience and your computer experience; consider embracing cloud accounting.
Accounting packages that use the cloud will cut hours off your monthly bookkeeping as well as helping to keep your accounting fees down.
5. Scan records into the computer and back up your data weekly.
Want more articles like this? Check out the financial management section.
Still not convinced about the importance of keeping good records?
Remember, life can change in an instant! Your business can be sailing along smoothly one day, and then turn upside down the next. Look at the last few years of floods and fires in Australia to see how easily a small business can lose everything, and have to start again.
Natural disasters may seem like a one in a million chance, but consider other more common reasons why up-to-date records are important: The sudden need to borrow money from the bank, family members falling sick, law suits against your business and so on.
If any of these things happen and your business records are not in order, it could be the difference between surviving, selling your business or worst of all, declaring bankruptcy.
What are your top tips for keeping a five star record keeping system?