The small business specialists
Phone: 13 12 49
Creating a system for collecting revenue, paying employees, suppliers, and taxes correctly and on time is part of operating a small business.
You may choose to operate a manual or electronic financial record keeping system, but regardless of its format, it should be simple, easy to understand, reliable, accurate, and provide information when you need it and in an accessible format.
The Australian Taxation Office (ATO) provides a comprehensive guide to record keeping for small business. This is available on the ATO website.
Manual record keeping systems consist of paper based journals for each financial year. They are a good way to learn about bookkeeping and accounting, and keep control of your financial records when you are starting out.
The journals are divided into separate sections for receipts, payments, wages and superannuation, bank reconciliation, inventory and others. You record your business transactions manually in the appropriate sections for each month.
Manual record keeping systems are based on cash accounting principles where you record revenue and expense transactions when they occur.
For example: you record a sale when you actually receive the cash from the client, not when you send the invoice.
Electronic record keeping systems:
For example: you record a sale when you raise the invoice, not when you actually receive the cash from the client.
Using computer accounting programs, you can easily generate orders, invoices, aged debtor reports, financial statements, employee pay records, and inventory reports. Many programs have a direct email facility for sending invoices to clients, orders to suppliers, or BAS returns to the Australian Taxation Office (ATO). Some allow you to monitor actual business performance with financial forecasts.
There are various commercial computer accounting programs available from commercial software retailers. Before purchasing a system, it is advised you discuss the decision with your bookkeeper and accountant to ensure your selection is compatible with the systems they use.
Choose an accounting program that will work for your business. Do some training to gain confidence about using and getting the most out of your system. Also be prepared for the cost of keeping the software up to date.