Good Bookkeeping Makes Good Business Sense

Every small business owner in and around Mandurah, Dudley Park, Coodanup, Greenfields, Erskine, Pinjarra and Meadow Springs, in Western Australia needs to keep records. Why? Because it’s a legal requirement. Many business owners choose to outsource their bookkeeping requirements using our mobile bookeeping services. Contact us for more information

The Australian Taxation Office (ATO) requires you to keep business records:

• for five years after they are prepared, obtained or the transactions completed (whichever occurs later), and
• in English, or in a form that the ATO can access and understand in order to determine your tax liability.

You should keep records for a longer period if you use information from those records in a later tax return (for example, claiming a loss carried forward from a business activity in an earlier year). The records should be kept until the end of any period of review for that later return.

Records relating to assets for capital gains tax purposes may also need to be kept for a longer period. You can issue and store records in either paper or electronic form.

There are penalties for not maintaining the required records and for not keeping them for five years. Keeping good records will help you avoid these penalties.

Keeping good Business Records Makes for Good Business
By having an organised set of records, you’ll find it so much easier to:

• complete your Business Activity Statements (BAS) and prepare your annual tax returns

• monitor the health of your business
• make sound business decisions, for example, by keeping track of debtors and creditors to ensure your cash flow is adequate
• demonstrate your financial position to banks and other lenders, and also to prospective buyers of your business, and
• make best use of your tax adviser.

Rather than paying an accountant or tax agent to sort through a shoebox of paperwork, outsource a freelance mobile bookkeeping service, or have professional bookkeepers come into your premises to generate well prepared records. That way you can present all the necessary information to your accountant or tax agent who can then advise you accordingly

As bookkeepers we continually see the importance of monitoring the progress of your business. By having good records you can quickly see where your business is improving, or what parts of your business may need some changes. Your bookkeeper is an essential part of your business, and therefore should be regarded as a necessary investment not an unnecessary expense

Identifying sources of your receipts
Most businesses have money coming in from a number of sources, and you’ll be spending money on both personal and business items. You need to identify and differentiate your business and personal expenses, so that your bookkeeping accurately reflects the costs incurred in running your business

Accurate Financial Statements
Your bookkeeper should be able to quickly prepare accurate financial statenments when called upon so to do. These may include balance sheets and income(profit and loss) statements. The P & L shows your income and expenses for a given time frame. The balance sheet shows your assets, liabilities and equities for a specific date

Legitimate Expenses
The ATO recognise that there are legitimate expenses incurred in running your business. Any claims that you make for deductions need to be substantiated. By keeping your bookwork in order, having your bookkeeper file all the relevant documentation in order will be important when the Tax office conducts an audit in your business.

Preparation of Tax Returns
Just as you need to support claims for legitimate expenses, your bookkeeper needs to record the income coming into your business. By having an efficient tax system in place, you’ll be able to track all income, expenses, and credits for your tax returns.

Keeping separate records for each business
It can be tempting to record all of your business activities in the same set of accounts. However, what happens if you decide to sell one of your businesses? How do you show which business is generating what income.

The type of business you operate affects the type of records you need to keep for ATO purposes. You should set up your books using an accounting method that clearly shows your income for your selected tax year. You may choose to use an accounting software package such as MYOB or Quickbooks. Contact our team of mobile freelance professional bookkeepers for more information.