If you are operating a small business, one of your responsibilities as a business owner is to make sure that it generates profit. Once ATO deems your business to be more of a hobby than an enterprise, ABN or Australia Business Number will be cancelled. If your business has also violated the terms and conditions of setting up a business and you are no longer operating your business you are most likely to have your ABN cancelled as well.
There are ways to avoid ABN cancellation and as a business owner, you need to make sure that you have a viable plan and effective business management. Even if you are running a small business, you can still make sure that it is going to be in good hands if you consider hiring a bookkeeper.
A bookkeeper prepares the financial statement and report so business owners will have an idea where their business is going. A bookkeeper also gives business owners peace of mind knowing that their business has enough to survive. Although having enough is not a proof that your business is going to be profitable, you will have an idea of the aspects that you still need to improve.
A bookkeeper prevents ABN cancellation by ensuring that you have a steady cash flow. While watching over your cash flow is not deemed be-all-and-end-all of running a business, ensuring that your cash flow is not in danger can help you maintain its stability. With the help of your bookkeeper, your assets and actual liability are going to be separated so you will know the sum of money that goes to your business savings account. It is also easy to determine whether or not you are making a profit or a loss once your financial statements and reports are organized.
• Reconnect With Your Associates
When it comes to networking with people, you need to make sure that you have a continuous or ongoing process. Consider reconnecting with your business associates as you can get advice from them especially when it comes to creating viable action plan.
• Build New Connections
Aside from reconnection with your associates, you should not also forget to build new connections. Make sure you have two or three acquaintances that you can build a good working relationship with. You should give importance to community as it can serve as your strong system of support especially for tough times.
• Assess Your Goals
If it has been a year since you opened a small business, make some assessment if you have achieved all of the goals you set. If there are goals which you have not accomplished, determine the factors that deterred you from accomplishing those goals.
• Re-Evaluate Your Spending Habits
Unnecessary purchases can also affect your business. Assess your spending habits and if you find out that you made purchases on impulse, try implementing new measures so you can prevent unnecessary spending. You may also speak to your bookkeeper for recommendations. With these simple changes, your business can make a difference.
If there are two essential financial statements that you would often receive from a bookkeeper, these are going to be the Profit & Loss Report and Balance Sheet. Business owners rely on these statements because they show the financial status of the business. Your bookkeeper interpret the figures and explain the how’s and why’s of the figures, but as a business owner, you remain clueless.
It is important that you know how to interpret these figures because they can help you monitor your business performance and make a sound decision. Your financial planners, bookkeeper and financial advisors will also have an idea of the business approach to use.
In a balance sheet, you can find the assets, liabilities and equity. Your assets include the items you own and the liabilities are the payments that your business owes. The difference is called equity or net worth. If you are looking for a comprehensive report that will help you tell the key performance indicators of your business, a Balance Sheet is a good financial statement you can refer to. With the use of a Balance Sheet, you will know the return on equity, financial strength, control of working capital and return on capital.
It may take a while before you completely understand a Balance Sheet because of all the technical terms you can find in it. When tracking liquid items, bookkeepers and business owners refer to Current Assets and Current Liabilities. You should be watchful of these amounts because they can help you make the right decision and manage your cash-flow. With the use of bookkeeping software, preparing a Balance Sheet regularly is easy.
If you want a summary of your business expenses and income, a Profit & Loss Report can provide you the information you need. It gives you an indication of your business’ performance. The report shows the sales, cost of goods sold, gross profit, expenses, operating profit before tax, tax payable and net profit. With a skill developed over time, you will be able to interpret the figures found in a Profit & Loss Report. The gross profit is one of the key elements of the report and it is expressed as a percentage. The Gross Profit Margin is important because it enables you to track your business’ profitability and compare figures with your competitors.
If there is a decrease in the Gross Profit Margin, it could mean an increase in inventory costs, heavy discounting or turning over profits with low margins. The Net profit Margin is measured as a percentage. A Profit & Loss Report must be prepared every month especially if your business is using bookkeeping software. If you practice regular analysis of your business, you will be able to unlock key business drivers. As a result, you will be able to determine the correct pricing, target shrinkage and even control costs.
It may take time before you can master interpreting these financial statements but once you know the significance of these figures, you can easily determine where your business is going. You can also create an effective business planning that increases the chances for success.
If you want to keep track of the time you spent on a particular task, time tracking is the way to go. Not only does it provide you greater peace of mind when it comes to estimating how much time you are actually spending on a specific task, you will also have the ability to adjust the pace in case you think your progress slows down. Time tracking is not just about getting the job done as fast as you can, it is also about accomplishing your projects in a timely and efficient manner. A time tracker is beneficial to both clients and employees because aside from its effective way of tracking the amount of time spent on various projects, time tracking applications are also downloadable regardless of the device you have.
• You get accurate information of the time you spent.
Have you ever experienced losing track of time as you were engrossed in accomplishing a task assigned to you? As a bookkeeper, there are instances when you need to get the job done quickly so you can accommodate other tasks at hand. While most bookkeepers are compelled with multi-tasking, quality usually takes a backseat. With time tracking, you will be able to know the amount of time you need to finish a specific task without sacrificing quality. When you are keeping track of time, you can also pay attention to other crucial tasks such as invoicing, outsourcing and quoting. When you have an accurate account of your time, you will also improve your overall efficiency.
• You become more efficient as an employee.
How many times have you caught yourself getting side tracked by social networking sites while letting an important task wait? When you are not focused on your task, you find it easy to check out post updates without realising that you are already wasting your time. However, if you have a time-tracker, you can stay focused on your task and set aside less important matters such as unnecessary web browsing. You can greatly improve your efficiency this way. You can also check actual time instead of ideal time. When you keep on challenging yourself, you are more likely to complete the task efficiently.
• It is easy to outsource task to somebody else.
If you can easily identify where your time is allocated, you can determine whether or not you need to outsource the task to others. If you used to have difficulties completing certain tasks because you are unsure of the time you allocate, a time tracker can help you resolve such difficulties. You can also evaluate the time spent and determine if you are working efficiently. You can also use time tracking as a guide for booking other people to get the job done.
• It reveals hidden time.
When you make it a habit to track your time, authenticity and integrity are ensured for both employees and client. No time will go unnoticed and you prevent multiple revisions and intensive project management.
When it comes to business management, your business’ financial aspect requires attention and while bookkeeping and accounting fees are quite high these days, ensuring quality is going to be the best practice to follow to avoid experiencing poor bookkeeping. Just imagine operating your business without paying attention to your financial activities. You had high hopes that your cashflow is still intact but when you received a letter from the ATO reminding you of your delayed or non-payment of GST and PAYG, everything will surely sink in that you need to recheck your bookkeeping task.
You worst fear has finally come true as the ATO forwarded the letter to your bank informing them of your non-payment. It was too much to take and you are well-aware of what is going to happen next. You panic at the thought of your bank receiving the letter from the ATO. You are restlessly waiting for the bank manager to call and demand of a good explanation for your non-payment.
Being in the business requires you to keep watch of your cashflow from a bird’s eye view. For the most part, business owners rely on bookkeepers when it comes to ensuring that their financial activity is kept in check. However, your business is doomed to fail if you do not take an active participation in the process of checking your financial statement. As a result of non-payment of GST and PAYG obligations, the ATO is left with no choice but to garnish the company’s bank account.
The sad truth about mismanaging a business is the failure to pay attention to their operating expenses and wages bill. It seems too easy to request the ATO to defer payments, but if this already becomes a habit, it is definitely difficult to catch up. Once a business is in financial distress, making a payment of debts is a challenge. If paying debts is not definite, insolvency is not far from happening and bankruptcy is inevitable.
Even the hardest working people are not immune to financial stress and there are things beyond a business owner’s control. If you have a business partner and he is not doing his part in managing the business, it can also take its toll on your business.
• Can you still meet the contractor’s bill and payroll?
• Are you making timely GST and superannuation payments?
Timely management reports should be prepared by your bookkeeper so you will be able to keep watch of your business. Bookkeepers should meet the following obligations for a cost effective way of handling your business:
• Create a system so invoices go out promptly and reminder notices are sent effectively to avoid falling behind payment schedule.
• Prepare a system that has the ability to highlight late payers once due dates are triggered.
• Terms on invoice should also be set up so it will be easy for you to find out about your collection costs.
As a business owner, it is also your responsibility to call the bank manager before he calls you, give the ATO a call, arrange payment plan that you can follow, prepare budget and reduce head-count if it is considered necessary.
Have you ever wondered why your bookkeeping woes just don’t seem to end? There might be one aspect of your business that you may have forgotten to pay serious attention to. Although preparing financial reports is your bookkeeper’s job, it is still necessary that you understand the importance of various bookkeeping documents. If those statements leave you confused whenever your bookkeeper presents them, it is a clear sign that you need to seriously consider gaining basic understanding of the documents. You may not be as well-versed as your bookkeeper, but having an idea about the purpose and how you can use them will help you understand the financial information that your bookkeeper gives you.
The Cash Flow Statement is intended for presenting the movement of your assets. The main purpose of the statement is to demonstrate which direction your assets are going. There are three movements that the statement is broken down into: operating, investing and financing activities. Operating activities refer to the activities that the business performs. Making a sale is an example of operating activities. The investing activities refer to the purchase and sale of various assets and an example is buying a new location. Financing activities include paying or generating debt.
The Income Statement provides a summary of your business’s profits and losses for the current period. It also shows the business’s income and the sales revenue. You can also find the expenses of your business such as the wages and rent in the income statement. In order to find the net profit or net loss, the bookkeeper has to find the difference between the expenses and the income. Business owners often expect to find a net profit on this type of statement.
If bookkeepers want to provide advice or recommendations, this is the statement they will get references from. The bookkeeper will obtain information about the status of your business and the steps to take to make it more profitable. As a business owner, you will be able to know whether or not your business is doing well.
The balance sheet is an important bookkeeping document because it shows the amount of money you currently have. However, you should keep in mind that your specific investments are not taken into account. Compared to most accounting or bookkeeping statements that focus on every financial detail, the balance sheets only show the business’s overall success.
The balance sheets are also referred to as statements of financial position and they are considered bookkeeping’s building block. If there are additional statements that need to be created, the balance sheets are going to be essential so final conclusions can be drawn. In fact, other statements obtain information from the balance sheets.
More often than not, there are three essential elements that can be found in these balance sheets: liabilities, assets and equity. The liabilities refer to the items that your business owes such as loans. Assets include business-controlled items such as machinery and cash. The equity refers to the capital left after the assets have been used to settle liabilities. The balance statement also shows that the business’s assets are equal to the sum of both the equity and liabilities.
When discussing your expectations with your bookkeeper especially in terms of the kind of task you want accomplished, it is important that your expectations are reasonable. It is easy to raise the bar when it comes to hiring a bookkeeper, but you will not get the results you want if you always put pressure on your bookkeeper.
For your business to prosper, with the help of a bookkeeper, you need to know their duties and responsibilities. From there, you will be able to set your own boundaries and adjust to your bookkeeper’s pace. You cannot expect results when you are asking too much from your bookkeeper.
• Pay more attention to details. When dealing with numbers, it is important that bookkeepers are accurate with the information they provide you because it is easy to overlook these details. When your bookkeeper is paying serious attention to the data on your statement, it only goes to show they are detail-oriented.
• Be well-versed in accounting. Your bookkeeper should also have the ability to explain the details in much simpler terms so you will be able to understand the information.
• Make realistic suggestions. The statements bookkeepers make play an important role when it comes to giving you some recommendations on the actions you need to take for your business to have significant improvements.
• Be able to work without giving you a feeling that you need to remind them you exist.
• Have the ability to follow through. A bookkeeper should meet deadlines and accomplish goals that you set.
• Prepare a cash flow statement, balance sheet and statement of profit and loss on a monthly basis. These essential bookkeeping statements must be provided to you following a consistent deadline.
• Stick to their commitment. A reliable bookkeeper should provide a financial report in a timely fashion.
• Provide a reasonable price for the service. Bookkeepers who have substantial knowledge about their job will have an understanding of the service cost.
• Have a deeper understanding of the bookkeeping industry and the type of business they work for. Bookkeepers do not only concentrate on generating financial reports and interpreting figures. They are also known for providing advice and recommendations to business owners. Before you consider hiring a bookkeeper, make sure the company they are connected with has substantial experience dealing with various business industries.
• Know the ins and outs of bookkeeping software such as Reckon and MYOB. A bookkeeper must be computer literate for these duties to be executed properly.
• Have solid communication skills. Business owners communicate with their bookkeeper through emails, phone calls or even one on one conversation.
However, business owners can also lean towards embracing unrealistic or unreasonable expectations, oblivious to the fact that they will eventually breed frustration. It can still be avoided by ensuring that the business owner is clear with his or her expectations. It is unreasonable to expect a bookkeeper to stay in constant communication, answering your emails within minutes. It is also impossible to get a bookkeeper that will nod along with whatever they are told to because this can wreak havoc on your business as a result of business biases. A strong connection with your bookkeeper paves the way to a better professional relationship.
Being in a business allows you to take control of your future. It breaks the cliché of earning money that often entails punching the clock and carrying out the task assigned to you. Running a business is indeed exhilarating, but reality sinks in once you deal with bookkeeping. While reaping the financial rewards of your hard work is the motivational factor of being in a business, ensuring that bookkeeping is properly done can be such a daunting task.
However, it is an integral part of your business. If you do not keep detailed and accurate financial records, you will never stand a chance to be in business for long. This may not be the fun part of your business, but you just cannot afford to take bookkeeping for granted. However, there are improvements in modern technology that enable you to streamline bookkeeping operations. This means, you no longer have to consider bookkeeping as a serious pain.
1. Be sure to get everyone on the same page. Creating a culture in the workplace is the first step you need to take if you wish to streamline your bookkeeping operation. Whether you have a few and hundreds of employees, you need to make sure everyone is on the same page. Workplace collaboration is important in ensuring that your employees submit accurate expense reports.
2. Create specific categories. If you have already developed a habit of tossing your receipts in a shoebox, bookkeeping can be such a headache at the end of each month. By establishing specific categories, you will be able to find it easier to identify your expenses. This technique simplifies bookkeeping and you will also ensure that the details in your report are accurate.
3. Keep records up to date. When you have little time and so much work to do, you can be easily tempted to fall behind on your bookkeeping task. Bookkeeping may have to take a backseat if you have a number of duties to fulfill. However, this is not a sign of a healthy business. Make sure you keep your financial records up to date and in order. This will only happen if you are doing the bookkeeping regularly.
4. Reconcile with the bank. Bank reconciliation can be time-consuming, but it is part of running a business. You do not have to stress yourself with reconciling with the bank statement because technology enables you to integrate account information with your bookkeeping software. This means that the job that used to take hours can now be done in minutes.