Tag Archives: Accounting

Accounting Software to run your business

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You started with a shoebox of receipts, now you have a storage box or maybe you are meticulous and have it all on a spreadsheet.  Either way it is time to start thinking about accounting software. This guide will look at why you need it and lead you through what you should consider in making your decision.

Accounting software, package or system describes a type of application software that records and processes accounting transactions within functional modules such as accounts payable, accounts receivable, journal, general ledger, payroll, and trial balance. It functions as an accounting information system.
source Wikipedia

Accounting software has changed a fair bit over the last few years with new competition driving new features and simplicity.  Probably the biggest change however is that it is all in the cloud. Put simply this means you rent access to the solution and do everything via the internet.  You no longer have software that you must buy and host internally on extra computer hardware that you must keep safe.  Instead you have a user-friendly solution that you can access from anywhere that integrates with your bank, POS system, etc.

WHY should you buy Accounting Software?

WHY should you buy Accounting Software?

Saves you time – track invoices, manage bills and expenses and pay staff in a few clicks
Tax time ready – calculate GST, PAYG and BAS reports
Built for Australian legislation reporting
Get paid faster – online invoices, pay now buttons and automatic payment reminders
Enter receipts on the move – use your smartphone to take a photo of the receipt from Bunnings. Great for travellers and tradies.
An external accountant or bookkeeper can have instant access at the same time you do
Reporting lets you quickly get a good idea of how your business is going now
Accounting software becomes increasingly beneficial as the business gets more complicated

HOW to make a decision on which Accounting Package

So now we understand that this software solution is so much more than getting a bill in the system, it is about automating the whole process.  Let us look at the features you should consider when selecting which vendor:

  • Different accounting package vendors offer different features and even within the same company they offer different levels which means you only get what you need.  For example, if you have no employees you do not need the payroll functionality. Consider what package you will need?
  • Pay Staff – Do you want payroll integration? Does the system calculate all payroll requirements including PAYG, annual leave, long service leave etc.? From July 2019 small employers with 19 or less staff must report payroll info to the ATO through Single Touch Payroll. https://www.ato.gov.au/Business/Single-Touch-Payroll/ (Be sure to read our essential guide on Payroll)
  • Ease of use – As an untrained small business owner how easy is it to learn to use the package and be assisted through the software to understand what the requirements are of controlling your finances?
  • Invoicing – Send customised, trackable invoices.  Can clients pay right from the invoice?  Can automatic payment reminders be sent?
  • Tax and GST –  Can you easily and automatically track what you owe, and see all your position at a glance?
  • Does the software support Standard Business Reporting (SBR) allowing you to lodge your GST BAS requirements? (Be sure to read our essential guide on GST)
  • Application integration – Can the package be connected to other software solutions you are using?
  • Time tracking and billing – If you charge by the hour are there features that will simplify gathering this data? For example, a smartphone App.
  • Reports and budgets – What level of detail do you need and can you compare against a plan or budget?
  • Track jobs – Does the system track stock, work in progress, orders, jobs, and other task management requirements?
  • Bills and expenses – How easy is it to upload your bills and easily categorise expenses?
  • Point of Sale (POS) integration – Is there a seamless connection to track sales and inventory movements?
  • Inventory – If you hold inventory/stock will this package help you forecast and manage it? Can you barcode scan items in and out if you want to?
  • Bank Reconciliation – Will the system be able to handle multiple bank accounts?
  • Manage customers & suppliers – Can you easily see which customers owe you money, and which you need to follow up on?
  • Take payments – Does the software allow EFTPOS or credit card processing?
  • Cash flow management – Can you see your money in and money out at a glance, and understand quickly what your cash position is?
  • Online accounting – Is there a smartphone or tablet app that lest you enter data or receipts as well as run your business from anywhere?
  • Multi-currency – Does the system need to handle foreign currency?
  • Account sharing – Can you invite accountants, bookkeepers, and partners so they can help you manage your business?
  • Security – What security and backup procedures do they offer to help you protect your data?
  • Customer Relationship Management (CRM) – Does the system keep detailed records on customers including what they buy, how often they buy, and when they buy?
  • Service – What support and training are available, what hours and does that support understand Australian regulations?

HINTS

For more information on what accounting tools are available and the specific features, they offer visit

Free trials are available to help you compare and chances are your financial expert will have an opinion on which one to use.

The accounting software packages you should consider in no particular order include Xero, MYOB, Quicken, Reckon, QuickBooks and Sage.

SUMMARY – Right Accounting Software

Having the right accounting package will save you vast amounts of time and effort and will help keep your business compliant with government regulations. 

Although these modern tools are brilliant in helping you control your business finances they will never replace having access to a financial expert.  We strongly recommend you have access to an accountant or bookkeeper to help guide you.

If you do not have external financial support today you can visit this site to help you find the right person

Budgeting for your future

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As many small businesses look for ways to bounce back from the many financial pressures experienced during the global pandemic, it can be difficult to pinpoint exactly where to start. Thus budgeting for your future is important.

Whether business leaders like it or not, a budget will be the guiding force that helps them get back on their feet and make strides towards a financially fit future.

For those looking at the best place to start, here are five ways to map out a business budget you’ll actually stick to.

1. Tally your income sources

Where are your main sources of income coming from? 

Start by looking at your sales figures, and then add any other sources of income for your business throughout the month.

Do you run any additional services alongside your main product or service offering? This can all add up when it comes to funds coming into your business.

No matter how many income sources you have, it’s essential to account for any and all income flowing into your business. Then tally all those sources to get a clear picture of your total monthly income.

You may also want to differentiate between recurring and one-off income in your accounting software. If you decide to take on any external funding down the track, this will demonstrate consistent revenue to potential investors. 

2. Determine fixed costs

Once you’ve sorted out your streams of income, now it’s time to get a handle on your fixed costs.

Fixed costs are any expenses that remain the same from month to month. These include your rent or mortgage, any loan repayments, as well as operating overheads like recurring equipment leasing payments, licenses, or insurances.

Are there ways you can cut down on these fixed costs? Perhaps refinancing your property mortgage or negotiating a lower interest rate for your loan might be a solution? It’s usually worth doing your research into different, more cost-effective platforms, especially in a competitive market with interest rates at record lows. Even if you don’t feel like you have time to look at your loan, it is important to always revisit your options and do your research on new products and rates in the market. Currently, with interest rates at all-time lows, it is a great time to save a significant amount of money, so it is worth allocating time to assess the options available.

3. Calculate your variable expenses

At the end of each month, work out your variable expenses. These costs don’t come with a fixed price tag and can vary in price from month to month, such as electricity, phone bills, or water bills. 

These costs can often fluctuate based on usage, so it’s a good idea to go through them with a fine-tooth comb to work out which expenses you need and what ones you can opt out of. Especially if your team only works from the office flexibly instead of full-time. Still, paying for that unused Spotify subscription for office beats? 

Maybe the water cooler is no longer on duty, or the fax machine is out of commission? Do you really need to order that extra box of whiteboard markers and backup printer ink? One benefit of transitioning to remote or hybrid working arrangements is that you can cut out any unnecessary expenses that you’re not using regularly anymore.

4. Set up an emergency fund 

As a business owner, you’ll know that accidents, issues or a once-in-a-lifetime pandemic can happen. Whether your computer system crashes, the toaster sparks a fire or a freak flood creates water damage, you need to be prepared for any unexpected costs.

Make sure you have some extra funds (around three months worth) tucked away for a rainy day, so you have peace of mind that you’re equipped to cover any surprise costs that come your way.

5. Evaluate your budget monthly, and stick to it

Once you’ve worked out a snapshot of your profit and loss, and you can determine what needs to be covered in your monthly budget, stick to the budget and track its success. 

Health-check your budget at least once a month to ensure you have more revenue coming in than costs going out. 

Are you actually maintaining your budget? Or blowing it? What expenses can you minimise? Do you have extra budget to play with? Do you really need another desk plant or novelty mug to get the job done? (spoiler: you don’t). 

Again, for those businesses eventually looking to raise capital, demonstrating the ability to maintain a lean-burn rate is gold to investors. 

In order to be profitable and accurately budget for the future, it’s important to make the necessary adjustments and be realistic with your financial picture. 

6. Make your money work for you

As a business owner, you will always have expenses, it is part of running a company, but that doesn’t mean that it needs to be a dead cost for the business. 

It is always a good idea to look at your options and think of ways to make your money work better for you. 

Think about different ways to manage your cash flow. Always consider taking advantage of loyalty points and how you can use your business expenses to gain rewards through the loyalty programs on offer.

By Brodie Haupt, CEO and co-founder of digital lending and payments provider WLTH

For more tips on budgeting for the future, see Small Business Answers various guides here.

Bank account for small business

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You have started your new business, you open your wallet and pull out some cash, and you wonder is that my money or some petty cash from my business?  Even if you have chosen to be a sole trader it’s a great idea to open a bank account, if you are any other business structure you must have a business bank account for tax purposes.  Once you do it opens up the ability to articulate which money belongs to you and which to the business. This guide will help you understand the benefits of having a business bank account and help you understand what you should consider in selecting an institution.

A bank is a financial institution that accepts deposits and recurring accounts from the people and creates demand deposit. Lending activities can be performed either directly or indirectly through capital markets.
Wikipedia

WHY have a separate Business Bank account?

When running a business you must keep account of business transactions and a bank account is a great way to have an auditable paper trail.

A separate business bank account will help you to:
  • Clearly show your business finances separate from your personal finances
  • Analyse your cash flow
  • Monitor your business income and expenses
  • Extract information needed to meet your tax and reporting requirements
  • Get detailed records of your business transactions. These can be downloaded to a spreadsheet or imported to an accounting package.

WHAT else can you do with a Business Bank account?

If you have a credit card attached to your business bank account and do most of your transactions through your credit card, your bank statements will, in effect, be a checklist of those expenses.

Some banks offer overdraft facilities, essentially providing a loan facility to go into a minus balance.

To open an account you will need an ABN and ID documents of an authorised owner or director of the business.

HOW to choose a business bank account?

So which bank should you choose? In fact you may not choose a bank, it may be a building society or credit union.  The answer is the one that suits you best and you should consider these points when making your decision:

  • What are the fees and charges?
  • Do they offer merchant facilities like EFTPOS?
  • Are their interest rates competitive if you need to borrow?
  • Do they cater to the needs of small businesses and do they have offers/solutions to suit?
  • Is there a local branch in case you need to visit? 
  • What is their online banking interface like and will it integrate with your accounting package?
  • What information is reported on each transaction?
  • What security measures do they offer for online transactions to protect your business?
  • How fast do they transact instructions and until what time at night?
  • Do they offer foreign transfer arrangements and what are the charges?
  • Can you have access to your own bank manager or business banking specialist?

For more information and comparing various bank accounts visit
https://www.finder.com.au/business-banking

For taxation purposes, the ATO provides the following guide on record-keeping https://www.ato.gov.au/Business/Record-keeping-for-business/Detailed-business-record-keeping-requirements/Running-your-business—records/Banking-records/

Here you will find useful information such as the requirement to keep records for 5 years including the period of review.  For example, did you know that if you did your 2015 tax return in 2016 you would need to keep your 2015 tax records until 2021.

HINTS

Regularly bank all the cash your business receives so your income and expense information is always up-to-date and you can easily reconcile your accounts and analyse your cash flow

Register for online banking – this may simplify your record keeping and bank reconciliation process as you can:
  • easily get detailed records of your business transactions
  • download financial information from your online account to your accounting package
  • identify extra transactions in your account including bank fees or interest charges, and direct debits and credits
  • check and record any errors or omissions
Regularly reconcile your bank records, which may help:
  • you be more confident that your records contain all the information you need to prepare your tax return and activity statements
  • you to better understand your cash flow
  • reduce the time it takes to prepare your activity statements or tax returns

SUMMARY – Small Business Banking

Unless you are a sole trader you must open a business bank account.  It will help you manage your finances and different providers will have an offer to suit your needs.  Always check to see what other services the bank may be able to offer your business.

A handy comparison of bank rates and fees is available here to help you compare. https://www.finder.com.au/business-banking