YOUR COMPLETE GUIDE TO BOOKKEEPING FOR START-UPS
Creating and managing a start-up business can be incredibly challenging. There’s so much responsibility. And most often, there so much work that needs to be done and so little time to do them properly. With Oftentimes, start-up entrepreneurs need to meet with clients, negotiate with suppliers, manage stocks, develop a strategy, find suitable employees, and manage business operations; it becomes impossible to meet the bookkeeping requirements.
Unfortunately, businesses who fail due to failure in financial management tends to have discrepancies in their working capital, which tends to result in business failure. This alone should greatly imply in importance of bookkeeping for start-up businesses in Melbourne. Bookkeeping is a one of the most basic requirements for start-up entrepreneurs. This is due to the fact that bookkeeping provides vital information that entrepreneurs need, such as monthly income and expenditures forecasting, fund allocation for different loans and payments, recording all transactions, lodging tax returns, budget preparation for next year, and more.
This makes finding a skilled and experienced bookkeeper in Melbourne crucial. Start-up businesses need their services to develop, simplify and enhance the cashflow and allow the business to grow. Even if you are not doing the record keeping yourself, it wouldn’t hurt for a start-up businessowner to understand what bookkeepers do. So, without further ado, here is a guide to bookkeeping for startup businesses:
- BUSINESS ACCOUNT AND SYSTEM SETUP
Opening a bank account is the primary step when bookkeeping for startups. It is of utmost importance for startup businessowners to keep their personal and business bank account separate. The business bank account will contain all the business’ income. This will help the entrepreneur separate and differentiate his/her personal expenses from business expenditures, especially when claiming tax deductions in Melbourne or other parts of Victoria.
After opening a business bank account, the bookkeeper will typically help the businessowner decide on the bookkeeping system. Among these recordkeeping systems, the double-entry accounting system is probably the most popular used, since it takes note of both credit and debit entry for each transaction. This paves way for easier and faster identification of depreciation in profits, as well as keep the books balanced all the time.
- METICULOUS RECORDING OF ALL THE TRANSACTIONS
These days, the use of cloud-based bookkeeping software in record keeping systems is rampant since they offer lots of benefits. You can hardly find a business in Melbourne who doesn’t utilise cloud-based bookkeeping software. Aside form helping bookkeepers save time and energy, cloud-based accounting software also makes information readily available at any time and place. Financial statements and other important documents can be accessed by the businessowner and the board members of a company whenever they are required. They can be accessed using different devices and minimise errors.
Using smartphones, tablets or laptops, financial records can be accessed, thus allowing bother entrepreneur and the board members to get real-time data updates of the business. Like other businesses, a start-up business in Melbourne is legally obligated by the ATO and other related government agencies to record and store expenses, profit, deductions and other business-related information. Startups are required to save these records for five years, while others need to be kept safely stored for more than five years depending on the record-keeping requirements of the business.
- BANK ACCOUNTS RECONCILIATION
Bank accounts reconciliation refers to creating a document that summarizes the bank statements and the financial activity of the business. An experienced bookkeeper will match the transaction records with the activities in the business bank account to make sure that there’s no difference between the balance. This activity can help identify discrepancies in the information and notify the authorities and the business owner if there are fraudulent that are happening in a Melbourne-based business.
Bank reconciliation is carried out by a bookkeeper, once a month or every quarter to find out if there are erroneous activities such as unauthorised bank withdrawals or unrecorded deposits. It also helps track customer cheques that have bounced and if there are outstanding checked that need to be followed-up.
- INVOICING AND MAKING PAYMENTS
Invoicing is one of the key activities in record-keeping. An invoice is a record of the transaction between a business and their customers, suppliers, etc. A bookkeeper generally sends out bills on a timely manner and then follows up with the clients to ensure that payments are made quickly and correctly. More commonly, the invoices sent by a bookkeeper include payment options so that the clients are able to pay the business without experiencing any delays.
An entrepreneur, together with the bookkeeper, may offer incentives to clients in Melbourne who pays early and adds penalties to clients who are late with their payments. This enhances the company’s cash flow and makes sure that the income amounts more than the company expenditures. In a similar manner, a bookkeeper will ensure that suppliers and vendors are paid on time to prevent penalties and other additional expenses due to late payments.
- CASH FLOW MANAGEMENT
Having a bookkeeper will help improve a business’ cash flow, which means that the company’s income is higher than its expenses. This is probably one of the most important contributions of a bookkeeper to a start-up business in Melbourne. The bookkeeper does this by significantly cutting down all unneeded and irrelevant expenses that commonly eats their way to the profits of a business. A bookkeeper also helps save money by means of claiming all possible tax deductions.
By making use of their honed negotiation skills, they are able quickly get payments from suppliers. Bookkeepers also ensure that loans and debts do not go overboard and prevent them from affecting the bottom-line. Bookkeepers do this by creating financial forecasting for startups in Melbourne, which entrepreneurs can use to make smart, informed decisions and monitor the cash that comes in and out of the Melbourne startup business.
- FINANCIAL REPORTING
Most, if not all bookkeepers use record-keeping software in Melbourne. This allows them to generate all the necessary financial reports, compiles them and present them to stakeholders and board members, which is a very important undertaking. However, aside from board members and stakeholders, this compilation of financial records is also required by government institutions like the ATO, as well as banks and money lenders.
It is incredibly important to manage these records accordingly and to keep them organised. These essential records include balance sheet, cash flow statement, and profit and loss statement. Entrepreneurs require these documents in order to understand their company’s financial health better.
- PAYROLL MANAGEMENT
Happy employees work better – this is according to many studies. And what better way is there to keep your employees happy than by making sure that they are paid correctly and on time. An experienced Melbourne bookkeeper will effectively manage the payroll of all the staffs and employees. This task usually involves maintaining and storing the records of employees’ wages, bonuses, commissions (if any), superannuation, tax deductions and more.
A bookkeeper makes use of payroll software to generate the reports and then submit them to the Australian Taxation Office in order to comply with all the regulations. The Australian government regularly updates their system and these updates are automatically installed on the payroll software. The payroll system paves way for bookkeepers to calculate the working hours using computers, which eliminates data entry errors, thereby reducing the chance for businesses to be liable to tax penalties. A start-up business in Melbourne may only have limited numbers of employees. But it is vital to keep track of all the necessary information of each employee.
- BUDGETING AND FORECASTING
Successful businesses are often due to careful or meticulous planning for the future. Using the data from a bookkeeper, an entrepreneur can create form a mental picture of the level of profits and the amount of capital required to operate the business for the coming months. Budgeting and forecasting are vital information that money lenders and banks in Melbourne require before lending money to a start-up business. These are also vital for setting goals for each quarter.
Most startup businesses start operating under the guidance of this strategy. This makes sure that the company is meeting its objectives and that is has enough reservices to operate through its low profit periods.
- FINANCIAL ADVICE
Most businessowners do not have enough experience in running a company. Some of them are probably operating a business for the first time. As newbies, they are unaware of the fundamentals of bookkeeping. Thus, they require assistance for experienced bookkeepers to give them a better understanding of the rudimentary concepts of cash flow, profit, and loss.
Aside from financial advice, a bookkeeper, having enough experience, can help a company find the best sources of funding. Banks or money lenders that offer low interest on business loans. Bookkeepers will give entrepreneurs tips and advice that will help them make smart decisions pertaining to business investments.
An experienced bookkeeper in Melbourne is also the best person to seek advice if you are planning to expand your business. This professional can help you create a strategy and give insights as to the perfect time to venture into new markets within Melbourne.
A start-up business will consume time, energy, money and effort. Most of the time, entrepreneurs have so many on their hands that it can be quite overwhelming. Work piles up continuously that you will sometimes that it’s too much. Fortunately, you have many bookkeepers in Melbourne that you can rely on, who will make sure that you are on top of your accounts and will help make your business become financially stable as you move forward towards reaching your business goals