Let’s be honest. You’re not a bookkeeper.
You’re good at what you do, your trade or skill or profession. That’s why you’re in business.
But now there’s books and BAS’s, and all of a sudden you’re way out of your comfort zone.
This article is all about helping you choose a bookkeeping system that works for you. Find one that matches the needs of your business and your own style of working, and tackling your books becomes that little bit less painful.
Every business needs a solid bookkeeping system.
- You need up to date quality information in order to make decisions, identify changing trends in your income, and spot where you’re spending too much.
- You also don’t want to miss out on claiming tax deductions and GST on your purchases.
- A good bookkeeping routine will help you stay up to date with lodging your BAS’s and avoid interest and penalties for late lodgment.
- Most importantly, a smooth bookkeeping system is essential for your sanity. A pile of incomplete bookwork is stressful, and nobody wants to face tax time, a BAS due date, or a stern looking accountant, with a shoebox of receipts.
Bookkeeping is unavoidable. But when done well it can actually help you run your business. The first step is to choose the right system.
There are a range of bookkeeping options available, and one size definitely doesn’t fit all.
Pen & Paper Bookkeeping
We definitely don’t recommend doing your books by hand. Aside from being labour intensive, errors are common when adding up columns of handwritten numbers with a calculator. Your end of year accounting fees will be higher too, as it’s more work for your accountant. However if you’re totally averse to technology, we suggest the ‘Cash Book for Small Business’ by Collins, which you can find at Officeworks for around $16.
If you’re familiar with Excel, spreadsheet bookkeeping is a great free option. Although the spreadsheet will do the adding up for you, it still requires a lot of manual data entry, so it’s still prone to errors from typos and missed expenses. A spreadsheet is good for simple businesses with few transactions, or for businesses who are just starting out and aren’t ready to invest in bookkeeping software just yet. (If you’re launching your business with SmallBizLaunchPad and choose our Rocket or Boost Pack, you’ll get our ultimate bookkeeping spreadsheet included.)
Desktop Bookkeeping Software
The next step up is basic bookkeeping software. This will reconcile your bookkeeping records to your bank statements, checking you haven’t missed, double entered or typo’d any transactions. It will also produce reports to make your BAS preparation fast and simple. Cashflow Manager is a good option. It costs $297 per year for bookkeeping only, or $597 if you need payroll as well.
Cloud Bookkeeping Software
The best option for most small businesses is cloud bookkeeping.
- Bank Feeds are the biggest benefit of cloud bookkeeping. Your bank will automatically upload your transactions into your software each night, ready for you to allocate with just a few clicks. This means you never have to type a date or dollar amount, saving you HUGE amounts of time on data entry.
- You can then ‘teach’ your software to allocate many of these transactions for you. For example, a payment to Telstra will automatically be allocated to your ‘Telephone’ expense account. This makes your bookkeeping even faster still.
- You can log into your bookkeeping from anywhere you have internet access, rather than being stuck using the one computer you installed your software on. You can get your bookkeeping done from any computer, laptop, tablet or phone that is connected to the internet. You can also give your accountant access to jump in instantly to help you when you need it.
- Additional features such as invoicing, payroll, inventory, timesheeting and much more are either included, or available as ‘add-ons’, depending on which product you choose.
One downside to cloud bookkeeping is there’s a little more setup involved. Learning new software can be tricky, but you’ll find plenty of help and tutorial videos on your provider’s website. Also, depending on who you bank with, it may take up to a week or two to activate bank feeds. Consider making a one off appointment with a bookkeeper or your accountant to help you set up Xero and customise your Chart of Accounts to suit your business.
Xero and Intuit Quickbooks are by far the most popular cloud options in Australia. Pricing varies, and will depend on how many employees you have and a few other factors, but most businesses will pay between $25 and $60 per month. Both have free 30 day trials, so test drive both and see which suits you better.
How to Choose
Choosing bookkeeping software can be tricky. Your choice will depend on a few factors:
- The size of your business – for small businesses with fewer transactions, a simple option will be fine. But if you have lots of transactions per month, don’t waste time typing them all in, go straight for cloud bookkeeping with bank feeds, and let your bank enter all those transactions for you.
- The type of entity you trade in –
- If you trade in a company or trust you must prepare formal financial statements, so you’ll need proper bookkeeping software that reconciles to your bank statement. Cloud bookkeeping is the best choice.
- If you’re a sole trader or partnership, the requirements are not as tight, and a simple method is acceptable. You should still consider a computerised option to save time and avoid missed transactions.
- Your budget – if you’re starting your business on a budget, you may like to start out with low/no-cost bookkeeping solutions such as an Excel spreadsheet. You can upgrade to something more robust and fully featured once your business is up and running.
- Whether you run a separate business bank account –
- To use computerised bookkeeping software you must be running a separate business bank account. This is because the software relies primarily on your bank statement. Ideally ALL your business expenses and no private expenses should be on there.
- If you don’t have a separate business bank account you’ll be limited to non-reconciled options, being pen & paper bookkeeping or a spreadsheet, or use Cashflow Manager but ignore the bank reconciliation feature. You really should run a business account anyway, so perhaps now’s the time to start!
- Your accountant’s preferred software – before making your choice, check in with your accountant. Many accountants specialise or have a preferred software. By choosing their preferred option, they can prepare your end of year financial statements and tax returns more efficiently, reducing costs for you
- Your comfort level with technology – if you don’t fancy yourself as tech savvy, cloud bookkeeping may actually be the best choice for you. It’s more user friendly, you won’t have to do lots of data entry thanks to your bank feeds, and your accountant can log in to help you at any time.
Whichever option you choose, keeping your books up to date is critical to surviving and succeeding in business. Too many businesses fail because they get too far behind with their BAS’s and Tax, and end up with a tax bill they can’t handle. It’s also incredibly stressful to have months of bookkeeping hanging over your head.
Here are some tips to staying on top of things:
- Find a routine and stick to it. Thursday nights, or once a month, whatever works for you.
- Set up a system for collecting your receipts, so you don’t miss tax deductions. Perhaps an in-tray on your desk, a large envelope in your car, or a folder that sits right next to where you place your wallet at home.
- Another option is to take photos of your receipts on your phone. Let them sit there, email them to yourself, or download a scanner app that will automatically upload them to DropBox, Evernote or Google Drive for you. We suggest Genuis Scan (iPhone and Android) which has a free basic version, or $7.49 Android / $8.99 iPhone to upgrade to the auto-upload feature.
- Keep a separate bank account, and use it religiously for business transactions. Avoid cash wherever possible, swipe your card for everything. This means all your business purchases will show up on your bank statement, even if you misplace the receipt.
- Get some help starting out. Many who fail at bookkeeping never even begin, often because it’s just too daunting. Find a local bookkeeper who can set things up and give you a few training sessions.
- If you fall behind, call in a bookkeeper straight away, let them bring you up to date, then you can take over again.
- If you keep struggling, bite the bullet and get a regular bookkeeper. The stress it saves you and the tax office fines you’ll avoid will make it money well spent.
Ultimately, with a good routine and someone to help out when you need it, bookkeeping isn’t too hard to stay on top of. We might not go so far as to call it fun, but painless is definitely possible!