How has running your business been like so far? Initially, you start small, find stable ground and then gradually, expand your business. The first phase, the development phase, is full of lessons – this is the time when you face the most challenges.

And this is the right time to master your bookkeeping skills so that you can optimise your finances earlier on.

Bookkeeping may seem difficult initially, but remember that it contributes to your business health. So devote specific time every week for the task. Here are some of the most common issues that you may face when managing bookkeeping.

Accounts Receivable and Collections

What process do you follow from generating invoices through to collecting the payments?  This process can be quite complex, and so often leads to further problems. Having invoices created and sent regularly, and preferably when the goods or services are provided will ensure that everything is recorded and will enable cash flow comes in regularly.

As well, you need a process to follow up outstanding invoices on a regular basis.  Too many businesses do not do this and find them self in financial difficulty as a result.  Better still, implement an automated process that will send out email reminders automatically and you will find most customers will pay fairly quickly, leaving you to call only those who still don’t respond.  It will save you hours each month.

By doing this, funds will be there for you to pay your expenses, meet your business financial obligations and to help grow your business.

Cash Flow

Cash flow problems can start when you combine business and personal finances. Many small business owners use the same account for both, resulting in a tangled mess that is too hard to clean up.  Drawings are made as needed for personal expenses and are then not available when required for expense payments and for meeting government obligations like tax.

By separating your business and personal accounts from the very first day, you’ll be saving yourself from plenty of trouble down the road.

Paperwork

Tracking receipts and storing them properly is one of the biggest problems that you may face as a business owner.  Make sure you compile them in an organised way and store them somewhere safe as many accounting aspects rely on tracking expenses accurately.

A good accounting software can help you with this task. As far as storage is concerned, you can do it offline but doing it over the cloud is more preferable because of easy access and greater security.  Take a photo or scan any paper invoices or receipts received and upload them to the transaction in your accounting ledger or save on a cloud storage facility like Google Drive or Dropbox.

Payroll

Managing payroll is a complex process, and if you make mistakes, you can be penalised by government.  Payroll management isn’t only about salaries, but also includes taxes, superannuation, bonuses, benefits, and other areas.  Find yourself a specialist in payroll to assist you in meeting your obligations.

Closing your Accounts

Ideally, you should close your accounts every month so that important figures and financial metrics can be obtained.  By delaying this you won’t be able to report timely information, gain useful insights and make effective decisions.  You also run the risk of recording transactions in a prior period where you have already reported externally, particularly to government agencies.  Closing your accounts every single month will avert this. Sounds complex? Then seek the advice of a professional accountant.

Visit our website www.higherpurposeaccounting.com.au for more information.