The Importance of Accurate Bookkeeping for Small Business Growth

“I want to make a business decision but are my numbers accurate?”

I am a bookkeeper in Melbourne and providing bookkeeping services for over 20 years to Small and Medium sized businesses. There are some businesses and business people that employ us only to keep them compliant with the ATO and other statutory bodies. Then there are businesses and business people that want the compliance piece but would also like to take the numbers a step further and use them to make decisions. As a professional in this space, that has been putting numbers together for most of my life there are several considerations to take into account when bringing your transactions together and when going to the next step and making decisions with your accounts. If you have a business, do these points cross your mind when going through your accounting process?

Bookkeeping

The 90:10 Rule:
My clients who want to do their transaction processing themselves – “No problem”. I don’t want to stand in the way of my client’s appetite to do part of the process or the whole process. However, I always warn them, it is an extremely important process that shapes their financial reports. While 90% of the transactions are simple to enter (like grouping apples with apples and oranges with oranges) it is the 10% or even 5% that will trip the non-accountant up. Regular transactions such as Stationary purchases or tea and coffee for the office are simple to allocate and often ‘rules’ can be put in to place so these can automatically be allocated with little intervention from the bookkeeper also making it q is the initial stage of the larger, whole Accounting Process and like in the AFL Football, usually picking the best coach is the most important part of your team’s success. Likewise in bookkeeping choosing someone who understands the vulnerability and how precious the transaction allocation process, although mostly basic makes or breaks everything down the track, when the reports are being published.

uite cheap to process. However, when you come across a large sum of money that is deposited into the bank such as a sale of motor vehicle or a refund/payment from/to the ATO or an expense for Customs Duty etc, this is when a good bookkeeper is worth their weight in gold. These random transactions are regularly allocated to the incorrect account and in doing so results (way down the line) in your financial reports being inaccurate and requiring a consultant who costs more than a bookkeeper to amend the problems. My advice is if you are not trained (doesn’t need to be formerly) to allocate the curve ball transactions that pop up from time to time, outsource your bookkeeping and get it right the first time. Otherwise, be prepared to pay for complex cleanup costs.

Mountains of transactions – unmanageable:
The Achilles heel of bookkeeping Services Is the volume of transactions over time that slowly buildup to an unmanageable level. 1 month of transactions is easy to review and correct, but as time goes by (and everyone knows it goes by quickly when you are busy with a business) those transactions build up to an unmanageable amount and it is very difficult to review after 6 months or so goes by. The sheer volume of transactions to go through gets too much. Also, the length of time since the actual transaction has taken place, erases all memory of the expense and its nature. What did I spend $100 on last year on 27th May??? There is only so much Google search can help and then it is a guessing game. This is where many business leaders come unstuck. No one can help and in turn it is inevitable that your financial reports will result in inaccuracies. Some planning before your business gets going, Hire a bookkeeper can avoid this problem and it can be a quick exercise if done at the right time.

Click your Xero Report, is it reliable:
Our teachers back at school taught us to review our work/tests once we complete them. What does this do? Usually picks up silly mistakes that can cost you many marks. The same goes for Reporting in your accounting file. When you have allocated all your transactions for a period and you are ready to click the Report button in your Xero MYOB Quickbooks Online Reckon Sage Netsuite Business One (whatever software you are running for your business) you must review the balances and establish that they are reasonable and something hasn’t been erroneously allocated to an account. 3 x rent expenses for the quarter, Liabilities seem to be where they should be, all your bank accounts are reconciled and showing the correct balance etc. Only when this has been completed, and the balances are correct will your report be a reliable piece of information. Be mindful that some transactions that seem to be allocated correctly may have an allocation nuance. Such an item may be the purchase of a $20,000 piece of equipment that is sitting in your balance sheet, when it qualifies for the instant asset write off and should be sitting in your expenses. Bookkeepers Melbourne. Then you go and make decisions about cash spending/saving and about strategies based on performance. Skip this step and miss an inaccuracy in your financial reports and you are potentially going to make decisions based on inaccurate cash position, equity position or earnings position. A pivot of business strategy made with inaccurate data may go as far as sending you broke. Refinancing, Cash flow management, investment strategies (Capital, HR, IT, Marketing etc), personal spending (relevant for many small/medium businesses) are all common decisions for SME’s and must be made carefully. If this is not something you have time for or have the skillset for then engage the services of a bookkeeper near me and ensure your decision-making is being made off sound data.

When you are inputting transactions to your accounting system the task is simpler however this information forms the knowledge to be able to build reporting accurately. When preparing reports, It is like a race car driver who can feel a stone going under the front left tire. It requires a very skilful operator that can intrinsically identify what each balance represents and how this impacts the end result and hence how to manipulate those balances to get the correct picture. Race car driver or not, if balances are not accurate your decisions will be off!