Keeping Accurate Records for your Business

As with any advice on book and record keeping it is important to check with your professional accountant to clarify what system they prefer. From day one it is important to keep proper records for your business. The reasons for this are: 1. Accurate records are the best way to clearly understand if your business is succeeding, or failing. 2. You are required by law to keep accurate records so that your business can pay the correct GST component by the due date. The best time to do the books is when everything is fresh in your mind. If you delay book keeping until you have time it will always cost you money. You are likely you will forget some important legitimate deductions which would have reduced your business’ taxable income. The more self reliant you are with your book keeping, the greater the understanding of how your business is doing. In my various businesses I have always kept my own books, though I always use a professional accountant for lodging of business and personal income data. For the last 20 years I have been using MYOB, although there are many other software packages that you can use. When I run my business I always have a simple weekly summary sheet I can use and print out so that I instantly know where my business is at financially.

GST

The cost of an accountant completing your BAS statement will be crippling to most small businesses. My recommendation is learn to do it yourself. There are two ways of paying GST, either Cash or Accrual. Your accountant will tell you which method best suits your style of business. In Australia many of your purchases in the food industry will be GST exempt, yet everything that you sell will have a GST component. This means that you will have few tax imputs to offset your GST collected. Because of this it is important to keep your GST liabilities in a separate bank account from your business trading account. At the very least you should keep track of GST as it really isn’t your money to spend. You are just holding the funds for the government until it is time to hand it over. If you don’t have your GST liability when it is due the government will go to extraordinary lengths to collect it, not to mention giving you a substantial fine. You must ensure that what GST you have paid out of your business is offset against the GST that you have collected. It is your right to do this and to slip up here is like stealing money out of your own pocket. Since the introduction of GST I have always upgraded my MYOB to the latest version. This allows me to enter all my expenses GST inclusive into the accounts. However I still use a simple Microsoft Excel spreadsheet to give me the individual totals that enables me to easily enter the details into MYOB and ensure that I claim all that I am entitled to for GST. I use this for both my monthly cash expenditure and also my visa payments that are business related.

Breakeven point

It is important to know your business breakeven point. In real terms it is when your income equals your expenses. This is all the more reason therefore to complete a Weekly Profit Sheet. When your income exceeds your expenses then you get paid. If you increase your staffing levels it also tells you how much extra business you will require just to cover costs. To determine your breakeven point, simply add all of your expenses for the month, multiply by 12 to give you a yearly figure then divide by 52 to bring it back to a weekly figure.