The ABCs of Good Bookkeeping
Good Financial Decisions Start With Good Records
Modern accounting software gives business owners access to more financial information than ever before.
Cash flow, profitability, expenses, revenue and key performance indicators can all be reviewed quickly.
But there's an important catch.
Your reports are only as good as the information going into them.
That's why accurate and timely bookkeeping remains one of the foundations of good financial management.
Why Is Bookkeeping So Important?
Bookkeeping creates the financial record of what's happening inside your business.
Every sale, supplier payment, expense and other financial transaction ultimately feeds into your accounting system.
When those records are accurate and current, you can better understand:
How much money the business is making
Where your money is being spent
What customers owe you
What you owe suppliers
Your current cash position
Whether the business is becoming more or less profitable
Good bookkeeping also supports your tax and record-keeping obligations and makes preparing BAS, financial statements and tax returns considerably easier.
1. Go Digital With Your Paperwork
Receipts have an unfortunate habit of disappearing just when you need them.
Rather than accumulating paperwork throughout the year, invoices, receipts and other financial documents should be captured and stored electronically as part of your regular bookkeeping process.
This creates a much clearer audit trail and makes supporting documents easier to retrieve when required.
2. Record Transactions Promptly
Bookkeeping becomes much harder when it's allowed to accumulate.
Recording transactions promptly keeps your accounting system current and provides a much more useful picture of your financial position.
If your accounts are several months behind, the information may be historically accurate — but it's far less useful for making decisions today.
3. Categorise Income and Expenses Correctly
Putting a transaction into the accounting system isn't enough. It also needs to be allocated correctly.
Accurate categorisation helps ensure your Profit & Loss statement and other reports genuinely reflect what's happening in the business.
It can also reduce unnecessary corrections when preparing your BAS, financial statements and tax returns.
4. Reconcile Your Accounts Regularly
Bank reconciliation involves comparing the transactions recorded in your accounting system with the transactions appearing in your bank accounts.
Doing this regularly helps identify missing payments, duplicated transactions and other errors before they become bigger problems.
It also gives you greater confidence that the numbers you're relying on are accurate.
5. Make Technology Work for You
Cloud accounting platforms such as Xero have transformed bookkeeping.
Bank feeds, automated reconciliation and digital document capture can significantly reduce manual data entry and provide access to financial information from almost anywhere.
The objective isn't simply to replace paperwork with software.
It's to create a financial system that is accurate, efficient and useful for running the business.
6. Know When to Outsource
You can certainly manage your own bookkeeping.
The question is whether that's the best use of your time.
For many business owners, spending several hours reconciling accounts and processing paperwork means several hours not spent serving customers, developing the business or generating revenue.
Outsourcing bookkeeping can help ensure your accounts remain accurate and current while giving you back valuable time.
Better Bookkeeping Means Better Information
The real value of good bookkeeping isn't simply having tidy accounts.
It's having reliable financial information when you need it.
Accurate bookkeeping provides the foundation for cash flow forecasting, budgeting, profitability analysis and better business decisions.
At Lockwood & Ward, we can help streamline your bookkeeping and accounting processes, improve the quality of your financial information and reduce the administrative burden of keeping your accounts up to date.
Let us look after the books, so you can spend more time looking after your business.
Lockwood and Ward Pty Limited | ABN 76 113 938 373Level 9, 50 Clarence Street, Sydney NSW 2000 | Tel: (02) 9299 7044
