Is Bookkeeping Necessary for a Small Business in Australia?
In the Article (Quick Access)
Small businesses constitute a substantial part of Australia’s business ecosystem. As per a report published – 99.8% of Australian Businesses are small or medium. (ref: Smart Company)
Finance Record Management is one of the critical areas for a successful business and the professionals who support the day-to-day management of financial records are bookkeepers.
In this blog, we look at five reasons why bookkeeping for small Australian business is so important:
Five Reasons Why Bookkeeping is so Important for Small Australian Businesses
1. Bookkeeping Services help with Tax preparation
GST applies to all the small businesses across Australia (there are a few business types for which GST is exempted. To know more about GST for small businesses in Australia, you can visit the ATO GST website).
Every invoice a small Australian business raises includes a GST, which is to be timely paid to the government.
The bookkeeping professionals help you file GST and help you meet government compliances around them.
In short, they provide you with the financial information you need to submit to the ATO to help take credit for the GST charged to your small business by your vendors.
At the end of the day, GST involves a lot of calculations and reconciliation around input credit and GST charges. The bookkeeping and accounting services take all the guesswork to ensure that you file your GST correctly.
With proper bookkeeping, you ensure that your tax agents have all the required information to file your quarterly GST filings on a timely basis and ensure your Small Australian Business does not get a penalty for late or improper filing.
Also, A lot of small businesses miss crucial business opportunities because they are unable to meet tax filing deadlines.
In most cases, this is usually a result of trying to do everything at the end moment to meet deadlines.
A small business can easily avoid this situation by getting their bookkeeping in order by outsourcing their bookkeeping work to professionals or hiring a bookkeeping service on a monthly retainer ship basis.
2. Profession Bookkeeping helps small businesses manage financial records
Think of bookkeeping as an activity that involves everything ‘financial’ in your organisation.
Whether it is day-to-day expenses or invoices or processing payments or tracking invoices and amounts paid against them, it is bookkeeping that keeps you updated with how your business is doing ‘financially.
As a small business owner, you would not want to lose track of the outgoing and incoming money in your business.
At the end of the day, it is what keeps your small business running.
In the real world, think of a scenario where one of your clients owes you money on 5 due invoices and you have already delivered work to them.
Now until and unless you are notified of these invoices, you would never know when and what should you be paid.
And if you don’t get paid on time, how do you expect your staff and vendors to be paid on time.
This is where bookkeeping plays an important role for your small business.
It keeps you updated with everything ‘financial’ in your company.
3. Proper Bookkeeping helps with Accurate Budgeting
With bookkeeping, you can accurately budget for your business which further helps you create a financial roadmap.
A step that helps you plan your expenses and map them to the expected payments.
The activity also helps you identify the P & L concerning clients, products, and services in your businesses. Thereby, giving you access to look at the leaks that you can plug to make sense of your small business financial numbers.
All the above leads to Accurate budgeting, which helps your small business optimally plan its resources and expenditure to help small businesses prepare to raise SMB loans from banks.
Without accurate bookkeeping and accounting, you cannot budget correctly and might get into a cash crunch situation.
4. Bookkeeping Helps your Small Business make the correct Business Projections
Every small business wants to leap from a small business to a large company at some stage.
And to do that, they need a proper business plan which relies heavily on financial planning.
However, poor financial record management will stop your business from getting the correct financial numbers to set up a proper financial plan, which will prevent the business plan from being created.
How will you analyze and set up growth goals without accurate data and numbers?
If you don’t want to constantly deal with failed business projections, then it’s time you add bookkeeping to the top of your list.
Proper bookkeeping will help you map business goals and make smarter business planning decisions backed by solid financial numbers.
5. Profession Bookkeeping Services help with ‘Peace of mind’
As a small business owner, you are juggling many responsibilities simultaneously.
Dealing with bookkeeping issues is the last thing you want to handle.
If I were you (and I have been a small business owner for 12 years, so I write this with empathy), I would not want the tension of incomplete business books giving me sleepless nights.
A smartly managed bookkeeping can take care of your business’s bookkeeping needs and give you one more minor task to handle on a day-to-day basis.
What do you need before hiring a Bookkeeping Service for your small business?
If you plan to start a small business in Australia, you must first consider the following before hiring bookkeeping services:
- Choose a non-trademarked or copyrighted name for your business
- Consider the structure of your business (company, sole trader, trust, or others)
- Apply for ABN (Australian Business Number) for government identification
Once the above are in place, and the business has kicked off, then the issue of accounting and bookkeeping will be next on your list.
FAQs about bookkeeping for small businesses in Australia
Can bookkeepers do tax returns?
No – bookkeepers cannot do tax returns. Instead, they are employed to take care of your accounting books that involve updating your day-to-day business transactions, including expenses, income, etc. For filing taxes, you need a professional accountant.
Do bookkeepers do payroll?
Yes, bookkeepers can maintain payroll and do the usual bookkeeping works like updating tax records, keeping track of invoices, etc.
How much time do small business owners spend on bookkeeping?
As per a report published on Accounting Today, a small business owner spends anywhere between 40 to 80 hours per year on bookkeeping tasks.
What can a bookkeeper not do?
A bookkeeper cannot file taxes or do complex accounting jobs such as financial planning and budgeting.
Can I do my own bookkeeping?
Yes, a small business owner can do their bookkeeping by using a SAAS-based solution like Xero or MYOB.
The purpose of this blog is to help you with everything you need to know when it comes to bookkeeping for small australian business.
I have tried to explain everything under the sun related to this topic and have added my experience as a small business owner to ensure that you do not make the same mistakes I did while starting and growing my business :).
Good bookkeeping for a small business is the difference between a small business owner spending time growing a company and a small business owner spending their valuable time sorting their tax issues.