Record Keeping: How To Keep Your Books In Order
Managing any business relies on making sure your various accounts are maintained appropriately, since any mistake can quickly become costly. Fortunately, if you're trying to make sure your business records are maintained properly but you're not sure how, you can rely on our team to help you get the job done.
Starting With The Basics
Before you start maintaining your records, you're going to need to understand exactly what it is you're recording. Accounting and bookkeeping are two different processes, and it is important to understand the distinction. Accounting is the process of producing the various statements necessary for a business to operate, while bookkeeping instead focuses on creating the list of transactions necessary to create those statements.
Creating The Records
Maintaining your books requires you to track every transaction for your business from when it is first opened until you close it. The way you go about creating these records will differ depending on the accounting system that your business employs. The basic premise, however, relies on taking a record of every transaction your company makes based on whatever supporting documentation you have, whether that's an invoice, a purchase order, or any other financial record that can prove that a transaction has occurred.
It's A Question Of Software
How you go about building that transaction list changes depending on your choice of software. Of course, you can also choose to maintain this list by hand using pen and paper, but the long list of issues with such a system usually outweighs any benefits it could possibly provide. Today, these transactions are usually recorded using software with a simple physical backup if necessary, which is usually just a printed version of the digital records.
Ultimately, the choice as to what software you'll use is yours entirely. You can use something as simple as a spreadsheeting software to create a set of transactions in a table, or you can splurge for a dedicated bookkeeping software. So long as your records can be used at the end of the year to create accurate financial statements and submit every file necessary to meet your tax requirements, then your bookkeeping process can be considered a success.
Taking It One Step Further
The final step, then, is to consider which type of accounting system you will use – cash accounting, or accrual accounting. Smaller businesses tend to benefit more from the cash system, where transactions are only recorded once cash has actually changed hands. Once your business expands and an increasing amount of your transactions have delayed payments, switching to accrual transactions can be useful for bigger businesses, as transactions are recorded immediately.
Need More Help?
It's okay if you're still not sure where to start. Instead of trying to do this all yourself, you might want to consider getting some help from the leading small business accountants, the M.A.S Partners. To speak with our team of small business accountants in Sydney about what we can do for you, call us on (02) 9211 5000.