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In This Chapter

Choosing accounting software

Matching bookkeeping systems to the game in hand

Understanding GST, working with payroll and reconciling accounts

Settling into a certain mindset

Deciding whether you need to get more training

In some ways, bookkeeping is like cooking up a fine meal. The process of washing and chopping and steaming and frying isn’t much to write home about. What makes everything worthwhile is the outcome: The hot taste in your mouth, the warm feeling in your belly. A good bottle of red simply adds to the fun.

In the same way, adding up receipts and paying bills isn’t the most exciting activity in the world. What brings the buzz to bookkeeping are the results: An organised office, cash in the bank and a set of financial reports that help a business succeed. After all, without a Profit & Loss report, how does a business know how it’s doing? And without a Balance Sheet, how can business owners gauge their personal worth?

In this chapter, I explore the qualities of a good bookkeeper: Not just someone who can record transactions accurately, but also someone who cares about the financial statements that they generate. This chapter also considers what kind of training you require in order to become a bookkeeper, and what skills you may need to develop.

Deciding What Software to Use

Probably the first thing that a bookkeeper (or business owner, if you’re doing your own books) needs to decide is what software to use. In this book, I assume you’re going to use accounting software, as opposed to recording your business transactions in a handwritten ledger or a spreadsheet. I make this assumption because accounting software is significantly more efficient than any other option, and part of my role in writing this book is to help you do your books as easily as possible.

If you don’t already have accounting software, you will need to decide what product is going to work best for you and your business. Do you want to subscribe to a browser-based system, where you store your accounts in the cloud? Or would you be better advised to work locally on a desktop-based system?

I explain the pros and cons of different kinds of accounting software in Chapter 2. However, one tip I do have is this: Whatever software you choose, ensure this software has bank feeds capability. I explain more about bank feeds in Chapters 2 and 5, but put simply, bank feeds are a feature that can save up to 90 per cent of data-entry time, and provide a significant efficiency boost for most businesses.

Designing a System to Fit You

After you have chosen your accounting software, you’re ready to set up a bookkeeping system that works in harmony with your business. The first step is to customise your accounts list (often also called your chart of accounts) so that this list reflects the activities of your business. The process sounds simple — and indeed it is — and an hour or two spent customising your accounts is one of the most productive ways you can spend your time. I talk about accounts customisation in Chapter 3.

With your accounts list looking spick and span, you’re ready to organise your paperwork and receipts and start entering transactions.

Getting organised

Accounting and bookkeeping involves so many different bills, receipts and statements that I used to think that when I finally left this world for a better place, I’d be buried under a mountain of paper. Fortunately, the paperless office is slowly becoming a reality, but this still doesn’t mean that you don’t need to be super organised about your business recordkeeping.

What you want to create is a system that is efficient, but still meets taxation requirements in regards to recordkeeping. On the one hand, archiving invoices and receipts in electronic format can mean less handling of papers; on the other hand, you need to create a system where you can locate a receipt or invoice for every transaction for up to seven years after you lodge a tax return.

I provide lots of tips for getting your paperwork in order in Chapter 4. However, probably one of my biggest tips — and a tip that’s so important that I want to say it right at the beginning of this book — is to ensure that business and personal bank accounts are kept separate. Combining business and personal transactions in the one bank account wastes hours of bookkeeping time, causes confusion and can ultimately lead to mistakes. No matter how small the business, open a business bank account and devote this account to business transactions only.

Keeping track of expenses and supplier bills

In Chapter 5, I talk about tracking expenses, supplier bills and supplier payments. This work usually forms the guts of a bookkeeper’s daily or weekly tasks.

I explain in Chapter 5 that the kind of bookkeeping processes you use for a micro business with no employees and not many sales is very different from the processes for a large business with lots of employees, complex inventory and multiple locations.

For smaller businesses, the biggest single step you can take to make bookkeeping efficient is to enable bank feeds. Although bank feeds can’t automate transactions such as raising customer invoices, processing employee payroll or paying suppliers, the automatic import of transactions from your bank accounts makes recording expenses and reconciling bank accounts quick, easy and reliable. (Chapters 2 and 5 talk more about working with bank feeds.)

With larger businesses, I recommend you focus on establishing a rhythm of what happens when. How often do you need to enter supplier invoices, pay bills or generate reports?

My main tip for bookkeepers who are working with larger businesses is to set a schedule for bill payments, and then stick to it. For example, if you have weekly accounts, set one day per week where you settle these bills. If you have monthly accounts, set aside one day per month (usually a day that falls between the 20th and the last day of the month). Avoid paying bills in dribs and drabs, and invest time to negotiate payment terms with your suppliers, rather than cash on delivery.

Recording money in

Unless you’re also the business owner, most bookkeepers aren’t responsible for recording sales invoices — this task tends to fall to somebody else in the business. However, bookkeepers are responsible for recording customer payments, matching customer payments against invoices, and chasing customers for overdue amounts. I talk about this process in Chapter 6.

In Chapter 6, I also explain how to allocate other kinds of deposits that don’t relate to invoices, such as owner contributions, refunds, proceeds from bank loans and so on. Bookkeepers often find these kinds of transactions quite tricky, and so I try to provide you with a reference of exactly how to allocate each kind of transaction.

Getting Technical

If you’re new to business and bookkeeping, you will find there’s a heap to learn. When do you charge GST and when is something GST-free? How do know how much tax to deduct from an employee’s wages? And what is this arcane activity known as reconciling bank accounts?

Understanding GST

Registering for GST is optional if your turnover is less than $75,000 a year. If you think that your business, or the business that you’re working for, is going to exceed this annual turnover threshold and isn’t yet registered for GST, then I suggest you speak to the accountant quick smart.

Of course, complying with the law in terms of GST is much more involved than simply registering. You need to get down on scintillating topics such as what’s taxable, and what’s not; the key elements of a Tax Invoice; how often to submit GST reports and much more.

If you’ve never done any bookkeeping before, probably my strongest word of advice is to force yourself to read all of Chapter 7 (the chapter in this book that deals with GST) from start to finish. Scarcely the most exciting way to spend a couple of hours, but I guarantee you that your time will not be wasted. In addition, do ask your accountant or a qualified bookkeeper to check your first couple of Business Activity Statements — this way, you can be sure your tax codes and systems are configured correctly, right from the start.

Working with payroll

Whether you’re a business owner doing your own books or a bookkeeper doing the books for someone else, bear in mind that as soon as a business takes on an employee, the real fun begins. Government paperwork starts pouring through the door like owl-delivered invitations to Harry Potter.

As a bookkeeper or payroll officer, the scope of your job very much depends on the size of the business and how many employees there are. At its simplest, a bookkeeper’s role is sometimes to record a couple of pay transactions per week, maybe checking tax deductions or calculating monthly superannuation. But at its most complex, a payroll officer may be in charge of the payroll for a couple of hundred employees, and have to be familiar with minimum pay rates, convoluted leave calculations, termination pay and much more.

If you’re new to bookkeeping, you may find things such as PAYG tax, superannuation and workers compensation to be quite daunting. Take heart — in Chapter 8, I try to provide you with a step-by-step reference for everything you need to know in order to process your first pay.

My main tip for payroll is to be vigilant about reporting deadlines. Lodging forms and making payments for things such as PAYG tax and superannuation is a serious business — after all, you’re acting as a kind of caretaker for your employees’ funds — and the penalties for late lodgement or payment can be quite punitive. Not only that, but if you fall into a habit of lagging behind with paying these liabilities, you can quickly end up with cashflow difficulties.

Reconcile often, reconcile well

Reconciling bank accounts is one of the core tasks for any bookkeeper (and a process that I talk about in much more detail in Chapter 9). Put simply, a bank reconciliation is when you match everything that’s on your bank statement against everything in your books, double-checking that your work is correct.

Always reconcile the main business account before chasing customers for money, generating activity statements or generating management reports. For small- to medium-sized businesses, this means you probably reconcile accounts once every week or fortnight; for micro businesses, once a month probably does just fine.

Developing an Attitude

Over the years, I’ve worked with and taught lots of bookkeepers: Young and old, qualified and unqualified. Some scarily cocky, others achingly unsure, a few startlingly beautiful and many more rather careworn.

So what separates a good bookkeeper from a bad bookkeeper? Being young and beautiful doesn’t help much, that’s for sure (at least not with bookkeeping). Qualifications help, but aren’t the whole story either. Nay, I reckon what separates the wheat from the chaff is attitude.

A good bookkeeper cares when something doesn’t balance, gets upset when stuff goes missing, and goes a tad apoplectic at the sight of a disorganised office. A good bookkeeper cares that the financial statements make sense, and feels responsible when it comes to getting customers to pay on time. A good bookkeeper, in other words, is worth their weight in gold.

Convince yourself this stuff matters

If you’re already a bona fide, serious bookkeeper, you probably know that doing the books is a vital activity and that without the services you provide, the world would probably grind to a halt. Or, maybe you’re not a bookkeeper at all, but the owner of a small business skim-reading these pages as fast as possible. You want to get your books done with a minimum of fuss, and maximum speed. You hate messing around with receipts, despise filing and feel ill at the very thought of tax returns. That’s okay! In the end, the ‘work’ of bookkeeping actually works for you.

Think of bookkeeping as a means to an end. Whatever your dreams, whether they’re to own your home outright, put the family business back on its feet or sail around the world in a 30-foot yacht, nothing much is going to happen if you don’t keep good tabs on your finances. And guess what? You can’t keep tabs on your finances unless you do your books.

Quit counting sheep

Am I preaching to the converted with all this chat about the importance of bookkeeping? Maybe you’re someone who knows what it means to lie awake at night counting sheep, worrying that the sheep don’t balance.

To you, I have a slightly different message. In this book, I encourage you to cast away your magnifying glass and grab a telescope instead. Sure, you’ve mastered the fine detail, but now you’re ready to move ahead and start looking at financial statements. Is the business making a profit? How does this year compare to last year? Is the business growing at a steady rate?

Surprisingly, I find a lot of bookkeepers don’t give a second thought to financial reports. Even business owners sometimes get so preoccupied generating sales and paying bills that the only measure of profitability becomes how much is left in the bank account.

Don’t miss out on the fun. As a bookkeeper, take the time to read through Profit & Loss reports and Balance Sheets. You can help the owner understand what’s going on in their business, and chances are when you read these reports, you can spot any mistakes you’ve made. As a business owner, these financial reports are the reward for all your hard bookkeeping efforts.

Want to know more? Feel welcome to skip ahead to Chapter 10, which gives the lowdown on both Balance Sheets and Profit & Loss reports.

Do your job well

Whether you’re a professional bookkeeper or a business owner, you almost certainly want to get this bookkeeping lark over with as swiftly as possible. The stumbling block is figuring out how not to overcomplicate things. I’m often taken aback at how much time people take to do their books, wasting hours checking and double-checking, shuffling paper from one place to another.

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