7 bookkeeping tips for small businesses

Bookkeeping is one of those tasks that many Small Business Owners absolutely dread. So, if you are one of those people that think sticking a needle in your eye would be more exciting than calculating your GST, then rest assured you are not alone! Our BAS Agents help others in your tribe every day! 

One of the biggest fears we hear from Small Business Owners is they are worried about doing something wrong and having the Australian Taxation Office (ATO) breathing down their neck. Our experience is that if you are willing to take a bit of guidance in the beginning on how to look after your bookkeeping the right way, then you will find that the Australian Taxation Office might even be on your Team. 

So, if you want to tackle your own bookkeeping, the best way to relieve your fears will be to make sure that you don’t commit any of these seven deadly sins: Read on for our 7 bookkeeping tips for small businesses

Sin #1 – Only having one bank account

Number one in our list of bookkeeping tips for small businesses is opening the appropriate account or accounts. As soon as you start a business, you need to open a new business bank account, straight away! Even if you are just testing the water for a month or two to see if the business will be viable. You may even want to open a few! You will need at least one for your clients to pay their money into and for you to pay your business bills out of Then perhaps another one to park your GST, PAYG or Super obligations in while you are waiting to submit them to the ATO. 

We quite often see the situation where a Small Business Owner uses their personal bank account for their business, especially when they don’t have any employees. However, this sinful bookkeeping mistake is bad news for your sanity, your cash flow and your crystal ball that allows you to clearly see how well your business is performing. 

Being an entrepreneur is hard enough without having to figure out if an expense was for personal use or business use, let alone how to process it all through your online cloud accounting and bookkeeping software. 

Oh, and if you are paying yourself a wage, simply transfer the money from your business account to your personal account to ensure that you know exactly how much ‘play money’ you can spend too. 

Sin #2 Not entering your bills regularly enough

Time is precious and it is human nature to put off bookkeeping tasks that we really don’t enjoy. So, we understand that sitting down to enter in a huge pile of receipts, that may have been taking over your car or kitchen table, is not your most favourite thing to do. 

One great thing is that with today’s technology you can banish this sin forever. Many online accounting software providers, such as Xero and MYOB are starting to build optical recognition technology into their bookkeeping software. This means that you can simply email your bills directly into your software or you can directly upload them. Then once they arrive inside your software, the programs use optical recognition to read the details off the bills such as the date, invoice number, amounts, GST, and items that you bought. How cool is that! No more data entry.

Another great bookkeeping tool that we use here at ProfitAbility Virtual Assistance is AutoEntry. AutoEntry also uses optical recognition and it can connect with over a dozen of the world’s most popular accounting software providers. The thing we love about AutoEntry is that it also remembers exactly what you did with a transaction last time, so you can ‘set and forget’ how to process all of your regular transactions.

Sin #3  Making it hard for your customers to pay you

We are positive that you wouldn’t dare commit this bookkeeping sin, however some Small Business Owners make it really hard for their customers to pay them. Crazy isn’t it?! Being paid for your products and services is how a business survives, so it is critical that you make it as easy as possible to get your customer’s cash into your bank account. 

If you are a retailer, you can do this by making sure you have an Eftpos facility. Most people don’t carry cash these days, so even if you are really small, make sure your customers can pay by card. Square and Vend have some really affordable options for small retailers, so be sure to check them out. 

If you are a business that sends invoices out to your clients, then make sure you sent them out within a reasonable time frame after completing the work. The longer you wait to send out your invoices, the longer you will have to wait to be paid for them too. 

Another sin our Bookkeepers see when a new bookkeeping client joins us, is that they don’t have their bank details on their invoice. Some of your clients will want to transfer money to you via their internet banking, so make it easy for them by letting them know exactly where to send the funds to.

Sin #4 Poorly managing your GST, PAYG and Superannuation obligations

This is one of the hardest bookkeeping sins for many Small Business Owners to confess that they are guilty of, and understandably so. Managing your tax obligations is one of the trickiest jobs you will do in your business because you are receiving money into your bank account that is technical not yours. 

It is easy for many Small Business Owners to innocently forget that they owe this money to the ATO and they unconsciously go ahead and spend it on other important things. This unconscious spending is bliss until the tax man pipes up, usually quarterly, and demands that their money be paid in full by certain date or you’ll pay a penalty.

So how can you handle this better? Firstly, as we mentioned in Sin #1 you could open a separate bank account to park your GST, PAYG or Super obligations into while you are waiting to submit them to the ATO. That way if you do need to ‘dip into it’ before it is due, then you can as long as you have the full amount ready for the ATO by the due date.

You could also consider paying the ATO each week, fortnight or month if that reduces the pressure on your cashflow. Your BPay details for your GST, PAYG and Super remain the same each time, so just use these details to pre-pay your obligations. 

Sin #5 Putting off debt collecting

We are yet to meet a Small Business Owner who loves debt collecting, unless that is what they do for a living. Let’s face it, asking people for money is hard. However, not being able to pay your bills and having your family suffer because of a slow payer, now that’s a lot harder.

As we constantly mention, cashflow is the lifeblood of a business and making sure you are paid for your products and services is paramount. Don’t ever feel guilty for asking people for the money that they rightfully owe you. The best way to make the debt collecting process easier, is to get onto it right away and I mean literally one day after it is due. 

Now this quick response doesn’t need to ‘demand payment’ or ‘threaten legal action’, it should simply be a polite email to let them know that you understand how busy they are and that due to that, they may have forgotten about your invoice. Remember it could also turn into a scenario where the invoice has gone astray for whatever reason and they have never received it. So in this instance, an early follow up is critical.

Thankfully a few bookkeeping software programs are making it easier for us to remove ourselves from the debt collecting process. Take Xero and MYOB for example, where you can pre-set up to 5 invoice reminders. With these pre-set reminders you can customise when they are sent, for example how many days past their due date, and what the emails will say too. So, why not start off with a gentle nudge and move to a firmer notification as time passes by.

Sin #6 Not paying yourself or your team properly

This bookkeeping sin is a biggie. Many Small Business Owners simply do not realise that the amount they need to pay their staff is governed by Australian Legislation. There are more than 100 industry or occupation awards that cover every employer and employee within Australian and the only time an award won’t apply to your business is when it has an Enterprise Agreement or Registered Agreement in place that has been approved by the Fair Work Commission.

So, when it comes to reviewing the Award that governs your business, it is important to note that you need to read the entire document. Having said that, be sure to pay particular attention to the minimum weekly wages, employee classifications, hours of work entitlements and the allowances that must be paid too.

Once you understand exactly what your employees are entitled to then also make a note to check the award regularly for updates or simply register with Fair Work Australia to be notified of any changes to the award. The last thing you want is find out that you have been underpaying someone and then have to find a bunch of money to back pay them.

The other important person to pay is yourself. Now working out what to pay this person is really tricky. You are the boss and you get to make all of the rules (well most of them anyway!), so surely you can pay yourself as much or as little as you like, yeah? And the answer to that is ‘of course you can’. 

Just remember that how much you pay yourself will impact many aspects of your business and your home life. So, you need to work out a fair value for the work you do and ensure that amount covers all of your household expenses as well as leaves your business with enough cashflow to cover all of the business expenses too. Our recommendation is that if you are ever unsure and would like some guidance, then be sure to chat to your trusted accountant (or ours if you don’t have one). 

Sin #7 Trying to be a Small Business Super Hero

The final deadly sin that sees many businesses fall into an early grave is trying to be a Small Business Super Hero. 

You know the one?

• The one where you get up at some ungodly hour to get a head start on the day before the rest of the family wake up.
• That one where you are solely responsible for the sales, the bookkeeping, the cleaning, the marketing, the website updates and so on, and so forth.
• The one where you hardly get to enjoy your family time because you’re thinking of work and you are forced to stay up late at night to finish off the 17 tasks you started today.
• And finally, the one where you collapse into bed after a really long day and beg your brain to stop adding things to your to-do-list because you’ve got an early start and a big day again tomorrow. 

This has to stop! You have to jump off the mouse wheel! 

We are all guilty of it and honestly at times there will be no escaping it, it is just what needs to be done … BUT … the Small Business Owners who make it out with their sanity in check have implemented this one magical piece of advice – play to your strengths and outsource your weaknesses. 

There is a reason why you started your business. You are amazing at what you do and that is what people pay you for. So if you not focussing most of your attention on how to continue doing that and how to keep improving upon it, then you are going to burn out mentally and physically.

If you are ready to take your business to the next level and to play to your strengths, then have a look at how ProfitAbility Virtual Assistance can help you achieve more in your day.

Going from Sinner to Small Business Bookkeeping Saint

If you are one of the many Small Business Owners that is guilty of a bookkeeping sin or seven, never fear – you are definitely not alone, and your situation can change quite easily. It is the small tweaks that we make every day, that truly make all of the difference to our businesses in the long run. 

So, if you would like to feel a little more ‘Saintly’ and a little less anxious, about your bookkeeping then simply choose the sin that you believe has the most potential to cause you a headache and take one action today that will make a positive impact on your business from tomorrow. 

These actions could be as simple as:

1. Booking an appointment with your bank to organise another bank account.
2. Ensuring all of your bills are in your bookkeeping software by the end of the day.
3. Checking that your bank details are on your invoices and sending out any outstanding invoices.
4. Making a decision on the best way to handle your GST, PAYG or Super obligations moving forward and set yourself a reminder.
5. Having a look at your aged debtors or accounts receivables report or at least learning how to find these reports in your bookkeeping software.
6. Locating and reading your Industry or Occupation Award. 
7. Asking yourself, ‘What is the next step I need to take to play to my strengths and outsource my weaknesses? Then take one action towards a solution. 

Summary – bookkeeping tips for small businesses

Finally, please always remember that you are not alone in this amazing, crazy, life-changing journey and there is always someone out there that has your back … like us! So never hesitate to reach out if you would like some Small Business Support or Bookkeeping Support.

Thinking of doing your own bookkeeping?

If you’d like to find out more about how to best use the top software available, how about checking out one of our 15-minute webinars? Packed with tips and tricks to really get you on track and using the software to the max. Just click on an image below.