Everybody gets 24 hours a day. The difference is what we do or don’t do in that time – and what we don’t do is as important as what we do – and this applies to your accounting set up as to anything else.
Accounting Set Up
Your accounting set up is like being caught between a rock and a hard stone. Especially at the start, nobody has the money to engage a full-time accountant to do it all. But most don’t have the time or expertise to do it all alone either. Catch 22.
The trick is to break it into 12 smaller steps and then work out what you can do alone or with a bit of help and where you need to raise your hand for backup.
# 1 Choose an Accounting Software
Your accounting software is the foundation everything else stands on. You can start with an Excel spreadsheet, but that becomes very time-consuming very quickly – not a good use of your time. So go for an accounting software reasonably quickly.
# 2 Set up Your Software
If you use a cloud provider, this is really easy. You just sign up and pay. And if you don’t use cloud but a desktop version? Don’t – go for the cloud. Don’t bother with a desktop version.
# 3 Set Up Your Accounts
This is the first challenge. Too many accounts and you drown – too few and you can’t see anything – the wrong accounts and your vision is all fogged up. So adjust and fine-tune this with time.
# 4 Allocate GST Codes
This is the really tricky bit. When you get this right, you are on the home run. Get your accountant to help you unless you really know what you are doing. Mistakes can cost you a lot of money.
# 5 Set up Bank Feeds
Bank fees are vital. If you have more than 10 transactions a week, you really need a feed. This sounds technical, but is really easy and will save you time.
# 6 File Your Receipts
You can only claim a GST credit if you hold a valid tax invoice. So storing your receipts is vital – offline or online. If online, you attach a digital copy to the relevant transactions in your software. Not hard to do, just time-consuming.
# 7 Allocate Transactions
Thanks to the bank feeds you set up all your bank transactions will already be waiting for you in your accounting software. You just need to allocate each transaction to an account.
# 8 Set up Bank Rules
A bank rule tells your software how to allocate a transaction that comes with the keywords you list. So once set up you don’t even touch these transactions anymore. They go straight to the account you listed in the bank rule.
# 9 Reconcile Bank Accounts
Check that the bank balance you have in your system agrees with the bank balance on your bank statement. Once you are properly set up, this should always be the case but important to check this once in a while.
# 10 Pay Your Staff
Payroll is a minefield and any mistake can cost you a lot of money. So this is an area where you should seek help from an accountant. As an employer you bear a huge responsibility and the law is harsh on those who get it wrong.
# 11 Lodge Your BAS
If you are not registered for GST or PAYG withholding (or another indirect tax), then skip this step. You don’t need to lodge a BAS.
If you are registered for GST, you either lodge your BAS once a year (if you registered voluntarily) or quarterly. By the time you get to monthly lodgements you will have an accounting department taking care of all this.
If you are registered for PAYG withholding, you also report the wages you paid (W1) and the PAYG you withheld (W2) in your BAS.
Once your accounting system is properly set up and you know what you are doing, you can probably do this alone, but at the start get an accountant to help you.
# 12 Lodge Your Tax Return
As a business you need to lodge a tax return. This can be a huge task and it is not just about meeting your tax obligations but also about optimising your tax position to reduce your tax liability. If you get professional help with just one step in this whole process, this is the one where you should put your hand up.
So breaking your accounting into these 12 steps hopefully helps to see where you need help and what you can cover alone.
Please call or email if you get stuck.
Disclaimer: tax Talks does not provide specific financial or tax advice in this article. All information on this website is of a general nature only. It might no longer be up to date or correct. You should contact us directly or seek other accredited tax advice when considering whether the information is suitable to your circumstances.
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Last Updated on 04 September 2019