The ABCs of bookkeeping

In today’s digital times, you’re probably used to having unrivalled access to your financial numbers, key performance indicators (KPIs) and cashflow metrics. Without good bookkeeping, the speed and quality of your reporting can quickly fall down.

So, why is fast and accurate bookkeeping so important? And what are the main bookkeeping tasks that your business should be getting right?

The financial importance of good bookkeeping

Bookkeeping is a fundamental part of your financial process as a business. Without it, your accounting software has no financial data to work with, your FD doesn’t have the most current numbers, and your accountant can’t see the current financial health of the business.

Inputting your financial transaction into some form of record-keeping system is also a mandatory commitment if you’re a registered business and paying goods and services or value-added tax. Bookkeeping is what provides you with a historic breadcrumb trail of your finances – allowing you to track your cashflow, revenues and profits over a given period.

How to maximise your bookkeeping

So, bookkeeping is a vital part of your financial management. And the key to having your transactions recorded, available for reporting and accessible whenever you need them.

But how should the bookkeeping process work, in an ideal world? Let’s walk through the core bookkeeping steps and how you can get the most from this financial admin task.

To keep on top of your bookkeeping:

  • Scan all financial paperwork – the initial part of the bookkeeping process is to scan and record all receipts, invoices and remittances. This gives you a digital copy of the paperwork that relates to your income and expenses – important when you get around to filing tax returns and expense claims etc.
  • Record all transactions immediately – getting your transaction recorded and in the books ASAP is vital. This includes recording both your income and expenses, as soon as they occur, and matching them with the scanned paperwork. This not only helps you stay organised but also means your financial data is always up-to-date and can provide real-time reporting and numbers. This can be a huge help when running the business.
  • Categorise transactions accurately – when recording transactions, make sure you’re accurate and categorise each item correctly. Not only does this remove the potential for errors and miss-keying in your books, it also helps you track your spending and income more accurately, so your reports are an honest reflection of your financial health.
  • Reconcile your accounts regularly – reconciliation is the process of matching your transactions (both income and expenses) against your bank statement and other financial statements. It’s a key part of your bookkeeping and should be done regularly, to ensure that your balances are correct and that your records are totally up to date.
  • Use a cloud-based accounting system – bookkeeping doesn’t involve books (ledgers, in accounting-speak) anymore. In the digital world, you can use cloud-based accounting software, like Xero, to record your transactions and access your financial data in the cloud from anywhere, at any time. This makes it easier to keep on top of your numbers when out of the office (and Xero will even automate the reconciliation process too).
  • Outsource your bookkeeping to a professional – yes, you can do your own bookkeeping. But there’s a LOT of value to delegating all the hard work to a professional bookkeeper. If you don’t have the time or expertise to manage your bookkeeping yourself, outsourcing is a smart move. A bookkeeper will make sure your books are always accurate and under control. Plus, they can produce cashflow statements, revenue forecasts and other reports to help your business decision-making.

Talk to us about outsourcing your booking

With today’s cloud accounting software, bookkeeping is a far less tedious task than it used to be. But it’s still a regular, time-consuming job that can take you away from running the business.

If you’re thinking about outsourcing your bookkeeping, and freeing up that admin time, we’d love to talk to you. Our outsourced bookkeeping service will take on your bookkeeping tasks, to streamline the whole process. We’ll also introduce you to automated data-entry tools like Dext Prepare, Auto Entry and Hubdoc, that make snapping receipts and scanning invoices a breeze.

Let us do the books, so you can get back to talking to customers and winning work.

Contact us today on 08 6118 6111 or hello@prescottsolutions.com.au to discuss more!

When to Register Your Business for GST

Should you register your business for GST? Many business owners register their businesses from day one, regardless of income. Others, for example, many sole traders, choose not to register for GST until it is mandatory.

However, it is common that new businesses don’t realise they have exceeded the income threshold at which they must register! This can result in having to pay GST on sales to the ATO even if you haven’t included it in your prices – so you could lose one-eleventh of your income.

When is GST Registration Compulsory?

Your business must register for GST when it makes $75,000 income within a financial year. If you’re regularly making $6,250 or more each month, it’s time to check whether you should register for GST.

It’s good practice to check your turnover every quarter, and when you are getting close to the threshold, check every month. If you’re not yet using online accounting software, talk to us about your options, as this will make reporting and preparing for GST registration much easier.

You must register for GST within 21 days of reaching the threshold.

Special Rules

  • You can voluntarily register even if your turnover is less than $75,000. This means you can complete an annual BAS if you prefer.
  • If you’re making money through a ride-sharing platform like Uber, you must register for GST immediately. All commercial driving income, regardless of turnover, is subject to GST registration.
  • If you want to claim fuel tax credits, you must register.
  • If your business is a not for profit, the registration threshold is $150,000 per financial year.
  • If you’re not an Australian resident business, the rules for working out GST turnover are different, so talk to us before registering.

Need Help?

When starting a new business, there are many decisions to make, and GST registration is just one of them. Get in contact about the benefits of registering, and we’ll help you get set up on appropriate accounting software to help you on your way to business success.

Finalising 2022 Single Touch Payroll

It’s nearly time to make a finalisation declaration for Single Touch Payroll. There is no need to issue payment summaries to employees you have reported through STP.

Employers must complete the finalisation declaration by 14 July for employees. Employers with a mixture of employees and closely held payees have until 30 September 2022 to make the declaration.

Small employers (fewer than 19 employees) that only pay closely held payees have until the payee’s income tax return due date. Employers will need to liaise with the individual payee about the exact tax return due date.

You may have some payees who have not been reported through STP, so you still need to issue a payment summary for anyone not reported through STP. You will also need to submit a payment summary annual report (PSAR) for any payments outside the STP system.

Once the STP finalisation has been sent to the ATO, the employee’s information will be released in their myGov account and listed as ‘tax ready’.

STP Payroll Checklist

Be efficient and prepare as much as you can now so that you are able to finalise your data by 14 July.

  • Check that your business details, including ABN, registered name and address and authorised contact person are correct in your software.
  • You should already have necessary details for all employees, both current and any who have terminated throughout the year if you are using STP. The essential information is full name, date of birth, address and tax file number.
  • Review any terminated employees. Is the correct termination date recorded in your software? Are Employment Termination Payments (ETPs) coded correctly?
  • Review salary sacrifice payments to superannuation for Reportable Employer Superannuation Contributions (RESC) amounts.
  • Check with us for any Reportable Fringe Benefit Tax (RFBT) amounts that should be included.
  • Check that all payroll categories are assigned to the correct ATO reporting category. This includes all ordinary earnings, loadings and penalties, allowances, commissions, bonuses, leave payments and termination payments.
  • You may have other unusual payments such as those made under a voluntary agreement for contractors or labour-hire arrangements—check that you have reported them correctly.

Finalising Single Touch Payroll

It’s important to verify payroll figures before finalising, in order to minimise the chance of errors and having to re-issue at a later date. The finalisation process is the same whether you are using STP Phase 1 reporting or Phase 2.

Once the payroll year is completed at 30 June, you can then analyse the payroll amounts for each employee and cross-check against the numbers in your profit and loss accounts.

Talk to us today if you would like us to make the STP end of year process easier by reviewing and validating your payroll figures prior to finalising the data and lodging with the ATO. The end of the payroll year will be here sooner than you think!

Director Identification Number

From today, 1st November 2021, a director of an Australian corporation will need a director identification number (“ID”). 

What is a director ID?

The director ID is a unique identifier for each director who has verified their identity with the Australian Business Registry Services. You will only need to apply for this ID number once, and keep it forever. It will be applicable to all directors of Australian companies and registered bodies.

There are transitional rules in place to allow time for existing and new directors to apply for the ID number. The relevant dates are below:

  • Directors appointed prior to 31 October 2021 will have until 30 November 2022 to apply.
  • Directors appointed between 1 November 2021 and 4 April 2022 must apply within 28 days of their appointment.
  • Directors will need to already have applied for an ID for any new appointments from 5 April 2022 onwards, so if you are planning on becoming a director, you can apply before you are appointed

How do I apply?

The Australian Business Registry Services will be administering the director ID’s, and you will need to apply for your own. There are three steps to follow: 

Step 1 – Set up myGovID
Step 2 – Gather your documents
Step 3 – Complete your application

You can apply for a director ID now.

Who doesn’t need a director ID?

You will not require a director ID if you are:

  • a company secretary but not a director
  • acting as an external administrator of a company
  • running a business as a sole trader or partnership
  • referred to as a ‘director’ in your job title but have not been appointed as a director under the Corporations Act or the CATSI Act
  • a director of a registered charity with an organisation type that is not registered with ASIC to operate throughout Australia
  • an officer of an unincorporated association, cooperative or incorporated association established under state or territory legislation, unless the organisation is also a registered Australian body.

Existing Directors

For existing directors, your details with ASIC will need to be updated for each company you are a director of by November 2022. So when you apply for the directors ID please send it through, and we will let you know what needs to be done to update ASIC.

Help and Support

If you want to discuss whether you should apply for a director ID, please feel free to contact our office on 08 6118 6111 or email hello@prescottsolutions.com.au

Recruiting new employees? The 1 November superannuation rule changes

When your business hires a new employee, the Choice of Fund form is used to identify where they want their superannuation to be directed. If the employee does not identify a fund, generally the employer directs their superannuation into a default fund.

From 1 November 2021, where an employee does not identify a fund, the employer is required to contact the ATO and request details of the employee’s existing superannuation fund or ‘stapled’ fund (the fund stapled to them). The request is made through the ATO’s online services through the ‘Employee Commencement Form’.

If the ATO confirms no other fund exists for the employee, contributions can be directed to the employer’s default fund or a fund specified under a workplace determination or an enterprise agreement (if the determination was made before 1 January 2021).

Invite Prescott into your Xero File

To allow us to help you with your business, we need access to your Xero file with Adviser and Manage User permissions.

Simply follow the steps below, and we’ll be connected in no time!

    1. Open your Xero file
    2. Click on your Organisation name then go to Settings
    3. Click on Users, then Invite User
    4. Enter Prescott Solutions and xero@prescottsolutions.com.au, then select the permissions below
      • Payroll Admin
      • Business and Accounting – choose Adviser and don’t forget to tick Manage Users
    5. Lastly, click Send Invite