accountants desk with computer

Accounting Guide

Want to learn about online accounting for your small business? Read our chapters to find out about accounting software, hire an accountant, move from Excel, and more.

Chapter 1: How to prepare and lodge BAS online

Most Australian businesses have to pay GST. Many also make PAYG tax instalments, and some have to collect tax from employees. Find out how to keep track of it all through your BAS.

What is BAS?    

A business activity statement (BAS) summarises what revenue you take over a period of time and reports on a few key expenditures. GST-registered small businesses submit a BAS to the Australian Tax Office (ATO) to work out:

  • their GST bill or refund
  • what tax has been withheld from employee pay and must be sent to the ATO
  • their income tax instalments if they’re in the pay-as-you-go (PAYG) system

A BAS can also be used to record other taxes and credits, such as fringe benefits tax, luxury car tax, wine equalisation tax, and fuel tax credits.

Who has to lodge a BAS, and when?    

If you’re GST registered, then you have to submit business activity statements. Any business can register for GST, and certain businesses are required to. You have to register for GST if:

Most GST-registered businesses complete a BAS every quarter. After the quarter closes, you get about a month to complete and submit the report. Some types of businesses must submit BAS reports once a month, and others may only have to do it annually. Check the ATO page on lodging and paying to confirm your requirements.

How to complete a BAS statement    

Anyone who completes a BAS needs to report how much GST was collected from customers, and how much GST was paid to suppliers. Those numbers should be in your business accounts. If not, you’ll need to look back through your receipts and invoices or bank statements.

If you pay employees, your BAS must report how much PAYG tax you’ve withheld from their pay during the period. That information will be in your payroll system.

And if you’re making PAYG instalments on business income, then your BAS must also include an estimate of the tax you owe. That number is based on your sales for the period, which you can find in your P&L report.

You can set up accounting software so that all these numbers flow automatically through to the BAS when you complete it online.

How to lodge BAS    

Before lodging your BAS, check that the accounting data you’re using is correct. Most accounting software will generate an audit report detailing all the transactions included in the BAS. Use this to ensure all your sales and expenses for the period have been entered. Double-check that data against your bank statements, too – this is called bank reconciliation.

Once you’re confident the BAS is accurate, you can lodge it:

  • via your online accounting software
  • through your myGov account if you’re a sole trader
  • through the ATO’s online business portal
  • by having a registered tax or BAS agent (generally an accountant or bookkeeper) submit it for you

The beauty of a BAS agent    

A lot of Australian businesses have an accountant or bookkeeper who can take care of their BAS and tax obligations. Besides checking that the BAS is accurate, these professionals can sometimes help lower your tax bill and give advice on improving business profitability.

Keeping BAS hassle-free    

BAS is another admin job, but it doesn’t have to be a big one. You just need to go through your accounts and pick out a few key pieces of information for the ATO. It mostly comes down to whether or not your accounts are up to date. If you have good bookkeeping habits, it won’t be a problem.

A BAS or tax agent and online accounting software like Xero can help keep you up to date while minimising the workload.

Chapter 2: What is bank reconciliation?

You probably never heard of bank reconciliation until you got into the business. And now you’re expected to do it all the time. So what is it? And what’s the point?

What is bank reconciliation?    

Bank reconciliation is a way to double-check your bookkeeping. You do it by comparing your business accounts against your bank statements. Both sets of records should agree with each other. If not, you need to figure out why.

The purpose of the bank reconciliation    

Bank statements are reliably accurate financial records. By checking your books against them, you can:

  • Find and fix errors. You’ll spot your bookkeeping mistakes and clean them up.
  • Catch wrongful payments and fraud
    Reviewing expenses is a good way to spot incorrect payments or suspicious activity.
  • See how the business is doing (rather than guess)
    A regularly verified set of numbers keeps you in tune with financial performance.
  • Get tax breaks
    You can classify tax-deductible expenses while doing your bank rec.
  • Be prepared for filing taxes. You need a fully reconciled record of business income and expenditure to do tax returns.
  • Track profitability
    Use the opportunity to assign expenses to jobs and see how much money they really made you.

Our number one bank reconciliation tip    

It’s a good idea to use a dedicated bank account just for your business. That way, you know all the transactions on your bank statement are business-related and should appear in your business accounts.

If they don’t sync up, you need to figure out why. It’s most likely because you mistyped some information into your business accounts, entered it at the wrong time, or missed a transaction altogether. Bank reconciliation gets much trickier if you use the same account for business and personal transactions.

Common bank reconciliation questions    

Business owners who are new to bank reconciliation have five common questions.

  • Does everything have to match up perfectly?
    Some transactions may not go through your business bank account. That’s OK, but make sure you know why and keep a clear record of them.
  • Why do whole transactions go missing?
    When you make a transaction, and when it shows up in your bank account, the lag can cause confusion. It may explain why records don’t always gel.
  • Why am I always out by a few dollars?
    Bank fees will bring your bank balance down most months. Make sure you enter those deductions to your business expense account to bring everything back into line.
  • How often do I need to reconcile?
    You have to do it before filing tax which could be anywhere from monthly to annually, but try to be more frequent – daily or weekly works well. The longer you leave it, the tougher and more time-consuming it becomes.
  • How do I do bank reconciliation?
    Open up the record of your income and expenses in your business books or in your accounting software, and cross-reference the latest transactions against a bank statement from the same period.

The bank reconciliation process    

All you need to do bank reconciliation is a copy of your business accounts and a list of bank transactions from the same time period. You walk through and match them up.

It sounds mind-numbing, and it can be if you’re doing it manually with paper bank statements. But there are clever ways to lighten the load. Most banks will send your transaction data directly to online accounting software. Then you have both sets of records on the same screen, and you can run through them really fast. Smart software like Xero will even suggest matches, so all you need to do is click OK.

Whether you do it automatically or manually, you can get more in our guide on bank reconciliation.

Chapter 3: How to do bank reconciliation

lady in office suit

Bank reconciliation is part of life as a small business owner. It keeps your bookkeeping accurate and can help lower your tax, alert you to fraud, and allow you to track costs. So how do you do it?

Bank reconciliation steps    

Bank reconciliation happens when you compare your record of sales and expenses against the record your bank has. It’s how you verify your business accounting numbers.

  1. Get bank records
    You need a list of transactions from the bank. From a statement, you could get that from a statement, from online banking or by having the bank send data straight to your accounting software. If you run a current account and a credit card account, you’ll need both statements.
  2. Get business records
    Open your ledger of income and outgoings. This might be in a logbook, on a spreadsheet, or in an accounting software package. Some accounting software will pull in bills and receipts with the help of data capture tools and extract the data automatically.
  3. Find your starting point
    Find the last time the balance on your business books was the same as the balance in your bank account. Start the reconciliation from there.
  4. Run through bank deposits
    Make sure each deposit appears as income in your accounts. If something is missing, enter it. You’ll need to figure out if it was a sale, interest, a refund, or something else.
  5. Check the income on your books. Each entry should match a deposit on your bank statement. If something is missing, find out why. A customer payment might have bounced, for example.
  6. Run through bank withdrawals
    All bank withdrawals should be recorded in your books. This includes things like bank fees, which you might not have accounted for yet.
  7. Check the expenses on your books
    Each entry should match a withdrawal on your bank statement. If not, find out why. One of your payments may not have cleared yet, or maybe you paid using cash or a different account.
  8. End balance
    After you’ve checked all the deposits and withdrawals, your business bank balance should match the totals in your business accounts. This will be the starting point for your next reconciliation.

How to do bank reconciliation the easy way    

Bank reconciliation can be trying work. Switching between documents and comparing numbers isn’t everyone’s cup of tea. If you can’t spare the time or stand the monotony, there’s an alternative. Software will speed things up hugely.

How to use bank reconciliation software    

Most banks can directly send transaction data to accounting software, like Xero, through a secure online connection. When you’re ready to do reconciliation, the software pulls up each bank transaction in turn and either:

  • suggests a match with a corresponding entry in your accounts, or
  • asks what the transaction was for and enters the info into your accounts.

With the right software, you can do bank reconciliation on your phone.

Bank reconciliation problems    

No matter how you do bank reconciliation, you’ll come across mystery transactions from time to time. There will be amounts that appear in one set of records but not the other. Don’t let it panic you. This is why you’re doing bank rec, and there’s often a straightforward explanation.

Do business books show something that’s not on your bank statement?    

If a transaction isn’t showing on your bank statement, it’s most likely because you got income that you didn’t have from a bank, or you paid for something out of a different account or with cash. Get to the bottom of it and make the necessary notes.

Does the bank statement show something that’s not in your business books?    

If a transaction isn’t showing in your business books, it could be from a keystroke error when you entered a transaction. Or it could be a transaction that you forgot to enter. Make the required corrections or updates.

Fixing bank reconciliation problems    

It can take a long time to figure out mismatches. You’ll need to go through invoices, receipts, emails and diary entries to get there. Doing bank reconciliation weekly – or even daily – can help you avoid these frustrating searches because you’ll have a clearer, more recent memory of the transactions you’re reviewing.

Make bank rec less of an ordeal    

However you do bank rec, do it often. The longer you go without doing it, the longer it will take to catch up. It won’t just be that you have more transactions to do, it will take longer per transaction because you’ll have a harder time recalling the details.

Schedule the time to do it every week or even every day. And set up a system that makes it quick and easy to grab the records you need.

Chapter 4: What is depreciation, and why should I care?

Depreciation affects your bottom line, your tax bill, and the value of your business. Those are three good reasons to learn what depreciation is and how it works. Here are the basics.

What is depreciation?    

Depreciation is what happens when a business asset loses value over time. For example, a work computer gradually depreciates from its original purchase price down to $0 as it moves through its productive life.

There are techniques for measuring those assets’ declining value and showing it in your business’s books. This area of accounting can get complex, so it’s a good idea to work with a professional.

Purpose of depreciation: 3 main functions    

Depreciation accounting helps you understand the true cost of doing business (because wear and tear is an expense), reduce your tax bill, and estimate the value of your business.

1. Depreciation as an expense (cost of doing business)    

To understand how profitable your business is, you need to know all your costs. Depreciation is one of those costs because assets that wear down eventually need to be replaced.

Depreciation accounting helps you figure out how much value your assets lost during the year. That number needs to be listed on your P&L report and subtracted from your revenue when calculating profit. If you don’t account for depreciation, you’ll underestimate your costs, and think you’re making more money than you really are.

2. Depreciation and tax 

Because depreciation lowers your profit, it can also lower your tax bill. If you don’t account for depreciation, you’ll end up paying too much tax.

You can gradually claim the entire value of an asset off your tax. However, there are rules around how quickly you can depreciate certain assets from a tax perspective.

3. Valuing your business (depreciation on the balance sheet)    

As assets lose value, so can your business. For example, a transport company with old trucks may not be worth as much as a transport company with new trucks. Your assets are listed on your balance sheet, on what is called the fixed asset register. Make sure you update the register whenever you work out depreciation. It’s also worth remembering that assets are often used to secure loans. As they drop in value, they offer less security, and you may find it more difficult to get finance.

What can be depreciated?    

While most business expenses are tax-deductible, they’re not all depreciable. There’s a difference. Consumables like stationery can be deducted from tax, but you have to claim for them in the year you bought them. For most businesses, only fixed assets can be depreciated.

What are fixed assets?    

A fixed asset is something that will help you generate income over more than a year. It includes things like tools, machinery, computers, office furniture, vehicles, and buildings. You don’t always have to own them. Some leased items may be depreciable, too.

Intangible assets, non-physical things like patents and copyrights, can also be depreciated (or amortised). They’re incredibly valuable to your business, and that value gradually shrinks as they near their expiry.

If an asset doesn’t lose value – such as land – then it can’t be depreciated. Nor can inventory. That is dealt with separately, under the field of inventory accounting.

Choosing a depreciation schedule    

To depreciate an asset, you must first estimate its lifespan. A computer might only last three years. A kiln in a factory could last 30. You’ll probably find that the ATO has a depreciation schedule for the types of assets in your business. It’s common for small business owners to simply follow those recommendations.

An asset’s value can be adjusted to zero at any time if it’s lost, stolen or damaged. It can also be sold, traded or combined into a new asset.

Methods of calculating depreciation    

You also need to decide how an asset’s value will decline over its lifespan. Will it lose most of its value early, or will it lose value at the same rate every year? There are many different methods of calculating depreciation, and some of them are quite complex. Three of the most common are:

Straight-line depreciation    

Under this method, the asset depreciates the same amount every year, till it has zero value. For instance, an asset expected to last five years would depreciate by one-fifth of its ticket price each year.

Diminishing value depreciation    

Under diminishing value depreciation, an asset loses a higher percentage of its value in the first few years. That rate of depreciation gradually slows down as time goes on.

Units of production depreciation    

Some assets’ lifespan is better measured by the work they do than by the time they serve. For example, a vehicle might travel a certain number of kilometres, or a packaging machine might box a certain number of products. You could depreciate these assets based on usage rather than age.

Depreciation for small business    

Depreciation can seem tricky at first, but it’s nothing to be scared of. It will help you better understand your costs and lower your tax bill, which are good things.

It doesn’t have to be complex either. Most businesses simply adopt the depreciation schedule provided by the ATO. Once it’s set up in your accounting software, the maths happens automatically, and the numbers flow straight through to your tax return. And, as always, an accountant or bookkeeper can provide advice along the way.

Chapter 5: What is a business credit score and how to improve yours

Every business has a credit score, which tells lenders and suppliers how good you are at paying debts. Find out how to use credit scores to your advantage, and how to keep yours healthy.

What does a business credit score say?    

A good credit score means that you’re quick to pay bills and debts, so everyone is happier to do business with you:

  • Suppliers will probably give you more favourable payment terms.
  • Lenders will give you better access to credit and capital.

You can apply the same logic to businesses you deal with. If they have a good credit score, you know they’ll probably pay your invoices on time.

How are business credit scores calculated?    

Many companies create credit scores, and they each have their own proprietary system for doing it. This means your business will have several credit scores, and you won’t really know how any of them were calculated. However, some basic criteria are probably used in developing all credit scores.

  • Most credit scoring companies are linked to debt collection services, so they know who is and isn’t paying their bills.
  • They gather publicly available information about your business from government departments and banks.
  • Someone may report you to a credit scoring company if they’re not happy with how fast you pay.

Your credit score might be on a scale of 1–5 or 1–100. The higher your score, the better you are at paying.

Accounting software and credit scores    

You can get business credit scores from credit scoring companies and through some accounting software.

It’s an excellent way to screen businesses before entering a contract with them. If the credit score is really low, you might take steps to protect your business – by either requesting a deposit, giving them shorter payment terms or declining the business altogether.

You can also punch your own business into the software to see what people are told about your credit rating.

How to get a good business credit score    

So how do you improve your business credit score when you don’t really know all the things that go into it? Here are some tips that accountants give to make sure businesses aren’t red-flagged to lenders or other businesses.

Review your business credit score three to four times a year

If it dips, contact the credit scoring company. They’re legally obliged to tell you why. It could be because:

  • they made a mistake, in which case you’re, entitled to a correction
  • a vendor reported you for withholding payments for legitimate reasons like invoice disputes  – again, you can get this corrected.

Know what a good business credit score is

Your credit score doesn’t need to be a 4 out of 5, or 75 out of 100 – so don’t stress over a few points here and there. Most businesses will be comfortable working with you so long as you’re not in the bottom quarter.

Pay bills on time

Most of your business credit score will come down to on-time payments.

  • Set up a good accounts payable system, so you know when bills are due.
  • Use accounting software to automate payments, so you don’t forget.
  • Keep an eye on cash flow, so you can see if you’re going to struggle to make payments.
  • Be aware that big companies and utilities are more likely to report you for late payment.

Be upfront if you’re having cash flow issues

Every business runs out of money from time to time. If it’s affecting your ability to pay bills, don’t be too proud to call those vendors and explain the situation. They’ll be far less likely to report you to a credit scoring company if you explain:

  • why you’ll be running late
  • when you’ll be able to pay

How to deal with businesses who have a poor credit score 

Credit scores are a two-way street. You can use them to protect your business from bad debts, too. Check out the credit score of clients new and old, and take steps to control risk.

Know what a poor business credit score is

Once you start watching your credit score, you’ll see how hard it is to get a really good one. Try and keep some perspective when reviewing the scores of the businesses you deal with.

  • Don’t worry if a business has a middle-of-the-road credit score. Just be wary if they’re in the bottom quarter of the scale.
  • If you find that an existing client has a poor credit score, don’t panic. Your personal experience of them counts for more. You only need to worry if their score is trending consistently downward.

Set cautious invoice payment terms for higher-risk businesses

You don’t need to turn down businesses with bad credit scores. You can still do a deal, but you may want to structure the agreement differently.,

  • Set shorter due dates, so you’re not extending. Themimprove
  • Ask for an upfront deposit.
  • Charge them interest or a late payment processing fee when invoices are past due.

Lower your dependence on late payers

Businesses that consistently pay late will put you under cash flow pressure. They may diminish your ability to pay bills on time, which will affect your credit score. Make sure you’re not over-reliant on businesses that keep you waiting. Gradually try to cycle late-paying clients out of your business.

Take care of your cash flow.    

So much of your credit score comes down to your cash flow. If you run out of money, you’ll miss payment deadlines, and your credit score will get dinged.

You’ll take a lot of pressure off yourself if you make sure you’re getting paid on time. Definitely think about your invoice payment terms and look at how online accounting can help you stay on top of accounts receivable.

And try to be strategic about when you spend money. Consider setting rules around how low you allow your bank balance to get. An accountant can help you decide what makes sense for your business.

Now you know what a business credit score is – look after yours. 

The maths behind credit scores are complex and mysterious. But the basics of protecting your business credit score are not. Pay your suppliers on time by making sure you keep a reasonable cash reserve in your business. Making sure you get paid on time will help. Good invoicing systems and accounts payable practices are vital to all this.

Chapter 6: Why you need to get an accountant

Owner-managed businesses often do their own accounting and bookkeeping to try and save money. When it backfires, they come to small-business specialist, Bob Stebbings. He explains why you need to get an accountant or bookkeeper and how to get the best value out of using one.

Most business owners don’t really enjoy bookkeeping or accounting. They end up doing it late at night or on weekends when they’d rather be spending time with their family and friends. Yet they carry on because they have a do-it-yourself (DIY) attitude, and they think hiring an accountant is a luxury. After all, why not work a little later and do the books yourself?

That attitude needs to change. Getting an accountant or bookkeeper is not a lifestyle decision; it’s a business decision. Investing in professionals – or changing the way you use them – can bring considerable returns.

They’ll keep control of your tax obligations, identify savings, and help you grow your business. And yes, as a bonus, they’ll give you back your weekends. You just need to use them in the right way to make sure your money is well spent.

Here’s what you’re missing    

As a small business owner, you have to do a lot yourself. There simply isn’t the money to outsource much. In deciding whether or not to get outside help on something, you have to ask if doing it yourself creates extra risks or costs.

Here are the potential downsides of DIY bookkeeping and accounting.

  • You miss out on tax breaks by failing to claim valid expenses.
  • You fall behind with invoicing (and with chasing unpaid accounts).
  • You underestimate your tax bill and get into trouble with the government.
  • Tax returns and other compliance paperwork is filed late, resulting in fines.
  • The books end up with mistakes that take hours to fix.
  • You don’t have reliable information to help you make business decisions.

Why you need to get an accountant or bookkeeper    

I specialise in helping owner-managed businesses, so I see a lot of clients who started off doing their own books. They come and see me when the job becomes too big or when they start making mistakes and losing money.

There are so many things an accountant or bookkeeper can do for you, but here are some key areas where they’ll help your business immediately.

Clean up your books once and for all    

When business owners do their own bookkeeping, it often only happens when they can find the time. That’s not really giving your financials the attention they deserve, and it results in:

  • data-entry errors
  • lost documentation (such as proof of purchase for expenses)
  • missed tax breaks
  • books that are out of date

If you get an accountant or er, they’ll clean everything up, so goals and ensures accurate records backed up by documentation. They’ll even set you up with software that makes it much faster and easier to record future income and expenses. That way, you’ll never fall behind again – and you won’t have to pay for someone to come and enter data for you.

Do your tax really well – and on time    

Late filing or payment of taxes results in penalties and interest. We’ve taken on clients in the past who’ve lost thousands this way. When you get an accountant, you won’t miss any more deadlines. The good ones will work well in advance so that tax filing is smooth and stress-free. You’ll forget what it was like to dread tax season.

Improve your invoicing and cash flow    

Your invoicing system is central to the health of your business. If you don’t bill efficiently, you won’t get paid quickly – and that’ll leave you short of money. It sounds basic, but this factor alone undermines a lot of businesses.

As an example, I think of the plumbing and heating engineers that service our building. About two weeks after they’ve been, they send me an invoice, which gives me 30 days to pay. If I pay on time, their business is waiting more than six weeks for the cash, even though the employees who did the work were paid the week the job was done.

Get an accountant or bookkeeper to set up an automated invoicing system, and you’ll be able to:

  • send invoices quickly
  • check at any time to see which ones have been paid and which haven’t
  • give customers a choice of multiple payment methods

Accountants and bookkeepers can also give you good advice on invoice payment terms, to help reduce the time you spend waiting on money to come in.

Get the power to make better decisions    

When you have to do the books yourself, you often don’t get onto it straight away. Other things come up that delay progress, and because you’re not a robot, you make mistakes. That means you don’t always have reliable, up-to-date information about your business.

And when you fall behind, it limits your ability to manage well. You don’t know how profitable you are or how much cash you can afford to spend on improving the business.

When you get an accountant or bookkeeper, they’ll ensure you always know where you stand. You’ll be able to see income and expenses as they happen, which will give you a good picture of short-term cash flow and long-term profitability.

Boost your profitability

Accountants can help you unblock growth in your business. They’ll start by removing unnecessary costs and smoothing out your cash flow, but there’s, even more, they can do. They’ll figure out what drives revenue and profit in your business – and help you improve them.

These will become your key performance indicators (KPIs). When a KPI goes up, so will revenue and profit. KPIs allow you to make strategic decisions.

KPIs in action

 

As an example of how this might work, think of a roofing business whose revenue is tied to the number of new jobs they win. They can’t win any unless they give an estimate, and they won’t get to give an estimate unless they answer the phone. That’s not always easy to do when you’re working at height.

So an accountant might measure:

  • calls answered
  • estimates given
  • jobs won

If the relationship between these three things was strong enough, an accountant would encourage the business owner to get an answering service. They’d even tell you how much return you could expect from the investment.

KPIs like these can easily be tracked using apps like Crunchboards or Spotlight. An accountant will set them up for you, so you can always see where to improve your business.

Getting the best value from accountants and bookkeepers    

As with any consultant you hire, you want to get maximum bang for your buck from an accountant or bookkeeper. Try to keep them focused on problems or opportunities that can make your business more profitable.

It’s all about return on investment so try to avoid tying professionals up with labour-intensive, low-yielding work like:

  • finding and fixing errors in your books
  • reconciling bank accounts
  • reconciling control accounts
  • rushing to meet tax deadlines

These are all important things, but they don’t add a tonne of value to your business. It’s catch-up work. You’ll burn through your accounting budget without getting any of the truly valuable services.

When you get an accountant or bookkeeper, find one that can automate your bookkeeping. Accounting. software systems automatically capture all your business data – including sales, expenses, payroll, inventory, and more – with minimal human involvement.

This will mean paid professionals spend far less time fixing old problems, and more time saving you money and improving your business. It’s all about return on investment. No one should understand that more than an accountant.

Getting an accountant or bookkeeper is a business decision.    

Don’t let bookkeeping distract you from your core work. It’s not where you’ll add value to your business.

A paid professional, on the other hand, has the expertise to:

  • lower your tax burden
  • avoid fines, interest and audits
  • identify and eliminate unnecessary costs from your business
  • help you measure and improve business performance

They’ll free you to work on the business, which is where you’ll be able to make the biggest difference. Plus they’ll allow you to spend more time with family and friends, which is a really great perk of making a good business decision.

Chapter 7: What does an accountant do?

Accountants do tax and compliance work – we all know that. But the best ones do so much more. They’re excellent troubleshooters and strategic advisors for small business. Learn what they can do for you.

14 things you didn’t know an accountant could do    

Accountants do more than you think. They can give you strategic advice and come up with clever ways to save money or boost revenue. They’ll also remove or automate administrative tasks that distract you from your core business. Get an accountant, and you’ll run your business with more clarity and confidence.

So what does an accountant do? The question is, what don’t they do.

1. Launch a startup    

Starting a new business can be exhilarating, but it takes more than a good idea. You need to know it will make money – and you need to convince investors and lenders of the same thing. An accountant can do that for you.

They’ll help test your idea, identify your startup and operating costs, and create credible revenue forecasts. They also know which lenders are playing ball at any one time, so you can approach the right people for finance. Plus they’ll work on your pitch, so you’re ready to impress those lenders.

2. Help with business strategy    

There are so many moving parts in a business. Sometimes it’s hard to know where to focus. Accountants can help you figure out what’s important.

They’ll work with you to set personal, professional, and financial goals and then give you tools to measure your progress. You’ll end up with a set of key performance indicators (KPIs) that tell you how your business is doing.

If you have accounting software, your accountant will set up dashboards that allow you to check your KPIs at any time of the day or night. And if things aren’t going as planned, what does an accountant do then? They’ll help you troubleshoot the issues, test solutions, and reset your KPIs as needed.

3. Fix your cash flow    

Many profitable businesses fail because they run out of money at the wrong time and can’t afford to pay suppliers or staff. Even a highly active business won’t last long if payments are slow to come in, or expenditure is too high.

Accountants know that revenue ebbs and flows, and that costs do the same. They’ll help you predict the effect on cash flow and come up with strategies to manage the situation. They’ll organise cash reserves and develop a spending plan that ensures there’s always money in the bank. It’ll make payday less stressful, supplier relations easier – and sleep deeper.

4. Listen and support you    

Being in business is challenging. It can be lonely, too. Specifics seem too hard, and you start thinking about the cozy 9 to 5 you left behind, a top accountant can keep your head in the game.

They know how much your business means to you. They can reassure and reset you on your journey. And they’ll help you cope with stress by breaking down big business problems into manageable parts. Giving moral support is an important part of what accountants do.

5. Manage your debt    

There’s good debt and bad debt. Your accountant can help you tell one from the other. They’ll find the least expensive borrowing strategies for your business – with the right mix of repayment flexibility and low interest. If you need refinancing, they’ll take care of that too.

Accountants will also advise when spare cash should be used to pay back loans, and when it should be reinvested in the business. They’ll do that by considering the numbers behind your business and looking at how your debt’s structured to develop a specific strategy for you. It’s not just blanket advice.

6. Deal with unpaid invoices    

Unpaid invoices are a fact of business. Chasing those debtors is a distraction you don’t need, but you can’t afford to ignore the problem. Your accountant can take the headache away.

They can set up invoice systems that send automatic reminders to customers when their bill is due and/or overdue. Some accountants will even call businesses that don’t respond to emails.

If invoices remain unpaid after this, your accountant can arrange debt financing – where a business will buy your unpaid invoices from you and chase the payment themselves.

7. Write and pitch loan applications    

Applying for a loan is both an art and a science. A good accountant will do more than just pull together your numbers. They can help you craft a compelling story.

Lenders obviously need to see solid financials and credible forecasts, but that’s just the beginning. An accountant will tie it all together in a presentation that sells a wider vision for your business. There won’t be any spreadsheets. You’ll be armed with graphs and charts that visualise the numbers – allowing your lender to see the opportunity. And they’ll use powerful forecasting tools that loan officers trust.

8. Budget smartly    

Detailed budgeting can eat up a lot of your time and energy. As a result, many businesses end up working off a vague set of numbers that are full of assumptions and estimates. Your accountant can help you produce a rigorous, accurate budget that gives you real confidence. You’ll know the real cost of doing business. You’ll know how much money you can reinvest. And you’ll know what you can pay yourself.

9. Get you staffed up    

Need hired help, but not sure where to start? Your financial advisor can step in here too.

What does an accountant do to assist with your human resources?

  • They’ll figure out what sort of hire will boost business the most. Will your bottom line benefit more from a salesperson or a technician?
  • They’ll work out the cost of hiring, training and paying an employee to make sure you can afford it.
  • They’ll also help you get payroll right, including complying with government paperwork, tax and insurance requirements.

10. Set up your cloud accounting software    

Your accountant will automate a lot of your business’s accounting so that sales and expense data flows directly into your accounts. They’ll also set you up with invoicing systems that tell you what’s been paid and what hasn’t. Smart software will even send reminder emails to clients who haven’t paid, so you don’t have to.

There are dozens of other automated systems they can implement for you, such as:

  • cash flow dashboards, so you always know where you stand
  • KPI tracking, so you can check overall business performance 24/7
  • automated accounts payable, so you’re always on top of expenses
  • mobile accounting apps that allow you to manage your finances from the road

11. Help you manage inventory    

Do you spend a lot on storage, or lose money writing off obsolete or damaged goods? Or do you sometimes lose revenue because you run out of stock? Smart inventory management is critical to doing good business.

Your accountant will identify the cost of holding inventory and come up with strategies to save some of that money. Plus they’ll review your sales data to help predict stock needs so that you can place accurate orders. They can even set up software that tracks stock levels and auto-orders items as they run low.

12. Make your business zing with efficiency    

The cost of doing business can climb quickly with things like:

  • storage – physical or IT
  • energy – electricity, gas, utilities
  • staff (and downtime)

Do you think about these costs strategically? If you don’t have the time or expertise, that’s something an accountant can do for you. They’ll identify unnecessary costs in your business and help you develop more efficient ways of working.

13. Unlock the power of technology    

calculating numbers on paper

Smart business software can automate a lot of the things you do manually. An accountant can take away those distractions by setting up affordable software for things like:

  • staff scheduling and time recording
  • point of sale
  • taking payments
  • customer relationship management
  • invoicing
  • payroll

This is one of the most important things an accountant can do for you. Automating business processes takes away pain, lowers costs and ensures everything runs smoothly. Just make sure you find a tech-savvy accountant that knows about business apps.

14. Bring some fun into your business – honestly    

What does an accountant do? The easy answer used to be that they wore suits and sat behind big desks. Not even that’s true anymore. Many modern accountants have interesting backgrounds and will come into your workplace to see how your business actually works.

Check out accountant and bookkeeper stories to learn about financial advisors who come from rock bands, orchestras and cheerleading troupes, to name a few.

It’s easier than ever before to find an accountant who you relate to on both a personal and professional level – and they can make all the difference to how you run your business.

You can find a nearby advisor now if you’re in Sydney.

And let’s not forget tax    

There’s more to tax than completing and submitting your returns. A great accountant will:

  • lower your tax exposure
  • help you deal with old tax debts
  • fix poor record-keeping
  • help you avoid audits
  • make sure your books are watertight if you’re audited

What does an accountant do? They make business better 

If your current accountant is going through the motions, you’ll be amazed at the difference a top accountant can make. They can bring a tonne of extra capability and insight into your business.

So what does an accountant do? Really, it’s whatever you need. Because if they can’t solve your business problem themselves, they’ll know who can.

Just remember that when looking for an accountant, consider more than their knowledge and skill. You should be able to have very frank conversations with them, so find somebody you like. An accountant that’s easy to get on with and can do all of these things for you is out there.

How to find an awesome accountant    

Nothing beats a recommendation from someone you respect and trust, so ask friends, family and business partners what they think of their accountants. If that doesn’t work, you still have options. We’ve compiled a list of progressive accountants that offer a wide range of services and understand the power of business software.

Chapter 8: When you should hire an accountant

Accountants can help out at various stages during the growth of your business. They can handle much more than just your payroll and tax returns. So when should you consider hiring an accountant for your small business?

Challenges for growing small businesses    

There are good reasons for hiring an accountant at different stages of your company’s growth. From a business plan to company formation, loan application to government audit, an accountant can make life easier for you at each step.

That doesn’t mean you always need to employ an accountant full-time or hire one on a retainer basis. Sometimes just a couple of hours of their time will be enough.

Like all small business owners looking to save money, you may think you can’t afford an accountant. But look at how long it would take you to do certain tasks (such as taxes), and ask yourself, is that a good use of your time?

For example, let’s say it takes you 10 hours to do your taxes, and your time is worth $100 an hour. That’s a cost of $1000 to do your taxes yourself. And there’s always the risk you’ve made errors – especially if you’re multi-tasking like most business owners.

However, if you get an accountant to take care of time-consuming tasks like taxes, it’s quite likely they will cost less per hour than you would pay yourself. You’ll not only have extra time to free you up to generate revenue, but you’ll have peace of mind that an expert is taking care of the details.

So what other moments during the life of a typical small business, might you want to hire an accountant to help you?

You’ll need advice when you write a business plan.    

If you involve an accountant while you’re writing your business plan, they will be able to use accounting software to add financial projections and other reports to it. This will help you create a business plan that’s realistic, professional and more likely to succeed. Our business plan template can help you get started.

Hiring a professional at this early stage will mean you benefit from their financial knowledge and advice right from the start. That could save you time and money compared with hiring one later.

You’ll need advice about your company’s legal structure.    

Not all businesses have the same legal structure – a number of factors determine different types. Some might be called limited companies, limited liability partnerships or corporations, others could be sole traders or proprietors. These vary from one country to another.

You should carefully consider each type before deciding which one best suits you. For example, you may do business as a sole trader or sole proprietor, working on a self-employed basis and invoicing under your name. If this is the case, you might be able to offset some of your living expenses against tax.

However, this also means you could be held personally liable for any business-related obligations. If your business fails to pay a supplier, defaults on a debt or loses a lawsuit, the creditor could legally come after your house or other possessions.

With a limited liability company structure, it’s different. As the name suggests, the liability of the business is limited to the assets owned by the business, not you personally (though there may be exceptions in some circumstances).

An accountant can explain the legal business structures available and help you choose the one that best suits you.

You’ll need an accountant to help with the finances.    

Small business accounting can quickly become complex if you do it on your own. If you feel you’re losing control of who owes you money and how much, an accountant can help you get back on track.

You may also want to measure key business metrics, such as the ratio of salaries and other employee payments to total revenue. An accountant can help here by managing your payroll and producing graphs so you can see how the ratio changes over time.

If your accountant uses cloud-based accounting software, they’ll be able to share your business accounts with you quickly and easily. And they can produce tables and charts that will help you understand your company’s current financial situation at a glance. This will help you monitor your business’s pulse and keep track of important things like cash flow.

Hire an accountant when you’re ready to delegate    

No doubt one of the things you like best is that you have control as a small business owner. You can set your own working hours, craft your business strategy, regulate your workload (at least to some extent) and determine your own finances. And being the master of all of these things is a wonderful and liberating feeling.

But sometimes it can stop you from delegating. Business owners can feel overworked, partly due to a reluctance to allow other people to help out. You might feel that no one can possibly know your business as well as you do. Therefore nobody can handle any part of your business as well as you can.

Inability to delegate can mean you’re left feeling overworked and stressed. At some point, you will have to let go, and learn to trust other people to handle some parts of your business so that you can look after the rest.

Delegating your company’s financial affairs is a good start. You need to choose the right accountant and make sure you trust them with your company’s financial information. Once you’ve handed over your company’s finances to someone more experienced in accountancy than you are, you will have more time to concentrate on other aspects of your business.

Some of the most successful business owners in the world are experts at delegating work to the right people – so try to learn from them.

Hire an accountant when you have to deal with the government    

It can be daunting dealing with government paperwork when you run your own business. This is why so many small business owners hire an accountant when the first tax filing is due.

But they can also help you cope with more than just tax returns. They can help your company interact with the government in other ways.

A good accountant will be able to:

  • Complete and file the required legal and compliance documents for your business
  • Keep your company up to date with the latest tax laws.
  • Prepare annual statements of accounts.
  • Keep your company’s status updated in the government’s company register.
  • Maintain records of directors and other administrative personnel
  • Organise and record share/stock allocation, such as when the business is formed when a business partner leaves or a new partner joins
  • Handle your payroll and ensuring that all employees’ tax codes and payments are recorded correctly.

Preparing your tax documents correctly could save you money – perhaps more money than your accountant charges you. And a good accountant will use their knowledge of tax laws and legislation to suggest ways you can free up cash flow, save money and raise capital for expansion.

Hire an accountant in case you’re audited    

It’s statistically unlikely that your company will be audited because there are so many small businesses and relatively few government auditors. But if it does happen to you, it can be expensive, stressful and time-consuming.

If you don’t already have an accountant at this point, it’s a good time to hire one. They can give you advice on how to work within the auditing process. They can also help ensure you don’t violate any tax laws afterwards – because the government will almost certainly be watching.

But it’s better to hire an accountant before an audit ever happens, especially if you can find one who will offer audit insurance. Audit insurance covers the fees you would have had to pay if your business needed to respond to an official enquiry, review, investigation or audit by a tax department. An accountant who offers audit insurance means they won’t charge any extra for the considerable amount of work they’ll have to carry out during the audit process.

Good accounting software incorporates an audit trail. This makes it easier for you and the government to see exactly what transactions have taken place over time – and who authorised them.

You’ll need an accountant when you apply for a business loan or overdraft.    

Banks like to know they’ll get back the money they lend out. Since the credit crunch, lending to small businesses has dropped in most countries. This makes it all the more important that you have a sound business case when you apply for a loan or overdraft.

An accountant can help improve your chances. Even the fact that you have an accountant might sway the bank in your favour, as it implies you’re serious about your business. With good accounting software, your accountant can present facts and figures that back up your application for funding. They’ll also be able to answer any questions your bank might have about revenue projections and expenses.

Your accountant can also help you choose which loan to go for, and tell you whether your bank’s terms and conditions and interest rate are favourable to you.

When your company is growing, hire an accountant.    

Companies don’t always grow at a steady rate. A new client or a big project can mean you need to grow your business more quickly than expected.

An accountant can help you handle growth transitions, such as hiring employees or taking on more office space. They’ll look after the detail (payroll, employee tax management, property tax, utility payments and so on), leaving you free to look at the bigger picture of the way your business is growing.

An accountant can also use accounting software to analyse your cash flow, inventory management and pricing. They can also provide insight into how to grow your business through financial analysis properly. They could even help determine when is the best time to introduce a new product or service offering to your range.

Get an accountant’s advice before you take on a franchise.    

Taking on a franchise is a popular method of starting up in business, especially in areas such as car grooming, cosmetics supply, lawn-mowing, courier delivery operations and fast-food restaurants. With a franchise, you can still be your own boss, yet in return for a share of the revenue or business equity, the franchise company will support you with brand marketing, sales, product supply and other important matters.

This can take some of the risks out of starting a new business. But on the downside you will have less commercial freedom and increased overheads because some of your income will go to the franchise parent company. Franchise contracts vary, so the amount you pay and keep will also vary.

It can be hard for someone new to running a business to tell whether it’s worth taking on a particular franchise. That’s where an accountant can help. They can look through the franchise contract to find out the fees and percentages charged, then help you estimate your likely income after those costs have been deducted.

Only you can decide whether you then want to take on the franchise or not. But armed with detailed knowledge of the finances, you can make that decision with greater confidence.

Get an accountant’s advice before you buy a business.    

Some people start their new business from scratch, others prefer to buy one that’s already up and running. You should always consult an accountant before buying an existing business. They will be able to look into the company’s accounts in detail and find out if anything looks wrong.

For example, they can check whether the company’s assets (like equipment), are fully owned or leased or part-paid for and whether the company has any outstanding debt.

It’s a good idea to consult a lawyer too. Working together, your accountant and lawyer should discover all there is to know about the company you intend to buy and run. This will give you peace of mind that you’re getting everything you’re paying for..

Get advice from an accountant before you sell your business    

It’s unlikely that you’ll have run your business for years without employing the services of an accountant. But if you have, you should seriously consider hiring one before you sell up.

An accountant will put your company’s financial records in order and produce statements of accounts that you can show to prospective buyers. Using high-quality accounting software they can create useful charts and tables to show your company in a good light. They can also talk to any potential buyers’ accountants during the due diligence process, which is often a legal requirement when a business is being taken over.

And, perhaps most importantly, an accountant can help you structure your financial affairs so that you get the most money from selling your business. Depending on how the sale is structured, the amount of money you receive after tax can vary considerably. For example, a lump sum might be less tax-efficient than monthly payments over a period of years.

Every company sale is different, and a good accountant will help you get the best result when you sell up.

Chapter 9:How to choose the right accountant

Choosing an accountant is like choosing a new business partner. The right accountant will become a trusted colleague, you can depend on, who offers advice and guidance as your small business grows. So what are the top things you need to look out for?

Top tips for choosing an accountant    

Once you’ve decided it’s time to hire an accountant, the next step is to choose which accountant to hire.

It’s important to take the time to do this carefully, and there are a few things you’ll want to consider first. You’ll need to think about issues such as the accountant’s location, the division of workload and the type of accounting software you’ll use. Consider how much you’ll have to pay the accountant and whether they can help to reduce your business taxes.

It’s in your company’s best interests to have an experienced, capable person handling one of the most critical areas of your business – your finances. The right person will save you time and money year after year. So here are some things you should consider when you’re choosing an accountant.

Ask yourself if location matters.

It used to be important to have your company’s accountant located nearby. But today, more companies are collaborating online, using cloud-based technology to manage their business. This means that location is less of an issue. With cloud accounting, you and your accountant can view identical real-time data at the same time – no matter where you are.

The decision about where to find your accountant really comes down to what suits your company best. Depending on how you want to handle the finances, your accountant could really be based anywhere in the world. For example, if you’re happy to collaborate via email, phone calls, video-conferences, or secure accounting software, then you could be in New York, and they could be in London. If your accountant can be anywhere in the world, you don’t need to make compromises based on their location. You can find someone who really understands the specifics of your business or industry.

On the other hand, you may prefer face-to-face contact and find it useful to have someone who’s able to go to business meetings with you. If this is the case, then you’ll need to limit your search to accountants who work nearby or are willing to travel to your premises from time to time.

Wherever they happen to be based, make sure they’re an expert in the tax laws that apply to your business.

The right person will save you time and money year after year.

Choose a certified or chartered accountant

In many countries, accountants are regulated by professional bodies that look after accounting qualifications and maintain high professional standards. Depending on the country you’re in, professional accountants may be called Certified Public Accountants or Chartered Accountants. Chartered Accountants (CAs) are highly qualified professionals who have completed degree-level study along with workplace experience and a professional competence program.

Given the greater experience and knowledge that a certified or chartered accountant has, they’ll be able to add value to your business right from the start. And if you expect your company to grow, it’s a good idea to hire a professional accountant at the beginning rather than later on.

Of course, it is possible to use accountants who aren’t certified, chartered or registered, but it might an unwise business move. Tasks such as bookkeeping, tax preparation and general financial management might not require a certified or chartered accountant. But you will almost certainly need one if your company grows to the point when you need a loan, or if you’re ever audited.

Look for an accountant with relevant expertise.    

You’ll need someone with experience preparing tax returns and financial documents for companies of a similar size and revenue to yours. If your company uses cloud-based software for much of its business, you’ll probably want someone who’s savvy with cloud computing.

It’s even better if they’ve worked with companies in similar market sectors to yours, as that will help them understand the unique needs of your business. You might want to check to see if they have larger clients. If they do, it’s a good sign as you’ll know they should be able to handle your growing needs over time.

You could also ask them for a client list that details each company’s gross revenue and number of employees. Find out how their clients have grown and developed over the years, to get a sense of whether they’ll be able to handle the evolving needs of your company.

Talk to government and business associations.    

Small businesses are the lifeblood of many countries’ economies. Because of this, governments like to encourage their growth.

As a small business owner, take advantage of business advisors’ networks available to help you choose the right accountant. There are often voluntary organisations and local chambers of commerce willing to advise you too. Make use of these, as they are there to help you and their advice is usually free.

They can also be useful places in which to network and talk to other business owners. Do this a few times, and you may find an accountant is recommended to you by other business owners. If nothing else, this could help you cut down the list of possible people to interview.

Tap into your social networks    

When searching for an accountant, the ideal candidate might be right under your nose. Start by asking any friends or family members who own small businesses if they would recommend their accountant. If so, why? And if not, why not? The answers to both questions could prove useful at a later stage when you come to interview candidates.

Bear in mind that choosing an accountant can be a personal decision, so what’s right for your best friend’s PR business might not suit your manufacturing company. Also, take into account differences in business structure. The best accountant for a sole trader might not be the best fit for a company with ten employees.

Make use of your connections online.    

Although Facebook might not be the best place to post a request for accountant recommendations (though it’s not the worst, either), more business-oriented networks could be useful. LinkedIn is one of the largest globally, and if you already have a profile there, you could use it to search for accountants who others have recommended.

Five ways to use your social network for more information    

Use LinkedIn or other online networks to delve a little deeper into each candidate’s background and find out things like:

  1. Who are they connected to?
    Do they have a strong network of professional people?
  2. How do they talk about their services?
    Are they enthusiastic and interested in their work?
  3. Have they received any recommendations from their clients?
    What do those recommendations actually say?
  4. What is their experience?
    How long have they been in business, and what were they doing before?
  5. What are their qualifications?
    Are they a chartered or certified accountant, a bookkeeper, a financial advisor or something else?

Decide how the accounting work will be divided.    

Accountants can handle every aspect of bookkeeping and small business accounting. In most cases, you can bundle up your bills and invoices, hand them all over, and they can do the rest. But this might not always be the best approach.

Accountants often charge by the hour, so making them do simple data-entry tasks is not the best use of their time – time that you’re paying for. So take charge and get more involved in the accounting process (if you can). This will give you a better grasp of expenses and revenues in real-time and a heads-up on potential problems.

For example, you might choose to enter the basic accounts data in-house, then hand the work over to your accountant. Then they can handle the more involved tasks such as bank account reconciliation, filling out tax return forms, payroll and capital depreciation calculations.

Good quality accounting software will make it easy for you to take part in your accounting process. It will simplify tasks like invoicing, automatically sending the invoice and recording its contents at the same time. And if the accounting software is cloud-based, you can then give your accountant secure access to your accounts with the click of a button.

Get someone who’s proactive about saving you money. 

Some accountants will do little more than manage your accounts and complete your tax return forms, but the best accountants are more proactive. So before choosing an accountant, ask what they could suggest saving your business money.

For example, what proportion of your operating costs do they think you can offset against tax? If you’re a sole trader or consultant, can you cancel a percentage of your phone bill, car costs, maybe even rent or mortgage payments? What are the implications of doing so? The accountant should warn you of any pitfalls. For example, using your home as business premises could result in a tax charge levied on the house when you sell it!

Always bear in mind that in most countries, there is a big difference between tax avoidance (usually legal) and tax evasion (usually illegal). You need an accountant who knows the details of tax law so well that they’ll save you money in legal ways, but not one who takes things too far and risks causing your business to operate illegally.

Be very careful about this, because ultimately it’s you, the business owner, who’ll pay the penalty if the law is broken.

Find out what software the accountant uses.    

Accountants often have their own preferred accounting software. The chances are they’ll have been in business for many years and may have become used to one particular brand of software.

This can be a problem. If your company uses a different type of software, there are potentially going to be issues sharing data. Although it might be possible to export and import data in a suitable format, it can be time-consuming and easily lead to errors. There’s also the risk of your highly sensitive financial information being read as you send the data back and forth because email is about as secure as a postcard.

So try to find an accountant who’s using the same software as you. Or, failing that, one who’s willing to do so. There’s no reason why they can’t use more than one accounting software type for different clients. That’s especially true if the software is easy to learn.

It’s best if you can agree to use market-leading accounting software that’s easy to use, and only exchange files that have been suitably encrypted. An even better option is to choose collaborative, cloud-based accounting software with encryption built-in. This will mean you don’t have to worry about the risks involved in exchanging data back and forth.

Interview several candidates before you decide    

business advisory meeting

As with anything else in life, don’t automatically accept the first offer you receive. Arrange things in such a way that you can compare a selection of accountants with each other. Then it will be easier to determine which one is best for your business.

An interview can be a powerful way to see how well you’re likely to be able to work with a person. And a series of interviews will not only help you better define the type of accountant you need but also gain you valuable free advice. This may even help you determine your own business requirements more clearly.

Always negotiate fees 

There’s no single, universal method that accountants use to charge by. Some will charge by the hour, some might charge a monthly retainer, others could charge a percentage of your turnover. As a small business owner, negotiation should already be part of your skill-set. If it’s not, learn it and apply it here.

Make sure you get written quotations from all the accountants you interview, then go away and compare them carefully. Consider a range of scenarios – one fee structure may make sense while your business is small but could become less attractive as it grows.

Nothing is set in stone. You could ask for a combined method of charging or a sliding scale based on turnover, or any other of a wide variety of possibilities. The accountant might disagree with your proposed fee structure, but if you don’t ask, you’ll never know.

Do background checks 

It’s important to talk to some of your prospective accountant’s clients before you sign on the dotted line. You can use professional services to help you with this, but if the accountant is genuine, they’ll likely be willing to give you a selection of contacts for references.

This will help confirm some of the information the accountant has provided to you. It will also enable you to hear first-hand about the relationship the accountant has with their other clients.

Be sensible when you contact referees. Don’t weigh them down with dozens of written questions to answer. A ten-minute telephone call is likely to tell you far more about your prospective accountant than a three-page form full of bland written answers.

Learn to use and trust your intuition    

You’re running your own company, you have experienced, and you’ve got a pretty good idea of what you’re doing. It’s also likely that you get along well with people since that’s an important part of success in business.,

So make use of those skills. Intuition is just another word for the unconscious processing that goes on in our minds. It’s not magic – it’s thought that takes place below our conscious level of awareness. Used in the right way it’s a powerful business tool in itself.

When you meet an accountant for the first time, consider your intuition. Alongside logical evaluations such as location, pricing, experience and references, ask yourself if you could trust this person with the intimate details of your business. If you think you could work with them for the foreseeable future, then that’s great.

But if your gut feeling is saying no, you should probably walk away. Your unconscious mind may have picked up all sorts of cues (such as verbal stresses and body language) that it doesn’t like. Intuition isn’t always correct, but when it comes to choosing something as important as a business accountant, don’t ignore it.

Good accountants will help your company grow.    

If all of this sounds more like a marriage than a business relationship, there’s a good reason for that! Your accountant will become intimately involved with your company’s operation, so it’s not a decision to be taken lightly. You will need one you can trust, who has the necessary experience and who will be there when you need them.

Good accountants help companies grow by managing complex financial work and offering advice on practical business issues. This will be guaranteed to save you money in the short and long term. The best ones will be your partner in all but name – and as long as you choose wisely, you can’t go wrong.

Chapter 10: Take the pain out of accounting data entry

How do you keep your books up to date? Most people manually type in business income and expenses, but that’s costly and tedious. Amanda Hoffmann has been a bookkeeper for eight years, and she says there’s a much better way.

Small business means big busyness. On most days, you’ll deal with customers, make marketing decisions, follow up sales leads, and manage operations.

After all, that’s taken care of – there’s the accounting to do. That often requires hours of mind-numbing, unproductive data entry. As a bookkeeper, I see the headaches that accounting paperwork can cause, and how online accounting software can help.

Four reasons to ditch manual data entry    

  1. It’s time-consuming
    No matter how quickly you can type, it’ll never be fast enough. There can be a lot of numbers to enter. Plus you really need to double-check what you’ve entered, which takes extra time.
  2. Its mistake-prone
    Data-entry errors occur even when people are well-rested, 100 percent focused, and excited to be entering the data – none of which is ever true.
  3. It’s costly
    Whether you enter the data yourself, or pay someone else to do it, accounting paperwork has a cost. It takes a long time for people to get good at it.
  4. It’s open to misinterpretation. The person who enters data is often given piles of invoices with handwritten notes. These can be hard to read, leading to:
    – extra phone calls to clarify details
    – data entry people making assumptions and mistakes.

What is ‘automation’ and how does it work?    

Smart accounting software automates data entry. Instead of a person organising and manually typing data into your accounts, the numbers flow in automatically:

  • Income shows in the money-in column.
  • Expenses show in the money-out column.

This happens because of two innovations:

  1. Data streaming directly from your bank

Many business bank accounts now talk to accounting software. When you make a transaction, all the details show up in your accounting software that night. You just need to choose accounting software that can receive bank feeds.

  1. Apps that read your paper invoices for you

Now you can get data from a paper receipt (or invoice) into your accounting software without going anywhere near a keyboard. With an app like Receipt Bank, you just photograph the receipt or invoice on your phone. Optical character recognition technology then reads the document and tells your accounting software who it’s from when it was issued, what it’s for and how much money is owed.

The upside of automating data entry    

Automation solves the major problems with accounting data entry by saving time, reducing costs and eliminating human error.

Bank reconciliation and tax compliance become so much simpler. There are no missed receipts, deleted emails or avoidable phone calls to ask for copies of lost invoices. Once bank feeds are running, you can create rules to categorise costs, or break down the tax components automatically.

The speed and efficiency of automated data entry can transform your business. No matter how much you grow, or how many transactions you do a day, your data entry workload won’t increase. The right system can handle a lot of volume without creating any more accounting paperwork.

Saving 60 hours per month    

I used to manually enter data for a property investor using their desktop software. They had a big portfolio, and I had to make sure expenses were correctly allocated to each property. The process was tedious and made worse by faded and coffee-stained receipts.

After converting their accounts to Xero and connecting Xero with Receipt Bank, I reduced accounting data entry by 60 hours a month. It was a massive time and cost saving for their business.

How to automate your accounting data entry    

It’s not hard to get manual data entry out of your business and your life. Just connect with the right technology and the right people.

  • Get online accounting software
    Look for software that enables bank feeds and has receipt-reading capabilities (or can integrate with a receipt-reading app).
  • Get an accountant or bookkeeper to set you up
    You can set up accounting software and bank feeds yourself, but it might not be quick. A trained professional will handle it far more efficiently.

As you can see, accountants can help you out during every stage of your company’s development. That doesn’t mean you have to hire one, but the right accountant should make life easier for you, so you can concentrate on what you love doing.

Your speciality is running your business. Leave the financial detail to an accountant. If you and your accountant use cloud-based accounting software, you’ll be able to keep track of what your accountant does, and always be able to see your company’s financial situation at a glance.

Get connected with an experienced accountant in the Xero advisor directory.

Chapter 11: Mac accounting software that’s elegant and intuitive

Small businesses using Macs have the same financial tasks as those using PCs. It’s often a challenge to find Mac accounting software that’s as feature-rich as the Windows version. So if you’re in the market for the best financial software for a Mac, what do you need to look out for?

Challenges for small businesses using a Mac    

It’s likely that if you’re a Mac fan and user, you’ll have high expectations for the way your accounting software looks and performs. But when we talk to small businesses, it’s clear that while Mac users love their Apple products, they’re not as affectionate about their financial software. So why is this such a common sentiment?

Software that is just a lift and shift from PC to Mac doesn’t leverage the power and design that’s at the heart of Apple products. As a Mac user, you probably remember that moment when you first booted up your Mac and thought “Ahh”. And it’s that emotion that’s often lacking while using accounting software.

It’s no coincidence that Apple products’ instant ease of use and the logical user interface has won countless awards. So when Mac users are confronted with software that doesn’t apply human logic to the design or functionality, financial tasks become painful. Accounting software on a Mac should ‘just work’.

Mac versions are often lacking in features.    

Most financial applications are designed for a PC first and then ported over to a Mac as an afterthought. As a result, Mac users are often left with a lack of feature versions, and poor customer support typically focuses on PC usage. In many companies, customer support doesn’t fully know about or understand the Mac platform to answer in-depth questions.

It’s also common for Mac software versions to also have lots of unnecessary features. This can mean you end up getting a bloated suite of complex and confusing tools instead of what your small business really needs.

Make it a priority to go with software that doesn’t tack on features for its sake and gets the balance of simplicity and usability just right. You should have everything you want and need, and no more.

The software should be cross-platform compatible.    

If your software isn’t cross-platform friendly, you risk wasting huge chunks of time using workarounds to collaborate with your financial advisors. For example, if you use a Mac and want to share data with your PC-using accountant, you’ll need to export data files to them saved in a Windows format. Even at this stage, you’ll often run into compatibility issues.

In the meantime, while your accountant is looking at your data, you won’t be able to make changes to it because you can’t merge their changes into your existing file. It’s only when they’re finished with the file that you can re-import it. In many cases, the software won’t work on all browsers either, which makes for a poor user experience.

Business apps should integrate with your software.    

Often Mac accounting software has a limited range of business applications or apps that integrate with it. But if you’re a Mac user, you’ll no doubt be used to having a variety of products that play nicely with your Apple devices. For example, you might already be using Basecamp, project management software that runs in the cloud, and encourages collaboration online. As well as being easy to use on a Mac, iPad and iPhone, Basecamp also integrates with several other apps.

If you’re in the creative industry, Adobe Creative Cloud may be the way you share files, give feedback or save settings across devices. Evernote is another handy online tool that lets you collect and find everything that you need and collaborate with colleagues online.

All of this considered, it makes sense to look out for financial software that is also flexible enough to allow a range of apps to integrate with it. As your company grows, this will make it much easier to manage all aspects of running your business. For example, you could integrate invoicing, time tracking or job system apps with your financial software. Online tools like Harvest make time tracking simple for small business – and they’re Mac-friendly. Harvest is time tracking software that lets you see real-time data to keep projects on time and on the budget.

Software needs to be simple and frustration-free    

Apple designs their products so that they are super simple to use. The financial software you choose for your Mac should be just as easy. You should get one consistent, magical experience, whether you’re on a Mac, iPhone, or an iPad. For example, if you’re out and about and need to send an invoice, you should be able to do it on your iPad with minimal effort. It should be as easy as a few taps, and you’re done.

With one version for all devices and browsers, doing business becomes much more pain-free and fun. Like an Apple product ‘just works’, your online software should too.

Accounting software on a Mac: Seven points to consider    

  1. Intuitive and beautiful design matters
    The simple, aesthetically-pleasing form and function of an Apple product is what makes many Mac users loyal to life. So when it comes to your software, don’t skimp on this all-important aspect. Often small business financial applications are bloated with far too many under-used features that only get in the way.
  2. The installation has to be easy. Just like how a Mac works straight out of the box, your small business software should be easy to start using. With cloud software, there are no installations or downloads. You just log in online at any time, from wherever you are. Updates and upgrades are done automatically and are free.
  3. Great customer support is important. As a Mac user, you are used to outstanding customer support. So it makes sense to choose software with the same level of excellent service, who won’t cut corners on training staff for Mac usage. No matter how complex your problem is, you should have a qualified person answering your questions. Look for companies that produce guides, videos, tutorials and forums to help you with day-to-day business tasks.
  4. Have all your business data in one place
    Organising your files on a Mac is as simple as ‘drag and drop’. So consider financial software that works in the same way. When you can drag and drop and attach source files to your invoices, bills, transactions, fixed assets and contacts, your company documents can all live in one place online. Some software will also allow you to email files straight into your accounting application.
  5. Collaborate more with your team. A core belief at Apple is that “collaboration is essential for innovation”. Follow their lead, and ensure that your financial application takes collaboration seriously. Look for software that lets you have as many users as you want, at no extra cost. This will help you collaborate with your accountant or bookkeeper and get the advice you need when you need it. Your business will be in a much better position to innovate and be successful.
  6. Using online business tools that integrate
    Apple products has a huge range of third-party applications that all work seamlessly together. So don’t restrict your business growth by using software that won’t integrate with other apps. Your small business will benefit and run more intelligent when you can integrate apps with your accounting software to manage all aspects of it from one place. For example, if you’re an online retail business, you could use cloud-based applications to stay competitive and enhance your customers’ experience.
  7. Stability and security are key
    Macs are secure and stable, and not as susceptible to the viruses or hacking that some hardware is prone to. In the same way, the best online accounting software heavily protects your sensitive financial data. Companies that store your data in offsite servers ensure that your information is protected with the highest level of security. All data is encrypted to the same level as your internet banking.

Make business fun again.    

As a Mac fan, you’ll have a deep-seated appreciation for software that puts ease of use and beautiful design first. Naturally, this means you’ll gravitate towards software that also reflects those qualities. So why not choose a product that not only delights you, but makes business and life more manageable?

When you’re having fun and excited about using your accounting software, you’ll be much more in tune with your financial situation and in a better position to grow. And that’s got to be good for business.

Chapter 12: Make small business accounting fun

Owning a small business is exciting. You get to do what you love, day in, day out. But traditionally, small business accounting isn’t exciting. So how can we change this stereotype and make accounting fun and easy?

Small business accounting challenges    

When we talk to the small business community and accountants and bookkeepers, several things become obvious. All small businesses need good cash flow to survive. But many don’t understand or manage their cash flow. They also don’t have good visibility of their accounts.

If you’re a small business owner, there might be a few reasons you started your own company. You may have wanted to do something you’re passionate about, have control of your future, or be your boss. But it’s likely that balancing the books wasn’t high on the list of potential advantages.

Having a passion for your business is great, but accounting often sits at the opposite end of the scale. The software many businesses have is often difficult to use. It’s had a history of being time-consuming and confusing for anyone who isn’t an accountant.

Too many people are frustrated with the software they use. Why is that? Small business accounting software has been unintuitive and difficult to use for years. Business owners often find themselves chained to an old desktop in the backroom labouring over the finances. With a system like that, it becomes obvious why people don’t have good visibility of their accounts.

Five ways cloud software makes accounting fun.    

  1. When statement lines from your bank account are fed into your accounting software automatically, you can see your cash flow in real-time.
  2. Seeing bank balances, invoices, bills and expenses at a glance give you a clear picture of your finances.
  3. View your accounts in the cloud so you can access them when you want, where you want, on any device.
  4. You’re free to be mobile – not chained to your desktop. When you can work on the same data as your advisors simultaneously, there’s no need to share a computer or exchange files.
  5. Small business accounting software with free updates means there’s no need for installations or maintenance.

Accounting can be fun and addictive    

Software that makes doing business a pleasure can only be a good thing. Making money and seeing how your business is doing should be fun. If your software is intuitive, it can be addictive to use.

What this means for small business    

When business owners use intuitive and easy software, they are much more in tune with their financial situation. This means they can avoid problems and take action when it matters, not after the fact when it’s too late. Adding to that, accountants and financial advisors are able to give them much better insight and advice, spotting future opportunities for growth.

When you get excited about using your accounting software, you’ll notice the positive effect it has on your business.

Chapter 13: Franchise accounting tips

Franchises come with many built-in advantages. But there are also some extra risks that you don’t get with a traditional small business. Good franchise accounting will help you avoid the pitfalls and make the most of the opportunities.

Let’s start with the advantages.    

A franchise is sometimes called a business in a box. It’s built on a proven concept and offers products or services that have already been market-tested. In some cases, the franchisor provides detailed manuals to help you

  • with setup, training and planning
  • overcome teething problems
  • run the day-to-day business
  • grow and succeed

It’s like going out on your own without being on your own.

The longer the franchise has been around, the more data they’ll have to share. The franchisor will have seen some franchisees succeed and others fail – and they’ll be able to share the lessons with you. That will give you a shortlist of key performance indicators (KPIs) to focus on when managing the business, making your life easier.

You’ll probably benefit from some brand recognition from the start, you may get discounted stock, and there could be systems in place to streamline admin tasks.

Franchise risks are real.    

bookkeeping calculation of ato tax

While you can take confidence from the systems and processes that make a franchise tick, you shouldn’t get complacent. Franchises come with risks that you wouldn’t encounter with traditional small businesses.

  • More startup debt
    Upfront franchise fees add substantially to your startup costs. Franchises usually come with a bigger payroll bill too.
  • Staffing from the start
    Many small businesses start as sole traders and add staff as they grow. Most franchises will require you to have a team from the beginning, which means you’ll need to manage human resources and make payroll.
  • Extra overheads
    You’ll have to pay monthly franchise fees as well as wages. Those costs can make it expensive to do business, so you’ll need more revenue to break even. And you’ll need to manage cash flow carefully.
  • Demanding sales targets
    Many franchises succeed by delivering products or services at a low cost. These low-margin, high-volume business models don’t leave much fat in the budget. If sales start to dip, your earnings outlook can change quickly.

Aims of franchise accounting    

You’ll want to control the risks of being a franchisee while making the most of the advantages. That means you’ll need strategies for:

  • dealing with debt
  • managing employees
  • staying on top of cash flow
  • looking after key performance indicators

Dealing with debt 

Debt is one of the biggest enemies of small business, and most franchisees start with a big one that includes:

  • a signup fee for joining the franchise network
  • a prominent store location (and refit)
  • wages that have to be paid while staff are trained

All this happens before you earn a cent. As a result, franchisees often start off with more debt than a sole trader.

Staying on top of your finance options

There are dozens of finance options these days. Your franchisor may even have provided yours, or maybe they guaranteed your loan. If you’re just getting started and thinking about how to structure your finance, make sure you:

  • have the flexibility to refinance if better debt options emerge
  • regularly review your debt with an expert to look for lower-cost options
  • have the necessary cash flow to service the debt

Most businesses carry debt. You can save yourself a lot of money by actively managing that debt to keep your costs down. It’s especially important in franchise accounting, where you also have monthly franchise fees (and other recurring expenses) coming out of your bank account.

Set up systems for your repayments

Make sure you include loan repayments in your budget and ring-fence that money, so you won’t be tempted to use it for other things. Set up automatic payments, so you don’t miss any by mistake. Missed payments attract late fees – which can add up –  and they extend the length of time you pay interest.

Managing employees    

Most franchisees are based in customer service industries, which means you’ll have staff. You’ll need to:

  • get them trained
  • keep them motivated
  • schedule their time
  • make sure they’re paid (and you comply with tax requirements)

Just when you think you’ve got it sorted, your best employee will take a new job, and you’ll have to start again. Use systems and business software to automate a lot of the work. For example:

  • Payroll software will calculate pay and tax for each employee, automatically fill out tax forms, and pay money directly into their bank accounts.
  • Scheduling apps allow you to create staff rosters and share them straight to everyone’s phones so employees can see when they’re due at work.
  • Time-recording software will clock the exact time worked – making it easy to calculate pay. You can install it on employee phones, so they can clock in using their device.

When you automate these admin tasks, you can focus on recruiting the right people, getting them trained, and keeping them happy.

Staying on top of cash flow    

Cash flow is crucial to all types of businesses, and most will have trouble at some stage. There will be times when it’s tough to buy inventory or make a debt repayment. It can be especially challenging in franchise accounting because payroll and franchise fees are constantly flowing out of your account.

The first step to good cash flow is a budget. You must know your recurring expenses so that you can plan around them. You also need to know how that plan’s unfolding from day to day, so you can make decisions as you go.

  • Is there enough cash to cover franchise fees this month?
  • Is revenue strong enough to make loan repayments?
  • Can you make payroll on Friday?

It’s not easy to keep tabs on all these moving parts because:

  • revenue will ebb and flow from one week to the next
  • staff expenses will change, especially if you have some overtime shifts coming up
  • there will be various other expenses like building maintenance
  • you might place an extra inventory order to cover a busy season

Your best bet is to use a cash flow dashboard to track all your transactions. The smart ones will even show what income and expenses are coming up to see how cash flow will look in the future. Cash flow dashboards work by combining data from your bank account, POS system, payroll, and invoicing software to tell you how much you have to spend.

Looking after key performance indicators    

If you have a good franchisor, you’ll know the secrets to success. They’ll have told you the three, four or maybe five things that separate their successful franchisees from the rest. These will be your key performance indicators and could be things like:

  • how many people enter the store
  • how long customers wait to be served
  • how much of a certain product you sell
  • how many recurring customers you have
  • how much do you pay in wages to earn a dollar of revenue

There are hundreds of potential KPIs, but a savvy franchisor will tell you where to focus. If you get those metrics right, you’ll know you’re much more likely to succeed. That can make franchise accounting and business management much more straightforward.

If your franchisor can’t tell you the KPIs to use, ask other franchisees in the network, or consult with a franchise accountant. It’s important to know where to invest your energy.

How to measure KPIs

It might be obvious how to measure KPIs such as customer satisfaction, employee productivity or cost of goods sold. Others may be more costly or difficult to measure. If you got the KPIs from your franchisor, they should also have systems for measuring them. If they can’t help, an accountant probably can.

Once you’ve picked KPIs and set up systems to measure them, you’ll want to:

  • set targets
  • brainstorm ideas for reaching those targets
  • come up with a schedule for reviewing progress

If the KPIs keep improving, so should your business outlook. You can keep a close eye on KPIs by using an app like Spotlight, FUTRLI or Fathom. They’ll create graphs and charts that show you how things are tracking – allowing you to check how your business is performing whenever you have a spare moment.

Your most important KPI

Most franchises offer low-priced goods or services, which means they need a lot of sales to make money. Sales numbers are a huge factor for these businesses.

Given the recurring franchise fees and often high staff costs, a dip in sales can be felt quickly. So make sure you have sales volume and staff costs at your fingertips at all times. This can be integrated into your KPI dashboard, or you can pull the data directly from your POS software.

Come up with plans now for what you’ll do if sales slow down. Don’t wait until you’re in a lull.

Why a franchise accountant is a good idea    

Because there’s so much money involved in buying and running a franchise, most franchisees will hire an accountant. But if you really want to protect your investment, don’t stop there – look for an accountant who has specific franchise experience.

Some issues are unique to franchise accounting, so it helps to have someone who’s been there before. For example, an advisor with franchise accounting experience will know :

  • how to deal with franchise fees from a tax perspective.
  • how to manage compliance expenses
  • what you need to report to the franchisor
  • where franchisees typically go wrong

An accountant who works for other franchisees in your specific franchise network is even better. They’ll know your business well and can tell you:

  • the main risks and challenges you’ll face
  • the most important key performance indicators
  • what successful franchisees do well

And because they’ve worked with the business for so long, they’ll have ready-made fixes for problems that franchises like yours typically face.

Accounting for franchises is about cash flow and KPIs.    

Franchises generally come with recurring costs in the shape of franchise fees, debt repayment and staff. These will put constant pressure on your cash flow.

Many franchises also come with a well-defined set of KPIs. And if they don’t, you can often work with other franchisees and specialist accountants to identify them.

To give yourself the best chance of success, it’s important to keep a close watch on cash flow and your KPIs. That’s especially true if your franchise relies on a high-volume, low-margin business model.

Consider dashboards to keep the important numbers close and meet regularly with your accountant to review performance and brainstorm improvements.

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