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Keeping your finances in check 101

by | 1 May 2021

Hands up if you don’t do numbers! Keep your hand up if the idea of setting up the business finances makes you rethink your decision to go into business in the first place. If that’s you, don’t worry; youre not alone. Business owners often find this part of the process the toughest. However, with some knowhow and the right tools, this essential aspect of running a small business can actually be the least demanding one. And, it’s true that keeping your finances in check and accounting systems will definitely make life easy. 

The basics are done and it’s time to have a think about how you’ll keep your business records and the type of accounting system you’re going to use. The temptation for a lot of business owners is to deal with this part “after”. After the doors have opened, after the first sale, after the first import…just after! The reality is, though, that the sooner this area of the business is under control, the more you can relax. In my opinion, understanding and having a healthy cash flow is one of the most vital aspects to achieving success.

The first question to ask is whether or not accounting and record keeping are part of your skill set. The next question: do these things interest you enough to keep on top of them everyday? Hopefully, the answer to the latter at least is an enthusiastic yes! However, if accounting and record-keeping aren’t things you’re comfortable with, start by employing the experts. Here are some common questions I get from business owners:

Do I need to keep financial records?

Like it or not, having a business in Australia means that certain records need to be kept for five years.

Whether youre a sole trader or have set up as a Pty Ltd company, youll need to be able to provide records to the Australian Tax Office if required. These include but are not limited to information regarding GST, income tax or PAYG, sales records and business payments.  

If you have paid employees, youre also currently required to keep employee information and wage records for seven years. 

Can I use my regular bank account or do I need a business bank account?

It’s best practice to have a bank account thats purely used for business purposes. That goes double for a credit card! However, if youre operating your business as a sole trader then youre not currently required to have a business bank account. 

If youre operating as a company, partnership or trust, then youre legally required to have a separate business bank account for tax purposes. 

Truth is, business bank accounts, when used solely for business purposes, just make life easier. You can track your income and expenses, keep an eye on your cash flow at a glance, and provide details to your finance professional. All without them having to take into account those shoe purchases. If you ever want to scale or sell your business, presenting details from a single account not only looks more professional, but makes it easier to understand the current state of the business. 

What options do I have when it comes to hiring a pro?

Bookkeeper, accountant, both, or none of the above? Unless youre a trained finance professional, at the very least consult a good accountant. They can give you all of the advice you need to ensure that your business is set up correctly from day dot. 

Once that decision has been made, consider wholl keep an eye on the daytoday finances. If you don’t have the time or the skill level to do this, consider hiring a bookkeeper. A good bookkeeper can do everything from your daily reconciliations to your payroll. They can also manage your accounts payable.  

If you want someone to also assist you with your legal compliance, consider a registered BAS agent. BAS agents are also able to handle all of your bookkeeping needs. 

If you do nothing else, get one of these professionals to help set up your systems and train you to use them correctly. You’ll also want to ensure that your finance professional is registered.

The best way to do that is to check their details on the Tax Practitioners Board website.

What software is available to streamline the process?

Were lucky! There are plenty of accounting software solutions on the market. Once you understand your business structure and how you intend to trade, research all of the available options. Most software solutions have different subscription levels on offer. The level you choose will largely depend on the number of transactions you process, the currency you deal in and whether or not the business has employees. 

Keeping business records is a government requirement, and online accounting systems are a fantastic way to do this. In addition, when used correctly, accounting software solutions will genuinely save you time. Some examples include Xero, Reckon, QuickBooks and MYOB but there are numerous others on the market. Ive used both Xero and MYOB systems, and there are pros and cons with both.

My current preference is Xero, however, largely because it’s straight forward and easy to use, even for the non-accountant or bookkeeper.

When it comes to picking your software solution, ask your advisor what they would recommend or what they work with. This can often streamline the process when it comes to compliance time. Trial some software if necessary, but the best tip I can give you is to get help setting up your system. Like everything, if it runs smoothly from the get-go, youll have less expense down the track. 

How often should I look at my bank account?

Daily! This particularly important if yours is a small business or if youre looking after the finances yourself. The last thing you want is to be shipping an item without receiving payment, or lacking sufficient funds to pay an invoice. The more you understand and control your finances, the less they will control you and your business. 

Is cash flow really important?

Being a small business owner, I know cash flow and good finance management are key. You may have heard the expression, “Cash flow is king? It’s a cute way of saying that good cash flow can be the difference between success and failure. Even if numbers really aren’t your thing, as a business owner, educate yourself as much as possible. Know what to look at in your bank account or your online software. Better still, have your finance professional provide you with a cashflow template. 

Online accounting systems can provide entrepreneurs with a snapshot of their business on one screen. However, whether or not you choose to subscribe to one of these, hire a pro to keep an eye on things. If that is too much, at least do the daytoday data entry yourself. In my experience, having a handle on the finance is key to business success. 

Justine-McLean-Business-Blog

Hi, I’m Justine – I’m so happy to find you here. The Flossi Creative blog is a resource for the dreamers, doers and career crusaders. Enjoy!

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