S & H Tax Accountants

Tag: bookkeeping

Bookkeeping Basics for Small Business Owners
On average, small business owners spend 10 hours each week recording, organizing, and processing financial transactions – everything from accounts receivable and payable to employee payments, expense receipts, and supplier invoices.

While the process may be time-consuming (and tedious!), effective bookkeeping is the foundation of sound financial management – which in turn, is the lifeblood of your business.

Feeling overwhelmed by mountains of paperwork and complex calculations? Here are three bookkeeping basics to help ensure a healthy financial future for your small business.

Faithfully track expenses

Accurate and consistent expense tracking is crucial for claiming tax deductions and lowering your overall tax bill. Plus, analyzing expenses can offer crucial insights into spending patterns and the overall profitability of your small business.

Small business owners should consider using a mobile app for simple, consistent expense tracking. Options like Expensify and Receipt Bank help do away with manual data entry with automated functions, including:
- Receipt data capture via your smartphone’s camera (no need to hold onto paper receipts, which can get lost or misfiled);
- Synchronization with your phone’s GPS to track mileage of business travel; and
- Importing bank and credit card data, plus integration with accounting software.
Systematic invoicing and filing

Efficient invoicing is about more than ensuring you get paid in a timely fashion. An invoice is an official record of the terms of each transaction and must be completed accurately to avoid errors in your bookkeeping process.

Here are a few tips for professional invoicing:
- Ensure each invoice includes all the important details: contact information, a tracking number, a detailed list of products or services rendered, and a breakdown of the total amount due;
- Provide an electronic receipt to reduce waste and create a “paper trail” if there’s ever a dispute; and
- Maintain an invoice-filing system that records when you sent the invoice, to whom, when payment was made, and any reminders sent out.
An online invoicing tool can streamline this aspect of your bookkeeping process and provide an efficient backup filing system.

Save time with accounting software

By law, every business is required to keep organized and timely financial records. However, manually posting income and expenses to ledgers and journals is time-consuming – not to mention stressful for the math-averse.

Shave some time (and stress) off your weekly bookkeeping with an all-in-one accounting software solution like Xero, QuickBooks, ClearBooks, or KashFlow.

Online bookkeeping offers numerous advantages, such as:
- Instant reports and real-time insights on profits and loss, customer accounts, payroll – and your overall financial “big picture”;
- Simplified data entry so you can collate and print invoices, purchase orders, and payroll much faster than with manual methods; and
- Improved accuracy through automation (once data is entered, the software handles all subsequent calculations and processes – including invoicing).
When it comes to accounting, vigilance is the key to mitigating risk and ensuring the long-term profitability of your small business. Be sure to set aside time each day, week, and month to update and review your books to catch any red flags and ensure your finances are on track.

At S & H Tax Accountants, we understand that keeping a record of your transactions, organizing your documents and keeping your receipts can be very tiring. That is why we are here to provide you with the highest level of service possible. We have well-qualified staff members who are able to help you. Book an appointment today, call us at 03 8759 5532 or email us at info@sahtax.com.au.

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19/04/2023
Unlocking the secrets of small business cash flow

When it comes to running a small business, maintaining a healthy cash flow is essential for sustainability and growth. Your business can be incredibly profitable but still ultimately fail because of improper cash flow management.

To prevent that from happening, here are some best practices that can help you better manage your cash flow and maintain the financial health of your small business. Remember, the key to success is to be proactive and vigilant about your finances.

Let’s dive in!

1. Understand Your Cash Flow Cycle

Before you can manage your cash flow, you have to understand your cash flow cycle. This involves tracking when money comes into your business and when it goes out. By examining the timing and sources of your cash inflows and outflows, you can identify patterns and potential issues. For example, you’ll notice periods where you have higher expenses and lower profits, or the reverse.

This information helps you make informed decisions on how to maintain a positive cash flow. For example, you might choose to offer more sales during your slow periods, or find ways to cut costs.

2. Develop Accurate Financial Forecasts

Financial forecasting is a crucial aspect of cash flow management as it allows you to anticipate your cash flow cycles. Regularly create and update cash flow projections, taking into account expected sales, expenses, and other relevant factors. Accurate financial forecasts will help you identify potential cash shortages or surpluses and make informed decisions on how to allocate resources effectively.

For example, you might hold off buying new equipment this month because the next two months are expected to be slower financially, then make the purchases when you have more cash coming in.

3. Monitor Your Cash Flow Regularly

Just like a doctor checks a patient’s vital signs, you should monitor your cash flow regularly to maintain your business’s financial health. This means reviewing your cash flow statements, balance sheets, and income statements on a regular basis. By doing this, you can spot issues early on, such as late payments or unexpected expenses, and take corrective action before they become major problems.

4. Maintain an Emergency Fund

Unexpected expenses are a fact of life for any business. To mitigate their impact on your cash flow, establish an emergency fund. This reserve can be used to cover unexpected costs or to tide you over during periods of slow cash inflow.

Ideally, your emergency fund should be able to cover at least three months’ worth of operating expenses. Not only will this help your finances, it will give you peace of mind because you know you’ll have breathing room in case of an emergency.

5. Invoice Promptly and Efficiently

Although invoicing is vital to your cash flow, many small business owners put off invoicing and following up on unpaid invoices.

It’s essential to invoice your clients promptly and efficiently, to maintain your cash flow. This means using accurate invoicing software, setting clear payment terms, and providing convenient payment options for your customers. If you have clients with accounts payable processes, make sure you understand the process and their payment cycles so you don’t wind up waiting months for payment.

Additionally, follow up on overdue invoices in a timely manner. The sooner you invoice and follow up, the sooner you’ll get paid.

6. Encourage Early Payments

Offer incentives for customers to pay early, such as discounts or other perks. This can help increase cash coming in and provide a buffer for cash flow management. Additionally, consider implementing payment milestones for large projects, where customers pay a portion of the invoice at specific intervals throughout the project.

7. Keep Your Expenses in Check

To maintain a positive cash flow, it’s essential to keep your expenses under control. Regularly review your expenses, identify areas where you can cut costs, and negotiate better terms with suppliers. Remember also to check your ongoing subscriptions and automatic payments. You may be paying a lot of money for products you don’t use.

8. Use Technology

Embrace technology to streamline your cash flow management. There are many tools available that can help you track expenses, create financial forecasts, and automate invoicing. By leveraging technology, you can save time and effort, allowing you to focus on growing your business. Chat to us to get our recommendations for your business.

9. Seek Professional Guidance
Financial professionals provide valuable guidance and insights on managing your cash flow. They will identify potential issues and develop strategies to maintain a healthy cash flow.

Working with a specialist can help you avoid costly mistakes and make well-informed financial decisions, well worth it in the long run.

The bottom line

Effectively managing your cash flow is crucial for the success and growth of your small business. By understanding your cash flow cycle, developing accurate financial forecasts, monitoring your cash flow regularly, and implementing the best practices discussed in this blog post, you can maintain a healthy financial position and pave the way for sustainable growth.

Of course, you can always reach out to us for guidance on managing your small business cash flow. Don’t leave your business’s financial success to chance, contact us today for a consultation, and let’s work together to ensure your business thrives!

If you need assistance with your cash flow and need some professional guidance, then please contact S & H Tax Accountants. Our Accountants can help you with managing your cash flow, and provide you with some guidance on how you can have a positive cash flow. Make a booking today at S & H Tax Accountants, call us on 03 8759 5532 or email us at info@sahtax.com.au

11/04/2023
When to raise your prices

It’s an inevitability in every business – you have to raise your prices to continue making a profit. There are many factors that go into deciding how much to charge, all of which are dynamic. The rising cost of goods, inflation, and a changing market are just a few reasons why any small business has to reevaluate its rates regularly to stay competitive (and to stay in business).

While it may seem like you just set your prices or recently adjusted them, this is a task that should be done once a year at minimum – preferably more. Read on for some signs your business is ready to charge more.

1. You have a loyal customer base

Once you’ve been in business for a while, it’s likely that you’ve built up a loyal base. People will return to you when they know they will get a quality product. They’re also more likely to return when they get to know you personally.

If your business has a lot of customers who bargain shop because you offer rock-bottom prices, choosing to raise your rates likely won’t go well. Wait until you’ve established a base of loyal customers who will be happily willing to pay more knowing they’ll get fantastic, personal service from you.

People buy from those they know, like, and trust, so once they get to know, like, and trust you, they’re likely to keep coming back. Build relationships to foster that customer base.

2. It’s been a while since you raised your rates

The rate of inflation is reason enough to raise your prices, otherwise you’re operating at a loss. Keep track of the rate of inflation each year and adjust accordingly. People generally understand raising prices in times of high inflation–even if they don’t like it–since every business on earth must either keep up, or accept the loss to their bottom line. It’s just good business sense.

For decades, the average rate of inflation has hovered somewhere around the 3% mark, with some years worse than others. If you’ve paid attention to the news lately, you’ll know that things are a little different in 2022. Take into account what’s going on in the bigger picture, and then adjust your rates accordingly to avoid absorbing the hit.

3. You’ve added value

This doesn’t necessarily mean that you’re offering more literal services for the same price. Value can also come in the form of increased experience or new skills. When you and your staff have added value to what they’re able to offer, that can and should be passed along to your customer base. People are almost always willing to pay more for a superior product or service.

4. Your competitors are charging more than you

Be sure to take a look around to see what your direct competitors are charging. As your business evolves and becomes better with time, check to make sure that you’re comparing yourself against other businesses of the same class.

If you don’t keep up with regular rate increases, you may be surprised to find that competitors you initially considered to be equal to you have raised their rates significantly. You will then find yourself in a position where you have to raise your rates significantly in one go just to keep up. Keep on track by regularly checking what they’re doing.

5. Your close rate is over 80%

Some people like hard and fast numbers, so this is a good rule of thumb. You want to aim for your close rate to be between 75-80%. If it’s lower than that, you likely have an issue with perceived value. If it’s higher than that, you’re probably overworked and also attracting mostly bargain hunters – not a true loyal customer base.

If everyone is saying yes to your prices, you probably aren’t charging enough.

Final Thoughts

There is a lot to consider when raising your rates, and you don’t want to do too much too fast. Make a point to reevaluate your rates every six months, and you’ll find that you can keep your customer base while also keeping up with the increased cost of doing business.

If you need advice, on how setting new prices may effect your accounts and how this would then effect your costs, please contact S & H Tax Accountants. We have qualified staff that can help you in the best possible way. Book a consultation with one of our accountants today, call us at 03 8759 5532 or emails us at info@sahtax.com.au.

12/09/2022
3 Consequences of Avoiding Your Bookkeeping

If you ask 100 business owners what they like least about running a business, chances are good that bookkeeping will rank high on the list. It’s an annoying and frustrating chore that takes up a lot of time and is easy to put off until tomorrow.

Avoiding your bookkeeping is dangerous, however. Not knowing your company’s financial situation can result in a series of missteps that could ultimately cost you your business.

Here are three consequences of not keeping up with your bookkeeping.

1. You’ll make poor decisions

You can only make informed decisions about your business when you have a full picture of your current financial situation, including how much money is in your accounts, what your cash flow forecast predicts, and how much money you owe. Without that information, it’s much more difficult to know when you can afford to spend money or when you need to hold back.

Without proper booking, your decisions will be based on how you think things are going, and that isn’t always accurate. You may have just finished a good month and decide it’s time to hire new employees only to find out you don’t have enough money in the bank to pay them. Waiting three months to hire employees might be more profitable for you in the long run, but you won’t know that because your books aren’t up-to-date.

Maintaining your books ensures you have your company’s full financial picture available to you so you can make smart decisions.

2. You’ll make financial mistakes

Your employees, contractors, and lenders all rely on you to make your payments on time, every time. Payroll itself requires considerable attention to ensure your employees receive their benefits properly.

Not keeping track of your financial books can result in expensive errors being made, including benefits being missed, bills not being paid on time, or over- or under-payments. This could cost you extra in fees for late payments or rushed payments, which also affects your books.

On top of all this, financial mistakes can lead to a lack of trust. You need a trusting relationship with your employees, contractors and lenders. Payment errors can erode that relationship quickly.

3. You’ll lose money

In addition to losing money in unnecessary late fees and payment charges, not keeping track of your books can result in lost money that your business desperately needs.

You won’t know which of your clients or customers aren’t paying you on time, which means you can’t follow up with them or add interest charges for their late payments.

You could be paying too much in expenses and if you don’t reconcile your books you’ll have no idea that money is being wasted. Perhaps you purchased a software program to enhance productivity in the early days of your business. Maybe you stopped using it but forgot to cancel it, so each month for the past few years, you’ve been paying for a service you don’t use.

Those payments add up and affect your overall financial position.

Final thoughts

Bookkeeping might be many entrepreneurs’ least enjoyable task, but it’s an important one. If you find yourself putting off bookkeeping or dreading doing it, it’s a good idea to look into hiring someone to do it for you. Bookkeepers are trained and knowledgeable in the process, and they can save you valuable time and money in the long run.

Otherwise, be prepared to set aside time regularly to do your books yourself and don’t let yourself put the task off. It’s too important to the future of your business.

Want to get your books in order without adding more work to your plate? Get in touch with us today.

09/06/2021