Bookkeeping sets the foundation for all accounting and tax management in your business. And we all know that if a foundation isn’t strong, any structure can fail!
Here’s how detailed and accurate bookkeeping benefits your business, and some examples of what could happen if it isn’t up to scratch.
The benefits of accuracy
True and accurate reports
– if your transactions are not recorded correctly, your financial reports will be incorrect, and you won’t get a truthful picture of how profitable your business is. And worse still, if accounting processes are not set up correctly at the start, there is a serious risk of compounding errors – possibly over many years. Accurate records enable you to get a clearer picture of the health of your business.
Save on tax
– recording errors could lead to you missing out on ATO refunds or GST credits. For example, sometimes business owners are not aware they may be able to claim GST credits on certain items, such as imports. By being aware of what you are entitled to claim and by recording transactions correctly, you avoid paying more tax than you need to.
Avoid expensive mistakes
– errors in recording transactions could lead to the opposite as well – overclaiming on GST or expenses. This could result in costly penalties from the ATO that you really don’t need!
Gets the books accountant-ready
– it’s no good going to your accountant at tax time with a box of receipts or untidy books. Your accountant is likely to charge you a whole lot more if they have to spend time correcting your entries. Can you really afford a hefty accountant’s bill at EOFY, or any time?
Better planning and decision-making
– having an up-to-date and accurate picture of your accounts helps you to make informed decisions, set budgets and plan ahead in both the short and long term.
Better reporting to investors and lenders
– if you have investors in your business or you are seeking finance from a lender, it’s important that your accounts are clean and provide an accurate picture of your business.
Avoid ATO problems
– Audits are often triggered when the ATO suspects a business might be avoiding tax. Now, if your business does get targeted for an audit, and your books are accurate and in order, you shouldn’t have anything to worry about. But if not, you could end up having to correct your returns and incurring penalties on top.
Know how much money you have to spend
– one of the best things about bookkeeping is it helps keep you on top of your cashflow. With up-to-date and accurate accounts, you have a far better idea of not only your bank balance, but of how much is available for investing in your business’s growth.