Bookkeeping is the process of recording financial transactions for your Melbourne business. These transactions include purchases of goods and services, sales, receipts from customers, and payments to creditors among other transactions.
The transactions are recorded on a day-to-day basis, and this ensures that nothing is left out when you are accounting for a given period. It is very important to record everything as it occurs, and the exact amounts involved. You will have the documents that explain the transactions in detail, for example, an invoice that you have received for goods that you purchased or an invoice sent to a customer.
- Double Entry
All business transactions are recorded in a system called double entry. It is basically a system that records the two sides of a transaction, which are the credit and the debit parts. This is true even where cash has not been exchanged as transactions done now to be paid for at a future date are ascribed to the current period. Their debit and credit effects are still recorded as part of double entry. Double entry ensures that the books are accurate because at any time the sum of the debit and credit entries must be equal.
- Purpose of bookkeeping:
- This is a necessary and essential process for business owners. It enables you to keep the records of all your financial transactions as they occur. At any one point in time, you should be able to know how much you owe/are owed, what your sales have been in the past month, how many purchases you have made and your capital.
- It enables you to keep up your payments and follow up with your defaulting customers. Through your records, you will be able to tell which customer has paid their debt and which one is holding you back by defaulting.
- When filing your annual tax returns, your bookkeeper will need to access your business records to determine what you owe your government.
- It keeps you in check. You may want to purchase a certain item but realize that the money you have according to your books is not sufficient to cover your monthly expenses, as well as the purchase. You will then focus on making more money to be able to afford the desired item.
- Bookkeeper’s services
Given the above explanation, it becomes easier to understand the work of a bookkeeper. They are the people who do this work for you on a daily, weekly, monthly or annual basis. They offer a variety of services including setting up software for your record keeping, data entry, payroll setup, inventory control, end of month and year accounting, bank reconciliations and credit card reconciliations among other services.
- What to look for in a bookkeeper
When selecting a bookkeeper firm, there are several things that you need to keep in mind. These include:
Always ensure that the person or company has offices near you and can thus come over and do the work ideally on a weekly basis.
It seems rather obvious but ensure that the person at least has some training and knows what they are doing. A certificate, testimonials or a reference should be enough.
- Services offered
Try and get someone who will cover all the bases. If possible, let them do the data entry, accounts payable, receivables, bank reconciliations, inventory records, end of month and year accounting and if you can negotiate it, handle your tax returns.
Ensure that the people you have hired are flexible and can work around your schedule. If you have to change your working hours to accommodate them, they may not be the right fit.
You may not have kept records for a while. Nevertheless, a qualified bookkeeper will not be discouraged by this and will be willing to work through the myriad of receipts and invoices. This is a winning trait. Look for it in the person that you hire.