A profit and loss statement is a very handy statement to look at for your business and seeing where your money within the business is going. It gives you a nice image of the net income of your business. It does this by calculating all the expenses that the business has incurred and subtracting this figure from the revenue that the business has brought in. By subtracting the expenses it gives you a clear indicator of the net income of the business.
With any accounting statement it does look a little confusing to start with. There are a lot of different headings and figures and it can be overwhelming. However once you understand the statement it will begin to look normal and easy to understand.
There are a few common terms that will show up on all profit and loss statements. Understanding these terms and knowing what each one means will help you to decipher the statement.
Revenue covers not only income from the products or services you provide but it covers ALL money that comes into the business. This can include the sale of equipment or property that is in the name of the business. It can also include any refunds that you receive for your tax returns.
The final expenditures line is the total amount that is paid out in expenditures throughout the period. However this is broken up into different sections so that you can properly understand where your expenses are going.
COG stands for cost of goods. This section is made up of the cost of the goods that you sell or provide. Selling something for X amount does not always mean that you make that amount. You need to factor in the costs in which are incurred to produce the product. These costs are allocated to the COG category.
The gross margin is the amount that you get when you subtract the cost of goods from the revenue that you receive for the product. This gives you the amount that you make as a profit on each product. It is good to try and have a set mark up amount on your products to ensure that your gross margin is suitable and sustainable for those products.
OPEX stands for operational expenditures. The operational expenditures for your business are all the other costs incurred by the business in the process of running the business and creating the products. These costs can include travel costs, equipment costs, wages, utilities, computer and software costs.
The list can become quite long depending on the nature of your business, however it is good to have each line separated so you can see exactly which of the operating costs are the highest and which ones you may be able to reduce in different ways.
Depreciation is the process in which different items reduce in their value. This covers a few different items including vehicles, technologic items such as computers and equipment. It is a good idea to track the depreciation of these items and then when they have lost their value it can be claimed at tax time.
EBT stands for Earnings Before Tax. The way in which this is calculated is by subtracting the COGs, OPEXs, interest and depreciation from your total revenue. Tracking the EBT is a great way to see the performance of the business.
Profit is classed as the bottom line of your business accounts. It shows the total amount of income that is in the business after all expenses have been subtracted from your revenue. The figure that shows is the amount of money that they business has actually made above what it has spent. Overall, seeing a profit is the goal for any business.
A simple way to think of the profit and loss statement is by thinking that it is a way to see your sales minus your expenses. Try to look at it as simply as possible and within no time you will be a whizz at the profit and loss statement.
There are many reports and statements that you can download from your accounting software in order to help you to understand where your business is sitting on a financial level, where money is being spent, what money is coming in and the overall position of the company. The balance sheet is one of these reports that can help you see a lot into the business. However when you first look at it, it may be a bit daunting and confusing to understand. The good news is, it is not actually that hard to understand once you know what you are looking for.
We have decoded for you the different sections of your balance sheet to help you learn to understand it and read it.
We already know that assets are possessions in which the company owns have a monetarily value to them.
Current assets are assets that you are able to quickly access. Current assets can include money that is already sitting in the bank account and money that is already in transfer to you such as a transfer for payment of an invoice.
Current assets can also include shares and short term investments that you may have under the name of the business.
Non current assets are assets that the company does have but are considered to be long term assets and not ones that can be quickly sold for their value. These would include assets such as a home, cars and large equipment.
Intangible assets are a bit different to standard assets. The intangible assets measure the value of the business, its brand and its intellectual property. This section covers all non physical assets.
Current Liabilities are current debts that you have to supplies, stockists etc that need to be paid in the near future. These would all have the invoices recording in your accounting program and the total figure show up on the balance sheet as a whole.
Non current liabilities are your long term debts that have been occurred and will continue to be paid off in installments over a long period of time. These can include mortgages, larger equipment costs and vehicles.
Accrued expenses are expenses that you know that you are going to have however they have not yet been received. These can include superannuation payments and BAS payments. You can run the report, know how much you need to pay however the due date is not for a little while yet.
Stock holder equity is the remaining value of the assets after the debts and liabilities have been taken out.
The capital stock refers to the amount of money that the owners may have initially invested in the business in order to start it up.
The retained earning is where the profit from the previous years of trading is accumulated.
This line is one that may or may not be needed with your business. It refers to funds that you have received for a service or product that has not yet been delivered. It is identified as a liability as you still owe the client a product or service for the funds that they have paid.
The balance sheet doesn’t need to be scary or stressful to look at. Once you start to understand each section of the balance sheet and how they all work together you will have no trouble in reading it and understanding where the money is within your business.
Bookkeeping is definitely one of those tasks in every business that falls in the love/hate relationship category. You love it when your books all match up correctly and every transaction reconciles, but you hate the task of actually doing it and getting on top of it. Errors and mistakes can happen very easily when it comes to bookkeeping and one small error can throw your books out completely.
There are a few common mistakes that business owners make when it comes to their bookkeeping which not only can cause headache and errors but it can also triple our workload and the time you spend on your bookkeeping. We have listed some of the common errors below to read through.
When setting up your business it is very important to set it up with separate bank accounts. This is so that your business and personal finances are kept separate from each other. Although the business is yours and the money comes to you it still needs to be accounted for through the business, same with all the expenses for the business. Having your finances separate makes bookkeeping a lot easier. It means that all transactions through the business bank account are business related and can be reconciled correctly. Using your personal account for business related expenses not only means that the payments are not seen in the business account but it also means that you could be missing out on tax savings for those expenses.
When you set up your accounting software it is advised to find one that can link to your bank account and have the bank feeds automatically coming through to your software. This means that each day ALL transactions in and out of the bank account are uploaded into the software and can be reconciled. You can set up rules and regular payments to streamline your reconciliations and save time. If you do not have the bank feeds set up the bookkeeping process can be a lot longer, you need to manually download the statements from your bank, upload into your software and go through and reconcile line by line. Most business owners do not have the time to do this on a daily basis which means you would probably do it monthly, sitting for hours reconciling a months worth of transactions is not fun in any ones books!
Using a bookkeeper to keep your accounts up to date and accurate is a life saver. They handle all the transactions and only come to you if there is an issue or a transaction that they are unsure of. They do all the worrying about making sure the accounts are up to date and reconciled whilst you focus on the important parts of the business. However if you choose a bookkeeper who does not understand the needs of you and your business or someone who you do not fully trust than their work can be more of a hinderance than a help. It is important to take the time to find a bookkeeper that fits in with your business, understands your needs and is experienced in the work that you need them to be completing.
As tedious and boring as bookkeeping looks, it is important not to leave it all until the last minute. Bookkeeping is a task that needs to be completed regularly. If you leave it all until the last minute and are left reconciling a years worth of transactions just before tax time you are bound to make a mistake or two. There may be transactions you can not find the receipts for or remember what they are for, there could be errors from rushing the reconciliations or you could simply not get it all done in time.
Bookkeeping is an important part of your business and one that you have to ensure is done correctly. If you are unsure on how to keep your books up to date or are not confident with it than look into hiring a bookkeeper to assist you. This is what they do, day in and day out. It is their stomping ground and the right bookkeeper will do wonders for your business.
Accounting and bookkeeping are amongst the tasks in a business that many people do not like or try their best to avoid. Unfortunately they are very important parts of every business and tasks that should not be avoided. When your books and accounts are up to date it makes life a lot easier when it comes to lodging your BAS, lodging your tax return and being able to see how you are tracking month to month with your income and expenses. One of the best ways to ensure that you are up to date with these tasks is by having a good bookkeeping and accounting program. A specialised program will help to keep it all in order, provide you with the information you need and also keep it all in one organised place.
There are many different accounting and bookkeeping programs available these days. Many are cloud based which means you can access them through your login details on any device and not have to download the program first. One that we recommend in Xero. Xero has many different functionalities and can make your business life ten times easier when it comes to the accounts and book keeping side of things.
Xero is a cloud based program which means you do not need to download it onto your device in order to use it. This means that you can access your account across many different devices at any time. You can also organise log ins for your accountant or book keeper so that they can also remotely access your details without having to be within your office.
Xero links to many different banking brands meaning that you can set it up so that your bank statements are automatically fed into Xero on a daily basis, meaning no transactions are missed and they are all entered in the correct order with the same transaction details that show on your bank statement.
With the bank feeds being automatic it makes reconciling your accounts a lot simpler. You are able to set up rules during your reconciliations so that certain transactions when they appear will be reconciled the certain areas without you having to manually input the details each time. This saves you a lot of time and sanity if you have hundreds of transactions coming through each day.
Xero has payroll capabilities within their different package types. You are able to set up a full payroll system including employee profiles so that they can enter in time sheets each week. You are able to set up the templates for pay slips with the different pay rates already added meaning less chance of error when completing their pay slips and calculations. Superannuation details can also be added in.
Xero has a number of different reports available for you to run when ever you need them. You can run reports to see how you are tracking on income and expenses, payroll reports and you can run your quarterly BAS statements straight from Xero. The reports can be downloaded in different formats so that they can either be edited or kept as a PDF.
Xero is a very easy to use program. There are many different functions available and most you can teach yourself quite simply. There are many tutorials on the Xero website for how to use the program as well. There are certified Xero bookkeepers and accountants that have undertaken training on the system as well, who can complete your bookkeeping for you or assist you in learning the program.
If you do not yet have an accounting program for your business, Xero is definitely one to consider. Because of the popularity of Xero, many bookkeepers and accountants are now becoming trained in the program meaning that when you do engage the assistance of them, they will have the knowledge of the program and be able to sort out any issues there may be with your books. We recommend Xero based on experience and success with the program.
A question we are asked a lot is whether both a bookkeeper and an accountant are needed or if they do the same thing. The answer is that yes bookkeepers and accountants both work on the accounts of the business however their roles are very different and if you are not comfortable with completing the bookkeeping of your business yourself than it is ideal to engage the services of both.
Bookkeepers are just that, the people that keep the books in order for your business. They are in charge of the day to day tasks around your accounts and books. At the centre of bookkeeping is the General Ledger. The General Ledger is the document that holds all the day to day transactions and movements of the financial side of the business. They also conduct the following tasks.
Reconciling accounts – They reconcile the transactions that come in and out of your accounts, via the bank statements and bank feeds that are uploaded into your accounting program.
General Ledger – Your bookkeeper is in charge of the balancing of the general ledger and ensuring that each transaction is accounted for in the ledger.
Invoicing – Your bookkeeper is the person that would be in charge of creating and sending out invoices that require payment and tracking the payments of them when they come in.
Payroll – Your bookkeeper can also take control of your payroll for you. They are able to complete the pay runs and provide you with the details of who needs to be paid and how much.
Expenses – They can also upload any invoices that your business is required to pay and ensure that payment is made on these.
Supporting Documents – There are many instances where the ATO requires supporting documents to be provided such as receipts. Your bookkeeper is able to upload these documents to your accounting program with the corresponding transaction so that they are identifiable.
Your accountants job is a bit different to the above that is completed by your bookkeeper, however their job is made a lot easier if the bookkeeping tasks have been completed regularly and correctly. Your accountant is there to provide the reports that are required for you to be able to correctly lodge your quarterly BAS statements, lodge your tax returns and ensure that you are completing all legal requirements when it comes to the financial side of your business. They can complete the lodging of reports and returns for you and at times also liaise with the ATO if needed. They have the ability to also complete the following tasks.
Amending Transactions – Your accountant is able to go in and amend and adjust transactions that may have been incorrectly allocated or not entered in to the books in the first place.
Analysis – They are able to run reports and analysis of the financial side of the business to help you to see whether the business is in a good financial position or see if there are areas that can be changed in order to make the business profitable.
Lodging Returns – Your accountant will go through your accounts, books and general ledger to ensure that everything has been covered off and correctly entered before preparing your tax return for you and placing the lodgment of it.
Education – Your accountant will be able to assist you in understanding your accounts and financial side of your business. They can teach you how to run and read reports so that you can see yourself how the business is tracking.
Both bookkeepers and accountants are important parts of the financial side of your business. It is a good idea to have both a book keeper and an accountant that are able to communicate and work together when needed as this will make things run a lot smoother. They are beneficial not only for your business but for your sanity!
Having your own business is an exciting time. You are doing what you love and making the most of your talents. If you are not already at a profitable point in your business, it may be on its way soon. All your hard work is paying off. There may be times when you look at your business and everything you are doing and start to wonder if there is any tasks that you can outsource. Not only to make your life a bit easier but also to ensure that they are being done correctly.
Bookkeeping is one of these tasks. It is a task that needs to be done correctly, regularly and with patience. This is why you should definitely consider having a bookkeeper assist you with this side of your business. It is always hard to decide whether or not to pay someone else to help out in your business, especially if you are not yet making a lot of money – however using a bookkeeper can actually save you a lot of money in the long run. We have put together a few reasons why you should have a bookkeeper assist you.
As much as you want to be across everything in your business – it is your business after all, there are times when it is best to leave it to those who know what they are doing. A qualified bookkeeper has gone through training and courses in bookkeeping and accounts. They also make sure that they are fully up to date with the requirements of the Australian Taxation Department. Many people starting up a business do not have a background in accounting or finance and can find themselves in a lot of trouble if they are not accurately recording everything.
When you look at your accounts, chances are you are looking mainly at the amount of money that you are bringing it. Your bookkeeper will look at all the money that is not only coming in, but that is going out as well. The bookkeeper can help give you a different perspective on your accounts, show you where money may be draining and help with ideas on how to change the spending habits.
Having your accounts maintained and updated by a qualified bookkeeper means that you know exactly what is due to be paid and when it needs to be paid by. You also will have a record of invoices you have sent out and payment dates recorded. We have all had one of those moments when we send out an overdue invoice reminder, only to find that the payment had already been made but not offset in the bank reconciliation. Your bookkeeper will also help to ensure that you are aware of the due dates of your next BAS (Business Activity Statement) payments and that they are all made on time.
Due to the training and experience the bookkeepers go through, it means that you are less likely to have errors in your accounts. In many cases where a business owner has been doing their own accounts, everything may look right and correctly recorded however down the track it is found that there were a lot of errors that then need to be fixed. These errors can be costly and can result in needing to relodge BAS and tax Returns.
If you are able to outsource your bookkeeping to a bookkeeper it means that you have extra time on your hands and you are able to focus on the important parts of the business. You are able to focus on the core business and the sales and money making side of the business without the stress of whether you have updated the accounts. It means that you are able to get back to what you love and do best.
If you do not already have a bookkeeper for your business, now is the time to start thinking about it. It is a great time to start as the busy tax season has not yet started. It may be scary thinking about letting someone else in on that side of your business and sharing the accounts side of your business with someone. Take the time to choose a bookkeeper that you trust, one that will show you their qualifications and that you feel aligns with you and your vision. A great bookkeeper is the perfect addition to any business.
Running a business comes with many different deadlines and dates that you need to remember. There are dates that you need to pay your employees, dates that payments to suppliers are due, dates of new product releases or business changes. The ATO also have a list of dates for lodging of different financial reports for your business. These are very important dates to remember and it is best to ensure that you are lodging each of them on time to avoid any issues with the ATO or possible costs being incurred.
You need to lodge your business activity statements to the ATO. The cycle in which you are lodging your BAS will depend on the GST turn over of the business. If the GST turnover of the business is over $75,000 but under 20 million dollars annually that you need to lodge your BAS on a quarterly basis. You do not get to set your own ‘quarters’ and it is based on the requirements of the ATO. There is a deadline for the lodging of the previous quarters BAS statements. The lodgment can be done in a number of different ways including through your accountant, through the online portal or via paper lodgment.
The deadline details are below
|1. July, August and September||28 October|
|2. October, November and December||28 February|
|3. January, February and March||28 April|
|4. April, May and June||28 July|
As you can see the lodgment date is 28 days from the end of the quarter finishing.
Each year your business needs to lodge a tax return, even if the business is running at a loss. Depending on the structure in which your business has been set up will determine the type of return that needs to be lodged. If your business is set up as a company that the company needs to lodge a tax return. If the business is set up as a sole trader you need to complete just your personal tax return with the business financial details included in it. For those that are set up with their own TFN such as a partnership and trust you need to lodge both the personal tax returns and either a partnership or trust return as well.
If you are lodging a personal, trust or partnership tax return you are required to do so by 28th October following the end of the financial year. If you are lodging a tax return for a company you have until the 28th February in order to complete your return. You can have the October deadline extended if you are lodging through a registered tax agent.
Superannuation is a requirement for businesses to pay to employees who reach the required employment status. You need to pay your superannuation on a quarterly basis, although you can choose to pay it weekly or monthly if you prefer.
Superannuation needs to be paid and recorded through superstream which is an online portal.
The deadlines for superannuation payments are 28 days following the end of the quarter. The quarters are set up the same as the quarters for your BAS statements to be lodged – making it that little bit easier to remember.
It may seem a little daunting however with organization you should have no trouble keeping up with the dates. It is a good idea to set reminders in your phone or calendar in the weeks has the different deadlines so that you can be aware of them coming up and ensure that you have everything in order ready for it. If you are unable to complete your lodgment in time it is a good idea to call the ATO and speak with a member of the team to discuss your options.
Each of these lodgments can be done yourself or you can choose to have your accountant look over them first and then complete the lodgment for you.
If you are running a business you know that a good accounting program is a must. A program that is able to track your income and expenses, allows you to run reports both quarterly and annually and if you have staff members, one that is able to run payroll efficiently and accurately.There are many different accounting programs available and they fit in with the different needs of different
Cloud accounting is similar to installed software and has the same features and functions however it is all hosted remotely and online. The software itself is not housed on the user desktop and is accessed via logging in through the internet.
There are many benefits to the user when they decide to use a cloud based accounting program.
One benefit is that you do not need to install and maintain the software yourself. Updates are provided through the service provider and you do not need to make any changes in order to receive the updates.
Another benefit of cloud based accounting is that because the software is not being housed on the one desktop or device it means that it can be accessed from any device that has a stable internet connection. This means that you are able to work from outside the home or office.
The other benefit of having the program all online means that if you have hired a book keeper or accountant to assist with the accounting side of your business they are also able to log in to your account remotely from their office and do their work as well.
Using a cloud based software is as secure as using a program which is installed directly on your computer. When you sign up to the service you receive a login for your account which only you know (and the people you provide it to) which means that there is still that security. A number of the cloud based service providers have also now added in a secondary security measure where you need to provide another method of security to log in after entering your password such as a captcha or a pin code which is sent to your mobile number.
Most cloud-based programs also have the data saved on multiple servers cloud-based which means that the data is not only secure but it is also safe when it comes to ensuring that it is not lost. How many times have you had a program of some type downloaded on your computer and when your computer has fritzed out you have lost all of your information and saved data? passwords
The programs are definitely affordable for most businesses. Depending on the number of features and functions you need will determine the cost of the program for you. Those that need payroll functions or that have multiple businesses may need to purchase a higher plan. The good thing about most of the cloud based programs is that you can select to pay for it monthly which makes it even more affordable.
Having a cloud based software also means that you may save money in some ways. Because you do not need to have the program installed on your desktop it means that you can work with smaller devices such as a phone or tablet and you do not need to ensure you have up to date equipment and computers to be able to use the programs.
Many programs not, not just accounting ones are moving towards being housed on the ‘cloud’
There are many benefits to it and if you are looking for a new accounting program make sure you check out the cloud based ones before you make your decision.
It makes things easier for you, your bookkeeper and your accountant. Anything that keeps your accountant happy, BAS and tax returns lodged on time and all your data in one place is a great program
Bookkeeping had come a long way. Gone are the days of hand writing your transactions down in an exercise book each time you made a purchase. Even the days of using an excel spreadsheet to record all of your transactions are further and further away now. Digital bookkeeping has been becoming more and more popular over recent years and for many reasons. Completing your book keeping through a digital avenue has many advantages and has proven to be very successful for those who are using it.
Using a digital bookkeeping system that has been specifically made for that purpose is going to make your whole process a lot quicker, easier and streamlined. It means that you can keep everything recorded in the one place, under correct categories and the risk of loosing information is a lot less likely than if you were recording it all via paper.
Many digital bookkeeping programs have functions set up in them that help make the process of bookkeeping a lot quicker. There is the option to automatically feed your bank statements straight from your bank account into the program, the option to set up rules around certain transactions so that repeating ones are reconciled in the same way and it gives you a place where you can list all expenses and due payments. This means that the process is a lot quicker and more efficient. You are able to get more done in a shorter amount of time – leaving you time to focus on different aspects of your business.
Using a program that is able to download statements straight from your bank or financial institution means that the data is going to be a lot more accurate than if you were inputting each transaction manually. It means that all transactions are not only listed but they are in the correct date order and in the right section of the business. The last thing you want is to mix up transactions from one account and reconcile to another.
Most digital bookkeeping programs have the functionality to be able to download different reports for you to access the financial information of your business. You can download your balance sheet, profit and loss statements and much more.
Many of the digital bookkeeping programs are now cloud based. This means that the program is held on an external server and all you need is a subscription and an internet connection to be able to access it. You do not need to download software onto your computer and you are able to use it on any internet enabled device. This also means that you are able to provide your accountant or bookkeeper access to the accounts via a log in for the accounting program.
There are different subscriptions available within the different programs on the market. If you have employees that you have to pay wages and superannuation to there are subscriptions that cover this. If you are a smaller business with a very simple accounts section than there are also more basic subscriptions available. Whilst there are free programs available the recommended ones do come with a cost, normally a monthly fee. It may seem like a lot, however you need to think about how much extra time your bookkeeper or accountant would need to spend on the financials of the business if things are not recorded correctly and accurately. Overall it does become the more affordable option.
Another benefit of using a digital bookkeeping program is that if you do decide to move from doing your bookkeeping yourself to using a bookkeeper it means that they will be able to jump in and take over straight away. Most bookkeepers are familiar with the different programs available and have been trained in using them. They should be able to start without any issues of having to catch up or learn something new. We are becoming a very digital based world and this is one digital change that we are on board with.