Finances can feel so much more manageable when we start off with something short, simple and sweet.
Accounting sometimes conjures up an image of highly complex Excel sheets with rows and rows of complicated numbers. The world of numbers somehow has unfortunately been given a rather negative reputation, that it is somehow related to the stress of profits and losses, the frustration of balancing numbers, of keeping track of numbers to perform the dreary dreaded task of tax returns etc .
At CATS4TAX, accounting is more of an efficient way for a business or an individual to have clarity about the resources they have, where they want to go in terms of their objectives, and whether their plans are working effectively. Numbers = clarity and they present the reality of a situation so that we can either make plans to change what isn't working, or amp up what we are doing right.
We have been listening to clients over the years share their experiences of managing their finances and businesses, and really there is unnecessary angst in the general perception of accounting. So we thought why not find a way to give accounting a bit of a make-over and help people better understand what accounting is really about for small businesses.
1) Bookkeeping aka track your money
This may sound really basic, but you'd be surprised it's something individuals and businesses often neglect. You need to know how much and what is coming in. And of course, how much is going out and what that has been spent on.
For an individual, it could be something as simple as using that information to decide if you really need to buy yet another exact T-shirt in a different colour. For a small business, this is an activity that needs to be done regularly and clearly, and properly, right from the start. It is a clear indicator of whether your business is making profit, or how many more months of rent and utilities you can afford to pay based on your current level of business.
Even if you are one of the lucky privileged few to have tons of money to spend, bookkeeping is still necessary. Tracking money is not for those who have a tight budget and need to know how they are spending. It is a healthy habit for every individual and business. Whether you have a lot or just a little, track it. You will be thankful you did, because clear records can help later when it comes to doing tax returns.
When we say track your money, we don't mean just keep a little notebook and write down how much you spent on your Starbucks coffee every day. Explore the different ways of keeping a record of your finances, whether it is using a platform, a software or hiring the services of a professional bookkeeper or accountant.
And that takes us nicely to the next point.
2) Use your accounting reports to manage your business
What we appreciate about numbers is how they are simply quantifiable evidence that shows clarity of how a business is doing. All your statistics, percentages, sales figures, expenses etc. are little nudges to help you make well-informed decisions in your business strategies.
Some of the typical questions numbers can generate include:
How is your sales performing?
What's left after deducting costs and taxes?
Do you have enough money to pay your staff their wages?
How much are you spending on utilities?
Do people or any entity owe you money?
Do you need to chase late payments?
What is your budget?
Are you keeping to your budget?
Are you on track with your business goals?
Did you do better this year compared to last year?
Have sales improved in certain months?
How are you doing with your loans?
What does your inventory look like?
So you can see why a pen and a notebook aren't enough to keep a clear record of everything. And before you panic, remember there is support available in the form of accounting software such as Xero, or simply getting a professional business accountant or bookkeeper in your community to guide you through the numerical labyrinth.
We like knowing that in our communities, there are people with different skills and talents and we can let each of them do what they do best. At CATS4TAX, we may adore numbers but we are not the experts when it comes to graphic design for example. So it made total sense for us to place that part of our business in the hands of an expert. It gave us peace of mind and freed up time to let us do what we do best i.e. deal with numbers!
And here's a little bonus that comes with using software and going digital - a professional accountant can help you stream numbers to a live dashboard on your mobile phone. This means you have access to the financial situation of your business conveniently and easily. This is really helpful especially for those who travel, or who may not be in the office all the time. You don't have to lug your laptop with you everywhere just to check the numbers.
3) Manage and lodge your tax returns
This is a necessary step to take every year, and the clearer your bookkeeping is, the less painful and easier it is to do your tax returns.
There are three main taxes to know about, namely:
income tax where you pay a portion of your profits to the government
sales tax where you add a tax to your prices and later you pay that to the government
employee-related tax where you collect tax from the employee pay and then send that to the government
The dates for doing tax returns are clear each year, so you do have the whole year to keep your finances in order. It is not unlike when we were studying in school - when we did our homework and revision regularly, when it came to the final exam it was a lot more manageable instead of cramming everything last minute.
The good news about taxes is, business costs can actually reduce your taxable income, which is a real motivator for tracking your money and accounting for everything.
It helps to have a professional work out these deductible costs so you don't miss out on any benefits. The upside of having an expert take on these tasks for you is you are spared any unpleasant surprises to pay if you were to navigate this on your own.
Peace of mind so you can enjoy building your business
As a Registered Tax Agent, CATS4TAX has accompanied businesses in different industries on their financial journeys.
We have seen clients come to us in a frantic worry when they received notifications from the Tax Office, or who have, for various reasons, left their tax returns too late and are in a panic about fines. By untangling the financial knots, we are able to provide them with relief, ease and the realisation that tax returns are not something to be dreaded.
More importantly, if clients have not been tracking their money well previously, we hope to show businesses the benefits of regular, proper bookkeeping and how that can have a huge payoff whether it is for doing tax returns or helping them guide their business strategies.
We understand what it's like to run a business, and we love being able to focus on what we do best. We enjoy supporting clients with our expertise so you can focus on building your business.
There is much more we want to share with small business owners about the financial world of their business so we created a handy ebook to help you understand better what you need. Download a copy of our ebook below.
We hope these three basic things about accounting can help you have a clearer idea of what you can do to delight in your business and keep growing.