7 of the Most Common Bookkeeping Mistakes

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You’re motivated, savvy, on the move and incredibly time starved. Between growing your client base and seeking new investors, it’s common for day-to-day tasks to fall to the wayside. Just don’t let bookkeeping be one of them. Small bookkeeping errors add up to a major landslide. A few missed financial transactions here and there can throw off entire financial reports, or even lead to tax implications. Here are seven common bookkeeping mistakes you can avoid with the right bookkeeping help. 

7 of the most common bookkeeping mistakes and how to avoid them

Businesses of all sizes experience bookkeeping errors. From undocumented expenses to unfiled taxes, accounting mistakes come in all shapes and sizes. You could face not only unexpected losses, but government penalties if you fall into one of these seven avoidable traps. 

1. Falling behind in bookkeeping

One of the most common bookkeeping mistakes is simply falling behind. Even a month of missed reports stops you from accurately understanding your cash flow and current debts. Keeping a daily general ledger, the right way means staying on top of every single transaction that comes in and out of your accounts. 

2. Using accounting software incorrectly

Popular accounting software programs can do a lot of heavy lifting. But they are still subject to human error. In other words: You can’t skip taking the tutorial. Do an annual check-in with your accounting software and ask yourself: Am I using the most up-to-date version of this software? Can this software handle the scale of my bookkeeping needs? Is this software updated with the latest tax rates?

3. Incorrectly paying employees

If you have a full-time employee classified as a casual worker, the mistake could cost you thousands. You may be held responsible for back wages plus interest, and face legal penalties. What might seem like a small formality is in fact a major decision. Familiarise yourself with employee classification in Australia and New Zealand to avoid this costly mistake.  

4. Inaccurately reporting payroll and sales tax

A major part of keeping accurate business finances is paying the proper tax rate. Since payroll taxes vary across states and territories, you may need some help sorting out how to set up your payroll system the right way. In this case, it is always better to triple check than risk a hefty penalty at the end of the year. 

You must also make sure your point-of-sale systems are set up with the right sales tax (10% in most cases in Australia and 15% for most goods and services in New Zealand). Rest assured, if you don’t pay enough in taxes now, you will end up paying for it later. 

5. Mixing business and personal

The best financial practice for any business – even a small or medium-size organisation – is to separate personal and business transactions. When you’re trying to calculate tax deductions and reconcile your end-of-year reports later on, blended finances are a headache. You will have less to untangle later if you use a designated business account now. 

6. Tossing your records too early

Did you know the government requires your business to keep certain financial records for a set period of time? It turns out you can’t just send everything to the shredder when tax time is over for the year. In Australia, you should keep written evidence of your financial reports for five years after you lodge your tax return. In New Zealand, financial records should be kept on hand for seven years after you lodge the year’s taxes. This includes everything from invoices and receipts to wage books and vehicle logbooks. 

7. Hiring an inexperienced bookkeeper

Many of the above errors trace back to one common misstep: hiring a bookkeeper who is not able to keep up with your evolving bookkeeping needs. Someone with more experience can manage financial reports, prepare an accurate balance sheet, and stay on top of tax requirements. If you keep running into inaccuracies, it may be time to enlist a more robust bookkeeping team to round out your back office and keep things in line. 

If you’re a growing business in need of additional help, outsourcing your bookkeeping service may be the answer. Visory can help your organisation avoid these common mistakes. You will be connected with a team of experts with industry specific knowledge, and you will have 24/7 access to your financial reports. Contact Visory today to learn more about our suite of services that support your back office and help you avoid common bookkeeping errors.

Finding Professional Bookkeepers in Your Area: A Guide for SMEs

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Introduction

Small businesses rely on bookkeeping to track financial transactions and monitor their cash flow. Bookkeeping involves the systematic recording of financial transactions, so as a business owner, you always know where your money is coming from and where it’s going.

Accurate bookkeeping is vital for:

  • making informed decisions
  • managing your small business’s financial health
  • adhering to tax regulations
  • attracting potential investors in your industry
  • and planning for your future success. 

However, many small business owners face significant challenges when it comes to finding and hiring the right bookkeepers and accountants.

For example, many small businesses lack the time, expertise, and resources to manage their bookkeeping in-house. Others might have the time and resources, but find it difficult to find a qualified and trustworthy bookkeeper with relevant experience.

As many small business owners know, hiring the wrong staff comes with a high cost and risk. Without a professional and reliable bookkeeper or accountant, it’s possible to end up with bookkeeping errors and compliance issues that will set you back.

Thankfully, there are new bookkeeping services and solutions available to small business owners.

For example, Visory is an online professional bookkeeping and accounting service that helps SMEs in Australia and New Zealand overcome their business bookkeeping challenges.

Visory takes over all the bookkeeping responsibilities that small businesses need so you can focus on growing your business.

When you partner with Visory for your bookkeeping needs, you’ll receive many benefits, such as:

  • Access to a network of certified bookkeepers and payroll experts regardless of location
  • A professional bookkeeping service that provides quality assurance and customer support, so you can have true peace of mind.
  • A platform that integrates with your cloud accounting software to streamline and manage your business finances in one place
  • Best practice processes and workflows that ensure your business is running efficiently
  • Affordable and flexible pricing plans tailored for SMEs

In this guide, we’ll show you how to find professional bookkeepers in your area using Visory, the online bookkeeping service provider for SMEs.

How to Find Professional Bookkeepers in Your Area

Finding and hiring professional bookkeepers is a straightforward process with Visory.

First, you’ll need to book a meeting with one of our Experts to discuss your business and your goals.

In your discussion we’ll ask about:

  • Your business and the services or products you provide
  • What you’d like to achieve by working with a team of bookkeeping professionals
  • What kind of tools and bookkeeping responsibilities Visory can assist you with

You can also share any other business needs you have at this point, such as managing your cash flow, understanding your financial data, or entering new industries.

Once you’re confident Visory is the right fit for you, we will begin tailoring a detailed proposal for your business. Completing deep technical audits of your back office, you’ll receive recommendations on ways to improve your process and a service offering to meet your needs.

If you decide to proceed, we’ll introduce you to your team, which includes a Customer Success Manager and relevant Bookkeeping or Payroll Experts matched for your industry, business size and software.

Tips and Best Practices for Finding and Working with Bookkeepers

When working with professional bookkeeping services, it’s important to stay focused on the goal at hand.

Visory’s team of recognised and professional bookkeepers receives proper training to assist all new clients and keep their financial data up to date.

Here’s what you can do to help you get the most out of your bookkeeper’s expertise and education.

Be clear about your expectations and goals

It’s a great idea to share any specific expectations you have from a professional service. For example, some small business owners need more assistance with accounts management, while others need support when it comes to compliance or software.

Every small business is different, and Visory’s team of professionals is here to help you create bookkeeping systems that improve your financial health.

Provide accurate and timely information and feedback

To keep your company financials in check, it’s important to share accurate details with your bookkeeper. Many bookkeepers have a set process to manage their client financials but will tailor them around your specific needs.

Be sure to share specific details regarding services such as payroll and specific accounts management. Your bookkeeper will work with the details you share to set up the best tools and accounts to help your business financials grow as much as possible.

Use the Visory platform to track your progress and performance

With Visory’s services, you’ll always have access to your company’s financials. The more you track your progress, the more you can improve your decision making and ultimately your cash flow. Using Visory’s platform helps small business owners keep their focus on reaching and surpassing their business goals.

Review your financial reports and statements regularly

It’s also a smart idea to review your financial reports on a regular basis. Apart from the benefits of improving your decision making, this will also help you better understand which clients improve your profits the most, and where there might be potential for new clients and industries.

Ask questions and seek advice from your bookkeeper

One of the benefits of Visory’s services is that you get a team of professional bookkeepers and accountants to answer your questions and guide you as needed. Whether you have questions specific to your industry or just need help understanding your payroll reports – your Visory team is there to help.

Why Choose Visory for Your Bookkeeping Needs

When it comes to managing your small business’s financial health, Visory stands out as the go-to choice for many reasons. Some benefits of working with Visory include:

  • Convenience and accessibility
  • Security and privacy
  • Scalability and flexibility
  • Expertise and quality
  • Savings and value

Convenience and accessibility

Visory offers unmatched convenience and accessibility for a professional bookkeeping service. You can access your small business bookkeeping data anytime, anywhere, from any device.

Whether you’re at the office, on the go, or at home, your financial information is at your fingertips. This flexibility allows you to stay in control and make informed decisions no matter where you are.

Security and privacy

Visory takes your data’s security and privacy seriously. Your information is stored and encrypted on secure servers located in Australia and New Zealand. This means that you can peacefully focus on your business, knowing that you’re protected from any potential threats.

Scalability and flexibility

Small businesses aren’t static; they grow and evolve. Visory understands this and offers both scalability and flexibility.

You can always adjust your plan and bookkeepers as your business grows and you gain new clients, or as your needs change. This adaptability ensures that you always have the right level of support, no matter your industry or the stage of your business.

Expertise and quality

When you partner with Visory, you gain access to a network of certified and experienced bookkeepers. These professionals bring their skills and knowledge to the table, ensuring that your bookkeeping is in expert hands. 

Savings and value

Outsourcing your bookkeeping to Visory isn’t just a convenience; it’s a smart financial move.

It saves you time, money, and the hassle of handling bookkeeping in-house. By streamlining your financial management with Visory, you can redirect your resources toward growing your business and achieving your goals.

Conclusion

In the dynamic world of small business, effective bookkeeping is vital to financial success. However, finding the right bookkeeper can be a challenging task, and hiring the wrong one can lead to costly mistakes.

Visory steps in as the solution to these challenges. With Visory, you gain access to:

  • certified and experienced bookkeepers
  • a user-friendly platform for streamlined financial management
  • flexible pricing plans
  • and unwavering customer support.

Choosing Visory offers unmatched convenience, security, scalability, expertise, and cost savings. Your financial data is always at your fingertips, protected by advanced security measures, adaptable to your business’s growth, handled by experts, and cost-effective.

To simplify your bookkeeping and improve your financial well-being, choose Visory. Contact us today for more information and take the first step towards a brighter financial future for your small business.

How to Grow Your Business with an Effective Invoice Template

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If you’ve ever heard the phrase “time is money,” its significance in the world of business could never be more true. Every minute on your business clock presents an opportunity to make money. For many businesses, however, administrative tasks take up too much valuable time— an average of 16 hours per week! The process of creating and delivering invoices can be especially frustrating and time-consuming. And even though this important administrative task is important and keeps your business running, it shouldn’t take up so much of your time. That’s why you should consider using an invoice template.

An invoice template eliminates the hassle of creating invoices whenever you need to. It lets you quickly enter data against an already-created format, saving time and effort.   

What is an invoice? 

An invoice is a document a business sends another business or customers detailing the products or services provided. It’s a sort of bill that serves as a request for payment. It also acts as a transaction record, ensuring both parties are aligned on the goods or services exchanged and their financial obligations. An invoice contains several details, such as: 

  • The quantity of goods
  • The amount charged
  • The payment terms
  • The terms of the transaction 

Importance of invoicing

As mentioned earlier, invoices play a crucial role in maintaining accurate records of transactions. This is extremely important for accurate financial recording and organisation, especially if your business deals with many clients. Imagine providing services or selling products on credit but not having a record of these transactions. How would you ask for payment? Imagine having to remember all the details of the transactions off the top of your head when it comes to asking for payment. Invoices make this process easier. They act as a legal agreement between you and your customers. 

Invoicing provides several benefits for your business, such as: 

  • Improved cash flow: Well-recorded invoices set clear expectations for when your business expects payment from its customers. This reduces the time it takes for money to flow into your business. When you have a steady flow of income, this translates to improved liquidity, enabling you to meet financial obligations and invest in growth opportunities.
  • Reduced debtor days: Effective invoicing contributes to shorter debtor days—the time clients take to settle their bills. With well-structured invoices, you’re signalling your clients about the terms and due dates. This minimises the risk of overdue payments.
  • Enhanced customer relationships: Your invoice is not just a payment request; it’s also an opportunity for building stronger relationships with your clients. A well-crafted invoice demonstrates professionalism, attention to detail, and transparency. It shows that you value your clients’ trust and want to make the payment process smooth.

When you have a steady flow of money into your business, shorter debtor days and great customer relationships, your business is more likely to grow. That’s why invoicing is essential, whether you are dealing with 10 or 100 clients.

Invoice vs. tax invoice

Sometimes, you may need to create tax invoices. A tax invoice is a type of invoice that contains detailed information about a taxable sale or supply of goods and services. It’s a legal document issued by a seller to a buyer that outlines the specifics of the transaction, including the amount of Goods and Services Tax (GST). A regular invoice differs from a tax invoice in that a tax invoice shows that the price of certain or all of the goods you’ve sold includes GST, whereas a regular invoice lacks this feature.

So when is your business required to provide tax invoices? There are several circumstances where you may need to provide tax invoices. These include: 

  • You make a taxable sale of more than $82.50 (including GST).
  • Your customer requests a tax invoice from you.
  • You make a sale that is partly taxable and partly GST-free.
  • You make a sale on credit or provide a lay-by service.

What must businesses include on an invoice? 

Creating a well-detailed invoice template is extremely important. It’s not just about your business potentially losing income; it’s also about avoiding unwanted issues. For instance, an invoice that doesn’t reflect all the required information will likely raise eyebrows. It may come off as fraudulent, especially with many AI tools increasing the focus on accuracy. 

That said, your invoice template should contain the following information:

  • Invoice Title: The word “Invoice” should be prominently displayed at the top of the document to identify its purpose.
  • Supplier’s Information:

Legal name or trading name of the supplier

Supplier’s business address

  • Recipient’s Information:

Recipient’s name

Recipient’s business address

  • Invoice Date: The date when the invoice is issued.
  • Description of Goods/Services:

Detailed description of the goods or services provided

Quantity of goods or services supplied

Unit price for each item

  • Total Amount: The total amount payable for the goods or services.
  • Payment Terms: Clear and concise terms outlining when the payment is due and the accepted payment methods.
  • Reference Number: A unique identifier or invoice number for tracking and reference purposes.
  • Terms and Conditions: Any relevant terms and conditions related to the sale, including return policies, warranties, and late payment penalties.
  • Payment remittance information: Provide payment methods and information such as bank account details and currency.

A tax invoice template contains all the information in a regular invoice template. However, it contains minor differences or additions, such as:

  • Tax Invoice title: Instead of the words invoice, you should indicate “Tax Invoice” at the top of the document. 
  • Supplier ABN: This is your Australian Business Number (ABN), which is essential for GST reporting.
  • Recipient’s ABN: If the recipient is registered for GST, you should include their ABN in the tax invoice template to establish eligibility for claiming input tax credits.
  • GST Amount Breakdown: Your tax invoice template should include a section that breaks down the GST amount on each product separately. 
  • Total Amount Payable: The final total amount, including any applicable GST.

Invoicing tools and eInvoicing

For invoices to be effective, they must reach your clients on time. You, therefore, need an efficient system that can send these invoices accurately and efficiently. Your business can leverage invoicing tools such as eInvoicing. eInvoicing, or electronic invoicing, is an electronic method of creating, sending, receiving, and processing invoices. This method eliminates the use of paper and saves your business time and money. Examples of invoicing tools include Square, Xero, and Invoice2go.

In an eInvoicing system, invoices are generated electronically within a software application and then shared with the recipient through electronic channels such as email, electronic data interchange (EDI), or specialised eInvoicing platforms. The recipient can then directly import the electronic invoice data into their accounting or enterprise resource planning (ERP) systems.

Quick tips for sending invoices and getting paid

Creating a great invoice template is only the first step. Even after sending the invoices on time, you may still have to deal with delayed payment. So, how do you ensure you get paid on time for maximum cash flow? 

  • Set up automated reminders for overdue invoices. This saves time and maintains consistent communication with clients, encouraging them to address outstanding payments promptly.
  • Clearly state payment terms on your invoices. Specify the due date, accepted payment methods, and any early payment discounts or late payment penalties.
  • Provide detailed descriptions of the goods or services you’ve provided. This reduces confusion and helps clients understand the value they’re paying for.
  • Offer a small discount for early payments. This can motivate clients to settle their invoices sooner, improving your cash flow.
  • Assign unique invoice numbers to each invoice. This simplifies tracking and organisation, both for you and your clients.
  • Regularly reconcile your invoices with your financial records to promptly identify and address any discrepancies.
  • Embrace a range of payment methods, such as automated transfers and online transactions, simplifying the payment process for your clients.

How Visory helps businesses get paid

While a well-crafted invoice template is essential for your business’s cash flow and growth, managing them is just as important. At Visory, we understand the challenges of dealing with clients regarding tracking and following up on payments. When you use our services, we help you get paid faster. We do this by handling all your contacts, establishing clear contracts and tracking invoices and payments. This way, you focus on other income-generating tasks that help your business grow.

Contact us today, and let us take care of your Accounts Receivables. 

Super due dates for 2023 and 2024

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Superannuation is an essential part of long-term financial stability for most Australians. It provides your employees with retirement income, helping them live comfortably throughout their golden years. However, as an employer, you must make super contributions on time. So, you need to be aware of super due dates. 

As the name of these dates suggests, these are the dates on which your super contribution payments for your employees are due. Continue reading to learn the super due dates for 2023 and 2024, who needs to pay superannuation, how to handle extra contributions, and more. 

When do employers pay super?

Employers must make superannuation contributions for their employees every quarter. Unfortunately, the dates that super payments are due change every fiscal year. So, as a new fiscal year commences, it’s important to familiarize yourself with the super due dates for that year. The super due dates for fiscal year 2023 (July 2023 through June 2024) are as follows:

  • First Quarter: The first fiscal quarter spans from 1 July, 2023 to 30 September, 2023. First-quarter super payments are due 28 October, 2023. 
  • Second Quarter: The second quarter runs from 1 October, 2023 to 31 December, 2023. Payments for the second quarter are due 28 January, 2024. 
  • Third Quarter: The third fiscal quarter is from 1 January, 2024 to 31 March, 2024. Third-quarter payments are due 28 April, 2024. 
  • Fourth Quarter: The fourth quarter is from 1 April, 2024 to 30 June, 2024. Fourth-quarter super payments are due 28 July, 2024. 

Who needs to pay superannuation?

If you’re an employer in Australia, you must pay superannuation for your employees, often all of them. Here’s who you need to make super contributions for:

  • Employees over 18 years of age: You must pay superannuation for all of your employees who are 18 years old or older. This includes all full-time, part-time, and casual employees, regardless of how much money you pay them or how you pay them – even if they are temporary residents. All employees over the age of 18 are entitled to super contributions from their employers. 
  • Employees under 18 years of age: There is no requirement for you to make super payments for some employees under 18 years of age. However, if you have an employee under 18 years old who works more than 30 hours in any week, you do need to make super contributions for them, regardless of how often or how much money you pay them. 

What to do when staff want to make extra super contributions

It can be difficult to attract quality employees to your business. One way to do so is to offer additional benefits for employees, benefits like salary sacrifice. In fact, the salary sacrifice benefit is especially useful when you have staff that want to make extra super contributions. 

Salary sacrifice gives your employees the ability to make additional super contributions, as well as pay for other benefits, on a pre-tax basis. This gives them the ability to reduce their overall tax burden. If you have staff who want to make additional super contributions, consider offering a salary sacrifice benefit to make that option available to them. 

Super funds and award rates

When you hire a new employee who’s eligible for super contributions, it’s important to give them a superannuation standard choice form. This form tells you which super fund you’ll need to pay the employee’s super contributions to. 

As an employer in Australia, you’re required to offer at least an 11% award rate. That means you must contribute at least 11% of your employees’ earnings into their super funds. However, the super award rate may increase to 15% by 2025. 

Late Super Payments

If you make late super payments, you’ll likely have to pay a superannuation charge. That charge is based on the unpaid amount plus an administration fee and interest on the amount you owe. 

The good news is that you can avoid additional fees by contacting the ATO. Even if you can’t make the entire super payment you owe, you may be able to set up an installment plan to avoid additional fees and further action. 

Super guarantee charges and due dates

As mentioned above, you are required to make your super contributions by or before the super due date for the period the super is owed. If you fail to do so, you’ll likely face penalties known as superannuation charges or super guarantee charges. There are three parts to the super guarantee charge:

  • Shortfall Amount: Super contributions that haven’t been paid or that have been paid late. 
  • Administrative Fee: This is a fee charged by the ATO to cover the administrative costs of collecting late super contributions. 
  • Interest: You’ll also have to pay 10% per annum interest on the total past-due super contributions you owe. 

What Is a Clearing House?

It can be easy to get confused when you have multiple employees who want their superannuation contributions made to different funds. The good news is that you don’t have to fumble through the process and put in extra effort to make sure you make the right contributions to the right funds every quarter. 

That’s where superannuation clearing houses come in. 

A superannuation clearing house gives you the ability to make all of your super contributions for all of your employees from one platform. All you need to do is set up each employee in the platform when you bring them onto your team. The clearing house saves your employees’ super fund information and handles the disbursement of multiple payments for you. You simply make one lump-sum superannuation payment each quarter. 

Conclusion

Super guarantee contributions can be confusing, especially if you’re attempting to process them manually for multiple employees. However, the super contribution process doesn’t have to be a painstaking one. In fact, if you have a quality payroll solutions provider like Visory, chances are super contributions are as easy as a click of the mouse. 

Technological innovation has changed the way you do just about everything. Why not let technology simplify the payroll process? Learn more about how Visory’s payroll solutions can help simplify your super contribution process and let you focus more time on growing your business. 

 

Work-related travel expenses: How to track them and what to claim for your business

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Many business owners and employees travel, so you’ll likely need to record work-related travel expenses. The good news is that business travel expenses are often tax deductible, so tracking them can help you save money on taxes. Tax deductions can lower your taxable income, so you could pay less in taxes overall. 

In this post, we’ll cover everything businesses need to know to track, record, and claim work-related travel expenses, including: 

  • What are work-related travel expenses?
  • Business travel expenses you can claim
  • What you can’t claim
  • Records you need to claim business travel expenses
  • How to track work-related travel expenses

What are work-related travel expenses? 

Work-related travel expenses may include costs for business travel, accommodation, or meals. However, not all travel expenses qualify as work-related. 

Many small businesses run into issues with the Australian Tax Office when they deduct travel expenses. It can be confusing to determine what counts as a qualified business travel expense and what doesn’t.

One of the key issues employers run into is understanding the line that separates personal and business expenses. So, the ATO established clear definitions for the types of expenses that qualify to be tax deductible.

Business travel expenses you can claim

To qualify as a work-related travel expense, you or your employees must be:

  • Travelling away from your home and staying away overnight
  • Able to prove that the travel was necessary for your business

Some of the common travel expenses businesses can deduct are costs for:

  • Rental cars and additional fees for parking, fuel, tolls, etc.
  • Public transport (bus, trains, etc.)
  • Taxis or ride-share (Uber)
  • Airfare (tickets and baggage costs)
  • Accommodations (hotels)
  • Overnight meals

What you can’t claim

You can’t deduct travel expenses that aren’t necessary for conducting business. In other words, you can’t deduct your holiday. However, you can deduct the travel costs to go to another city and meet with a client. In that case, you may deduct transport, hotel, and even some meal costs. 

Other types of non-deductible travel expenses include: 

  • Leisure activities while on a business trip
  • Holidays during business travel
  • Travel insurance, visas, and other documents
  • Gifts and entertainment

If you combine a business trip with holiday, then you can only claim the portion of the trip that was for business. For example, if you live in Perth and attend a work conference in Sydney, you can claim those costs. But, if you decide to stay in Sydney a few days after to sightsee, then the extra days and money doesn’t qualify. 

To qualify part of those expenses, you’ll need to show how you separated the work from personal costs. 

Records you need to claim business travel expenses

Businesses may cover employees’ work-related travel expenses through travel allowances. However, there are specific guidelines for how much an employee may spend daily on travel allowances, which we’ll cover later in this post. 

To claim travel expenses, you’ll need to keep records. If you can prove something was a qualified business travel expense, you should have no issues with your tax return.

Businesses should keep these records for five years:

  • Meal and other receipts
  • Tax invoices
  • Ticket stubs
  • Boarding passes
  • Travel diaries

You may be able to show proof that something is a work-related travel expense through: 

  • Signed contracts 
  • Meetings with documentation
  • Proposals
  • Email confirmations

How to track work-related travel expenses

Businesses can cover work-related travel expenses for employees and track them. To do this, you generally have three options: 

  • Pay for expenses directly with a company card or business bank account
  • Set up a reimbursement program for travel expenses 
  • Pay employees a travel allowance

If your business covers travel expenses through any of the above methods, then employees can’t claim those on their personal taxes. Instead, you may be able to claim them and deduct the cost from business taxes. 

Keep in mind if you offer travel allowances that they might trigger the fringe benefits tax, which is a separate income tax. For example, some businesses offer an employee a living-away-from-home allowance instead of a travel allowance. Because the employee is away from home to work for long periods, it might be considered a fringe benefit.

Businesses need to keep accurate records on those travel expenses. Here are some tips to help you track work-related travel expenses.

1. Educate employees on what they can claim

You can reduce errors and missing records by training employees on how to track travel expenses before they go on a trip. Even a simple checklist of what travel expenses you cover and don’t will be helpful. 

Again, if you offer travel allowances, inform employees of the daily limits or reasonable amounts for meal, accommodation, and incidental expenses. The reasonable amounts vary depending on location and other factors, so consult ATO’s guidelines.

Additionally, your employees should keep all of their receipts and documents while travellingon business. 

2. Track expenses and keep records 

The ATO requires that businesses keep records for five years as proof of travel claims. There are several expense tracking apps that make it easier to save receipts and other documents. 

The ATO app also has a myDeductions tool for sole traders. Larger small-to-medium enterprises will want to invest in a more robust tool. Accounting software like Xero and MYOB also have expense tracking features. 

3. Log a travel diary

If you’re a sole trader or partner and travel for work for more than six consecutive nights, the ATO requires you to keep a travel diary. It’s a logbook of what you do and spend money on while traveling. 

A travel diary can be in any format as long as it shows:

  • The days you travelled
  • What you did each day
  • The times you did it 

These entries should all correlate with the records you keep—this acts as an activity timeline with records. 

Keeping a travel diary even for trips shorter than six nights might be beneficial. If you ask your travelling employees to keep a travel diary, you’ll have an extra way to verify their claimed expenses.

4. Track expenses with a bookkeeper

The ATO is particular about what you can and can’t claim for travel expenses, and it can be costly if you track them incorrectly. At the same time, business travel expenses can become complicated to track, deduct, and report. When your business is fast-growing and you have over 100 employees to track, this is especially true. 

Online bookkeeping services like Visory can help you track, record, and report your travel expenses. Once you need to lodge your business taxes, you’ll have organised books that include all the documents the ATO may need.

To learn how Visory can help you manage work-related travel expenses, and all your back-office finance needs, chat with one of our bookkeeping experts. Once you schedule a time to chat, we’ll get to know your business and identify the best services for you. 

How Do Bookkeeping Services Help Small Businesses?

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It can be overwhelming to take care of back-office responsibilities like bookkeeping while still focusing on growing your business. Online bookkeeping services for small businesses can help. 

Bookkeeping services for small businesses should do more than help you track financial records accurately. A professional bookkeeper can keep track of all transactions, reconcile bank statements, prepare financial reports, and more. By depending on professionals with greater bookkeeping and accounting knowledge, you reap the benefits of their expertise. 

This post will reveal the key benefits of bookkeeping services for small businesses. But before then, let us look at what bookkeeping entails.

Table of contents

What Is Bookkeeping?

In the business world, bookkeeping is the process of recording and organising financial transactions. It is an integral part of accounting, focusing on recording daily business transactions in the books of accounts. These include sales, purchases, taxes, loans, investments, payroll, operational expenses, etc.

Bookkeeping establishes the accounting groundwork. In other words, accounting focuses on analysing the data collected from bookkeeping. This process allows business owners to know their financial position, detect financial problems early and fix them before they grow into full-fledged disasters. How you do your bookmaking determines the accuracy of the overall accounting process. Thus, it is vital to hire a qualified bookmaker to do the job.

7 Benefits of Bookkeeping Services for Small Business

The benefits of outsourcing bookkeeping services for your small business are unmatched. Besides helping you organise and analyse financial information, you can accurately conclude the financial health of your business. These are not the only reasons bookkeeping is essential for a small business. 

The Australian Taxation Office (ATO) expects all businesses to maintain specific records and utilise accounting practices to track income and expenditure. Without accurate bookkeeping, tracking and reporting appropriate information to the ATO can be difficult. Here is a detailed overview of how bookkeeping services help small businesses. 

1. Makes You Prepared for Tax Time

Every business has to lodge a tax return at the end of the tax year. Tax deadlines are very strict, and lodging can be time-consuming. With a bookkeeping process in place, your financial information will be ready on time. That way, you won’t need to scramble for receipts and invoices with the taxman breathing down your neck. 

2. Enhances Accurate Budgeting

Outsourcing a bookkeeping service makes it easier to budget for the business accurately. With proper organisation of your income and expenses, it’s straightforward to review your costs and financial resources. A budget defines the financial roadmap for your business, helping you plan for the future by creating a manageable budget. 

Comparing your budget and the actual financial data is a perfect way to detect cost reduction opportunities or potential cash flow issues. If your financial books are inaccurate, it’s hard to make accurate budgeting since it will all be guesswork. 

3. Promotes Better Decision Making

As a business person, you need to clearly understand your finances to plan your company’s future effectively. You may have to make significant decisions like opening a new location or hiring a new employee. To make such decisions with confidence, it’s critical to understand your company’s financial performance. 

Accurate bookkeeping with the help of a professional offers up-to-date information, helping you make informed decisions. If the reports say that your business is running out of capital, you can opt to take a loan to boost development. 

4. Maintains Organised Records

The stress of trying to find a crucial document at the last minute can lead to missed deadlines and possibly a few errors. One thing a business can’t afford to do is make mistakes, as it could lead to costly consequences. A bookkeeping service can help with that! It will keep your books updated throughout, and help you maintain organised records. That way, it will be easier to find any information you need in no time.

5. It Helps You Focus on Other Business Operations

If you decide to do bookkeeping on your own, you will spend much of your time paying invoices, processing payroll, and tracking expenses. As a result, you will have insufficient time to attend to other operations. A bookkeeping service allows you to focus on what you do best. Having enough time to focus on operations enables you to grow your business effectively and gives you ample time for research and development plans.

6. Lowers Costs

Every business owner aims to reduce their overall costs of operations. One way of achieving this is minimising the salaries and wages of workers by employing only a few. An in-house bookkeeper requires a significant salary and benefits, but it’s possible to do without them. The cost of hiring a third-party bookkeeping service can be relatively lower, and you will have an assurance of excellent services. 

7. Avoids Conflicts of Interest

It can be risky to entrust bookkeeping and accounting to one of the owners in partnership businesses. Misconduct accusations can potentially ruin the relationship even when a record-keeping error is unintentional. If something goes wrong, the other members might question the intentions of the person responsible. 

Hiring an independent bookkeeping service helps avoid these inconveniences while boosting confidence among the owners. They can have faith that every financial statement is true, accurate, and unbiased.

What Bookkeeping Method Should You Use?

One of the first steps to bookkeeping for small businesses is to decide which method you should use. The method you choose may depend on various factors, including the amount of revenue you earn and the volume of daily transactions your business processes. 

Below, we discuss two of the most popular bookkeeping solutions for small businesses—single-entry and double-entry bookkeeping.

Single-Entry Bookkeeping

A single-entry system tracks all income and expense transactions. That means each transaction is recorded once and posted to the appropriate account. 

For example, if you receive $1,000 from a client, you would enter this into the “Sales” account. This method is ideal for businesses with low volumes of sales or purchases. However, it does not support a detailed analysis of past transactions.

Double-Entry Bookkeeping

As the name suggests a double-entry bookkeeping system tracks all transactions twice. In addition to recording the original entry, it posts the same transaction to both accounts. 

For example, if a customer pays you $1,000, you would first record (debit) the transaction in the Sales account. Then, you would also post the payment to the Customer account (credit). This method supports a more detailed analysis of past transactions because you can access information about previous entries. It also provides better visibility into cash flow.

How to Do Bookkeeping for Small Businesses

Bookkeeping tasks may include: entering transactions, reconciling accounts, analysing financial data, and creating monthly financial reports. Hiring a professional bookkeeper with extensive experience in the field can save you time and improve your business decision-making.

Bookkeeping for a small business requires these three steps: 

Track Each Transaction

The first step in any bookkeeping process is tracking each transaction. The bookkeeper needs to know what type of transaction it is – whether it’s a purchase, sale, receipt, or withdrawal. They must also determine which account to put it in. After entering the transaction, the bookkeeper must ensure that it is correct. This includes verifying the date, amount, and source of funds.

Accounting software like Xero and MYOB can help speed the process along. 

With tools like Xero, bookkeepers create invoices, bills, receipts, and other documents. An experienced bookkeeper has the knowledge to help your business use these tools accurately and effectively. 

Manage Bank Reconciliations

Tracking every transaction goes hand in hand with bank reconciliation. 

Bank reconciliation is the process of matching or comparing the balances in your accounting records against the actual balance in the bank. If there are discrepancies, the bookkeeper must find out why. Some common causes include incorrect debits or credits, missing transactions, or duplicate entries.

The bank reconciliation process is pretty straightforward. First, it involves obtaining the bank’s ending cash balance and adding any deposits in transit from your business. Afterward, the bookkeeper subtracts any funds not yet cleared by the bank and adds or deducts any other items. 

The second part of the reconciliation process involves obtaining your business’s closing cash balance, subtracting any bank fees, penalties, or NSF (non-sufficient fund) checks, and then adding any interest earned. In the end, your company’s adjusted cash balance should match the bank’s closing balance. 

Prepare Financial Statements and Reports

Financial statements provide information about your company’s performance over a specific period. Reports help you analyse your finances and make informed decisions based on the data.

At best, your business should prepare financial statements at the end of each month or quarter. This may include an:

  • Income statement
  • Balance sheet
  • Profit and Loss
  • Cash flow analysis

Visory’s bookkeeping services extend beyond tracking transactions, bank reconciliation, and financial reporting. 

We also offer accounts receivable, payable, payroll, and other support that growing businesses often need. Whether you’re looking for a simple bookkeeping service or one that covers everything, we have what you need.

What to Look For in a Bookkeeping Service

An online bookkeeper is typically an individual with relevant experience in accounting services offered to a diverse range of businesses. When looking for a bookkeeper, choose one that is well-acquainted with your business type and preferably industry. Look for those that specialise in helping small businesses like yours. 

Their service should portray excellent skills and experience to determine profits, losses, turnover, and other financial factors. This will help you determine the financial health of your business with ease. 

Bookkeeping Services for Small Businesses

Visory is a reputable bookkeeping company that gives you access to accounting and finance services that scale with your business. Our team of experts has experience in different industries and is ready to hit the ground running anytime. You will receive strategic reporting and insight to drive growth. Our monthly subscription fee is affordable and worth the investment. Contact us now to book a meeting.

What’s the Difference Between Payroll and Bookkeeping?

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No business gets far without sound financial infrastructure. Up-to-date and accurate payroll, bookkeeping and accounting practices help set the foundation of a successful business. So, it is important to understand the difference between payroll and bookkeeping and how, along with accounting, they contribute to your financial health. 

Software has simplified parts of the process, but it has not fully automated bookkeeping, payroll, and accounting tasks. Whether it’s an error preparing payroll payment register summaries or distributing payslips, any glitch can throw financial records off, so it’s important to hire the right expert.

Although many bookkeepers do payroll, by no means are all bookkeepers payroll experts. At Visory, we have a separate payroll team taking over these responsibilities. 

In this guide, we’ll go over the basics of payroll, bookkeeping and accounting. We’ll outline the tasks each may do, and the role each plays in your business. 

What Does a Payroll Expert Do? 

Payroll is the process of verifying and distributing payments to employees at the agreed rate and in accordance with designated award rates. The process might appear straightforward and easily automated, however, it’s an easily tangled process that can require skilled financial experts as well as Human Resources to ensure it is completed without issue.

Payroll Tasks

The tasks that a payroll expert completes may vary slightly depending on if you’re outsourcing payroll or hiring in-house. It also depends on the details of your service agreement. However, these are a few of the common tasks and responsibilities. 

  • Make sure all payroll transactions get processed efficiently and at the correct times
  • Calculate, collect, and record data to manage and track payroll information and balance sheets
  • Compile summaries of earnings, deductions, disabilities, taxes, benefits, leave, and non-taxable earnings for financial statements, audits, and more
  • Resolve payroll discrepancies
  • Follow regulatory payroll policies and procedural operations for compliance
  • Manage PAYG withholding
  • Reconcile payroll tax 
  • Set up single-touch payroll
  • Note total gross award rates of the payment register YTD report
  • Contribute to superannuation funds on behalf of employees
  • Implement ad hoc operational and financial reporting as required

Payroll Checklist

To keep payroll accurate, businesses need to collect and confirm employee details like those listed below. 

  • Have confirmed employee details
  • Legal name and address 
  • Date of birth 
  • Tax file number
  • Start (and termination date) of every employee
  • Details of account they want used to receive wages
  • Track pay details such as allowances, gross wage, hourly award, etc.

What a Bookkeeper Does

Bookkeepers manage many of the everyday financial needs of a business, from tracking cash flow and reconciling your accounts to updating your books and creating standard financial reports. 

Although bookkeepers are not the same as accountants or payroll experts, occasionally, a bookkeeper may perform some payroll or accounting tasks. Although, it is important to note that performing actions like lodging a tax return requires additional certification, such as becoming a BAS agent. If you’re considering hiring a bookkeeper, consider what types of tasks you need and their area of expertise. 

Bookkeeper Tasks

Here are a few common tasks bookkeepers may handle.

  • Pay suppliers, vendors, subcontractors, etc.
  • Produce, record, and track invoices for provided services or goods sent to clients
  • Bank reconciliations
  • Document customer receipts
  • Prepare financial reports like balance sheets 
  • Manage accounts receivable and payable
  • Track depreciation

What’s the Difference Between Payroll and Bookkeeping? 

Although a bookkeeper may complete some payroll functions, the two roles are different. Now that we’ve covered each in detail, let’s look at how they differ. 

In their most basic form, payroll and bookkeeping are different because they manage different functions within an organization. 

  • Payroll: The process for paying and managing award rates to staff.
  • Bookkeeping: The day-to-day management of the company’s finances.

Accounting is also sometimes used interchangeably with payroll and bookkeeping. It is key to understand these differences as well, especially if you are considering hiring an expert to help you with your business finances. 

What an Accountant Does

Accountants are advisers who produce financial reports and offer financial advice. They prepare tax returns and ensure taxes get paid on time and properly. So that the business is stable, accountants evaluate operations and recommend best practices, spot issues, and develop solutions to help the organisation run more effectively.

Accountant Tasks

Here is a brief list of many tasks an accountant might be responsible for daily.

  • Ensure the accuracy of the company’s accounting tax records
  • Make sure any financial transaction complies with relevant laws and regulations such as the Corporations Act
  • Prepare, report, and maintain important financial reports
  • Put together tax returns and see that taxes get paid properly and on time
  • Offer counsel on revenue enhancement, cost reduction, and profit maximization
  • Assess forecasting and risk analysis 

Why You Need Payroll and Bookkeeping Experts

An error in your financial records can impact your entire operation and knock the business off its game. A skilled bookkeeper can help you strengthen your business acumen, whether that be choosing the right bookkeeping software or analysing your financial data to identify areas of growth. 

With Visory, you can be confident that your bookkeeping and payroll system is efficient, effective, and agile.

As professionals, we know small errors turn into large problems so we scrutinise every line to ensure accuracy. 

Whether you are an international enterprise or a growing business, managing payroll and bookkeeping on your own can feel like a daunting task. Visory’s team of experts understands the differences between payroll and bookkeeping and can help you assess what your business needs. If you’d like to learn more about identifying the best ways to improve back-office practices, contact Visory today.

Bookkeeper Salary: How Much Does a Bookkeeper Cost?

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If you plan to hire a bookkeeper, one of the first questions you’ve probably asked is how much does a bookkeeper cost? Bookkeeper salary or cost for bookkeeping services can vary widely, depending on the type of service, experience, qualification, location, and more. 

The various pricing models—hourly rate, monthly fee, and salary—will also determine how much a bookkeeper costs. 

In this guide, we’ll compare pricing models, cost for bookkeeping services, and other factors. We’ll also dive into how much a bookkeeper costs, how bookkeepers charge businesses for their services and when hiring a bookkeeper is worth it. 

How much does a bookkeeper cost in 2023?

The average bookkeeper salary ranges from $60,000 to $80,000 or more, not including benefits and other costs. 

The hourly rate for a bookkeeper in Australia ranges from $100 to $150 per hour, but can also be more depending on the experience and tasks. 

Outsourcing to an online bookkeeping service, often a cost-effective option, has a set monthly fee that ranges from $500 to $2,500, depending on business size and task complexity.

Although these are the averages, the actual cost of a bookkeeper varies depending on a number of factors. Let’s dive into each factor. 

How much do bookkeepers charge businesses? 

Mainly, bookkeepers use any of these three models to charge businesses—salary, hourly rate, and monthly set fee. To help you choose the right model, let’s look at how each works.

Salary – employee

A salaried bookkeeper is usually an in-house employee. They may work full-time or part-time, depending on your arrangement. 

A full-time bookkeeper is ideal for large, international companies with frequent transactions. For example, public companies usually have full, in-house accounting and bookkeeping teams. They also tend to produce annual revenue that’s well over $100 million, so there’s more funding to support it. 

An in-house bookkeeping team can provide time and support to focus on revenue-generating activities, but there are significant costs to consider too. 

  • Base bookkeeper salary
  • Cost of hiring and retaining in-house talent (salary, allowances, training and development costs)
  • Office space and equipment expenses
  • Bookkeeping software costs

In-house bookkeeper salary ($60,000 – $80,000)

The annual salary of a bookkeeper ranges from $60,000 for entry-level to $80,000 for experienced. The median bookkeeper salary is $67,500.

Even if you hire a bookkeeper part-time and spend half the cost of the industry average, it would be about $35,000. Either way, the cost is quite substantial, considering you still need to pay for accounting and tax services.

Generally, the decision to hire an in-house bookkeeper isn’t for cost-cutting purposes, but it can come with its benefits. If your situation doesn’t require an in-house resource, outsourcing bookkeeping usually makes more sense.

Hourly rates – sole traders, freelancers, and consultants

If you engage a sole trader, consultant or freelancer as your bookkeeper, they usually charge hourly rates. The rates vary based on the types of tasks and the expertise you need.

Hourly bookkeeper rates are generally cheaper than bookkeeper salaries because contractors tend to use them. Since a contractor isn’t an employee, you don’t have extra costs for employee benefits and training. You also don’t have to pay for office space and equipment.

However, some freelancers may take advantage of this model. Without an incentive to automate tasks and create efficiencies within your back office, they can drag hours out to increase their earnings. 

Hourly bookkeeper cost ($100-$150 per hour)

Hourly bookkeeper costs add up fast. For example, for 20 hours of basic bookkeeping tasks at $150 per hour, you could easily pay $3,000 per month. During busy months or tax season, you could expect to pay even more. 

Another drawback of hourly bookkeeping rates is that it’s hard to budget for each month when your bookkeeping hours (and costs) fluctuate.

Set monthly fee – bookkeeping service 

Online bookkeeping service providers such as Visory offer a monthly set fee. It’s often the most cost-effective of the three models. You can choose from a range of pricing plans and select one that fits your bookkeeping needs and budget. 

For instance, Visory offers three different plans starting at $545/mo. The most basic plan has features such as: 

  • An expert bookkeeper
  • Real-time, accrual-based accounting
  • Monthly statements (P&L, balance sheet, and cash flow)
  • Quarterly business activity statement
  • A receipt and invoice capture tool

Cost for bookkeeping services (monthly fee – $545-$2,500)

Outsourcing is the best alternative if you don’t have the budget or need for an in-house bookkeeper or you simply want to cut down on employee costs. You could also opt for online bookkeeping services instead of hiring freelancers at hourly rates. 

Since online bookkeeping services charge a flat monthly fee, you know exactly how much you need in your budget each month. Monthly, in-house bookkeepers cost about $5,625, while most outsourced online bookkeeping services are a fraction of this (about $500-$2,500 per month). 

Remember, cost is only one factor to consider. Online bookkeeping services have more flexibility than in-house or freelance bookkeepers. If your business grows rapidly, you don’t have to worry about hiring more talent. Because bookkeeping services have teams of bookkeepers on-hand, they can more easily and quickly scale with you. 

To recap, here’s a comparison of the costs for bookkeeping services based on salary, hourly, or monthly rates. 

Type of pricing Bookkeeper  Average cost per month
Salary In-house employee $5,625 per employee
Hourly Freelance, sole trader $3,000 per month
Monthly fee Bookkeeping service (Visory) Starting at $545 per month

Bookkeeping cost and rates

Besides the contract type, other factors may affect the cost of a bookkeeper, such as: 

  • Location
  • Qualifications
  • Level of experience
  • Type of services
  • Frequency of service
  • Size of your business

When it comes to location, bookkeeper salary and freelancer rates can vary significantly due to cost of living. A report by Indeed shows the average annual salary for a Sydney bookkeeper is about $68,002. On the other hand, the average salary for a Perth bookkeeper is around $63,772. 

Tasks and rates

As mentioned earlier, the cost for bookkeeping services can vary by task. Generally, they should handle the below tasks.

  • Data entry (record and classify transactions to the appropriate accounts on the accounting software)
  • Bank reconciliation (download bank statements and reconcile the accounts)
  • Invoicing (prepare, send, and track invoices)
  • Track expenses
  • Generate reports
  • Manage accounts payable and receivable
  • Other additional duties as their skills allow

More complex bookkeeping and accounting services come with a higher cost. More complex bookkeeping and accounting services, such as BAS Lodgements, come with a higher cost.

Bookkeeping experience and qualifications

The experience and qualifications of a bookkeeper impact their salary significantly. 

For instance, an entry-level bookkeeper should handle data entry, invoicing, tracking expenses, generating reports, and bank reconciliation. If they are skilled in BAS and financial statements preparation, you should expect to pay more, and so forth.

Before hiring, familiarise yourself with the different bookkeeper levels and the duties they can perform. At the same time, look out for their qualifications to help identify the right candidate. 

An entry-level bookkeeper should have a Certificate IV in Accounting and Bookkeeping. But to provide business activity statement (BAS) services, they need additional qualifications and experience. These include:

  • Experience – 1400 hours of relevant work
  • Registered BAS Agent with Tax Practitioners Board

In addition to the above work and education requirements, sole traders, contractors and outsourced providers must hold Professional Indemnity (PI) Insurance.

How hiring a bookkeeper saves businesses money

Maintaining your books might seem manageable initially, but keeping tabs can be challenging as your business grows and transactions increase. Having a bookkeeper or bookkeeping service handle the books keeps you compliant and frees up your time to focus on your main objective – generating revenue. 

But that’s not all. Hiring a bookkeeper can save you money in many ways – here are a few of them.

Spend less on accounting

A professional bookkeeper can handle more tasks than you would if you did it yourself. They can keep your books clean and organised, so you spend less time and money on accountants. A bookkeeper can handle this as part of their normal duties, thereby saving what you would spend on accounting services, which are a little pricier. 

Bookkeepers are more affordable 

Bookkeepers can help you perform some tasks at a far lesser cost than if you were to hire an accountant to do it for you. For instance, some bookkeepers can handle payroll processing, accounts payable, BAS, and prepare financial statements. Generally, they charge less than accountants, meaning you can save significant money.

Focus on activities that generate revenue

Hiring a bookkeeper to handle your books frees up your time and ensures back-office tasks are completed at the highest standard. While you incur the cost of their services, it frees up your time, allowing you to focus on growing your business. 

As you bring in more business, the revenue covers the bookkeeping service cost. You also get more time to rest, which minimises the risk of burnout and its potential effect on your business. 

More accuracy

Another benefit of a professional bookkeeper is that they’re responsible for keeping your books updated and accurate. With many duties demanding your attention, the risk of making errors is always present. In addition, a bookkeeper is conversant with how to treat different transactions, which can eliminate compliance-related mistakes. 

Moreover, their advanced bookkeeping knowledge allows them to be more efficient than you would be performing the same tasks. All these factors contribute to savings for your business.

Easy tax lodgements

A bookkeeper helps track transactions and keep your records up to date. Consequently, you spend less time on tax preparations. They also ensure all the necessary documents are accurate and organized for smooth tax payments and return lodgement.

Get a team of bookkeepers and scale your business

Understanding how much a bookkeeper costs can help you choose the best option for your business. No matter the stage of your business (startup or enterprise), a bookkeeper can handle your books and free up your time, so you can concentrate on growing your business. 

Outsourcing is a cost-effective bookkeeping option for small and large businesses. You can find freelancers at a fraction of the cost of an in-house bookkeeper salary, but an online bookkeeping service makes more financial sense. Besides being less expensive than the other two, you get to work with a dedicated team of experts.  

Learn more about us and see how much bookkeeping services cost (and how much you can save), when you use Visory as your online bookkeeping service. 

 

 

How Much Can You Claim for Laundry and Clothing?

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It’s a question we’ve all asked in our lives when doing our first tax return. Looking down the list of tax deductible expenses your eyes are instantly drawn to it—Uniform & Laundry Expenses. If you’re living at home, you’re most likely outsourcing your laundry to your parents. But as most of us have done, you really want to know if you can claim anything to maximise your return.

Luckily the answer is yes in many circumstances. In Australia, you can get a tax deduction for work clothing and laundry expenses. However, it has to meet particular requirements to qualify as work-related clothing. It can be difficult to navigate all the guidelines, so we commonly get questions like: 

  • Can I claim work uniforms on taxes? 
  • How much can I claim for laundry expenses? 
  • Is dry cleaning and clothing repair deductible? 

In this guide, we’ll dive into work-related clothing and laundry expenses. We’ll also outline what qualifies for a deduction, how much you can claim for laundry, and more. 

What Can You Claim as a Laundry Expense? 

For taxation purposes, clothing and laundry expenses refer to the cost of buying, repairing, and cleaning work-related gear (garments and footwear). 

According to the Australian Taxation Office (ATO), you can claim any expenses you incur to clean specific work clothing. Mainly, the deduction includes the cost of washing, drying, and ironing the clothes. However, the expense is not allowable if the employer launders the clothes for you or reimburses for the cost incurred.

The amount you can claim depends on whether you launder the clothes at home, at a laundromat, or at the dry cleaner (see later section for more details). In addition, any repair costs for the eligible gear are part of the deduction. 

Types of Clothing You Can Claim

While taxation laws allow deductions for various categories of work-related attire, any conventional or everyday clothing you wear to work does not qualify for the laundry deduction. 

Work clothing that may be eligible falls into four categories.

  • Occupation-specific clothing
  • Protective clothing
  • Compulsory uniforms
  • Non-compulsory uniforms

Occupation-Specific Clothing

Occupation-specific clothing refers to work attire that specifically identifies you with a particular profession. These are mainly distinct uniforms that employees would not wear in everyday situations other than their jobs. 

For instance, let’s say your business’ dress policy requires employees to don navy blue suits and light blue shirts and blouses. You cannot claim the cost of purchase and maintenance as a tax deduction under occupation-specific clothing since the attire can be worn in multiple professions. 

However, a nurse or doctor who wears scrubs may claim laundry expenses since they are unique to their occupation. (They may also be able to claim non-slip shoes as protective clothing.)

Examples of Occupation-Specific Clothing

  • Chequered pants of a chef
  • Judge’s robe
  • Nurse and doctor scrubs 

Generally, any dresses, jackets, blouses, skirts, pants, and other items of clothing that are worn distinctly by members of a specific profession could qualify.

Protective clothing

Protective clothing is any attire worn during work to protect you from risks (injuries, illnesses, etc.) or protect the clothes from damage. In other words, the nature of your work requires you to wear them. According to the ATO, the items must have protective features and functions to qualify for deductions. 

However, they must not be everyday wear. Even if they have protective features and can be used for everyday wear, you cannot claim laundry expenses on them. For example, a building site worker who wears a long-sleeved shirt to protect their arms from abrasions, may not claim the shirt.

Examples of Protective Clothing 

  • Fire-resistant clothing
  • Aprons
  • Sun protection clothing
  • Smocks
  • Safety-colored vests
  • Non-slip nurse’s shoes
  • Overalls
  • Boiler suit
  • Safety boots
  • Goggles

Compulsory Work Uniform

Compulsory work uniform refers to attire that is mandatory to wear while on duty. Often your employer has a clearly defined work policy in place, making it mandatory for you to wear the particular attire while on duty.

The ATO classifies compulsory work uniform as attire that is:

  • Specific to your organisation 
  • Used to identify the products or services your organisation offers

However, if your employer requires you to wear a certain type of clothing, which can double up as conventional clothing, you cannot claim expenses. Unbranded black pants and white shirts worn by hotel staff would not qualify as an expense.

Examples of compulsory work uniforms

  • Police officers’ uniform
  • Military personnel uniform
  • Airline staff uniform
  • Nurses’ uniform
  • Embroidered supermarket staff uniform

Non-Compulsory Work Uniform

Non-compulsory work uniform refers to employee work gear that’s not mandatory to wear at work. Most non-compulsory work uniforms do not qualify for a deduction, with one exception.

To qualify for laundry expense deduction, the employer must register the design with the Textile, Clothing and Footwear (TCF) Corporatewear Register. Some key elements required for registration include identifiers, patterns and colours. 

Example of Non-Compulsory Work Uniform

  • A bus company registered employee uniform that’s not compulsory for the employees to wear to work

Note that you cannot claim a single item, like a jacket. The clothing must be a complete outfit such as a:

  • Dress
  • Skirt and blouse
  • Trouser and shirt
  • Suit 

How Much Can You Claim for Laundry?

As earlier mentioned, if your employer does your laundry, you cannot claim the expense. The same applies if they reimburse for the cost you incur. 

However, if you did the laundry either at home, at the laundromat, or dry cleaner, you can make the deductions against your taxable income as follows:

At Home Laundry

  • $1 per load (eligible clothing)
  • 50c per load (if the load contains eligible clothing plus personal items)

At Laundromat

  • $1 per load (eligible clothing)
  • 50c per load (if the load contains eligible clothing plus personal items)

Dry Cleaning and Repairs

  • The entire expense paid

Note that the deductions are allowable even if an employer pays you a laundry allowance.

How to Claim Laundry Expenses

To claim laundry expense on your tax return, the ATO requires you to provide evidence of the expense if it exceeds $150 per year.

If you’re doing the laundry at home, you should keep a diary of the number of loads you washed during the year. But if you took the laundry for dry cleaning, you should provide a record of the receipts and invoices. However, you can claim the expense without supplying evidence if the amount is less than $150. 

For the repairs or dry-cleaning service, the record should contain the following details;

  • Name of the service provider
  • Repair/laundry date
  • Details of the item repaired or laundered
  • Amount paid for the service

The ATO allows you to claim laundry expenses for eligible work-related clothing. They categorise the eligible items into occupation-specific clothing, protective clothing, compulsory work uniforms, and registered non-compulsory work uniform.

If you’re doing the laundry at home or the laundromat, you can claim $1 per load or $ 50c if you launder the clothing alongside other items. 

For repairs and dry cleaning, you can claim the entire expense. To qualify for the deduction, you must provide evidence of the costs if they exceed $150 per year.

Visory can help you maintain your business records and have them organised and ready when it comes time to lodge your taxes. Contact us today and learn how we can help get your books in order.

What Are The Generally Accepted Accounting Principles?

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Many finance and tax rules change by country, but in the world of accounting, some principles remain the same. For example, publicly traded companies in the United States use Generally Accepted Accounting Principles or GAAP. However, many Australian, public companies that operate in the US, and elsewhere may find them useful to know. You may also be wondering how GAAP relates to Australian accounting principles. 

If you are managing your books, it is important to know what best practices you should follow. Let’s dive into Australian accounting principles and GAAP. 

What Are Generally Accepted Accounting Principles?

Generally accepted accounting principles (GAAP) are a set of standards and accounting rules U.S companies use to create their financial statements. These standards ensure companies follow similar accounting conventions, giving investors a basic consistency when comparing financial records. 

GAAP sets guidelines for a range of topics from financial statements to assets, liabilities, foreign currency, equities, revenue, expenses, and more. That said, there are ten GAAP principles:

  • Regularity
  • Consistency
  • Sincerity
  • Permanence of methods
  • Non-compensation
  • Continuity
  • Prudence
  • Periodicity
  • Utmost good faith
  • Materiality

What Are Australian Accounting Principles? 

U.S. companies adhere to GAAP, but firms in other countries follow International Financial Reporting Standards (IFRS). Public companies in the US must meet GAAP accounting standards. While global companies in other countries like the UK must follow IFRS as well as their base country’s standards when creating financial statements.

For Australian companies, the Australian Accounting Standards Board (AASB) establishes generally accepted accounting principles for use by local and state governments. Australian public companies must comply with AASB accounting principles. 

The 10 Principles of Accounting

To better understand GAAP and Australian accounting principles, let’s dive deeper into the ten principles of accounting. 

1. Accrual Principle

The accrual principle requires that you record transactions in the period they happen, regardless of when the cash flow for the transaction is received. For example, you record sales and expenses when they take place rather than when cash changes hands. 

Suppose you are an architect and send an invoice for a project you’ve done. In that case, you should record it in your accounts receivable immediately when you send the invoice, not wait until you receive payment. The accrual principle is behind the accrual accounting method. 

Accrual accounting suits business owners who don’t receive payment straight away. It also shows your true financial position by tracking what others owe you and what you owe others. However, it can be more complicated than cash accounting.

2. Conservatism Principle

The conservatism principle refers to recognizing liabilities and expenses as soon you discover them. Contrastingly, you only record revenue when you are sure you will get it. The idea is to factor in the worst possible outcome in your company’s financial future. 

If your business predicts a loss, the conservatism principle suggests that you record the loss and amplify its potential impact. Conversely, if you are uncertain about receiving revenue in your small business, ignore the revenue until you get it. 

If you estimate uncertain revenue and loss in your company, you understate revenue and overstate losses. As a result, you become cautious when making decisions since you expect a lower net income. 

However, understating and overstating financial periods can complicate tracking finances in your business. Plus, this principle is open to interpretation; businesses can easily be tempted to manipulate it to their advantage. 

3. Economic Entity Principle

This principle states that business owners should separate the company’s transactions from their personal financial dealings and those of investors. 

The financial records of each entity should also be distinct. For example, if you own businesses A and B (or a parent company with several subsidiaries), each entity should have separate financial statements. 

The economic entity principle prevents personal and inter-organisational compounding of assets and liabilities, which would confuse business auditors. 

4. Cost Principle

The cost accounting principle is the concept whereby a company records assets, liabilities, and equity investment at the original buying cost. In short, the principle states that you record costs at the actual price you paid for an item. On top of that, the company should not adjust cost-related financial information with depreciation or inflation or market value improvement.

Here’s an example illustrating how the cost principle works. 

Business Z bought a property for $275,000 in 2018. In 2020, the property’s market value increased to 350,000. In this case, business Z cannot adjust the property’s cost to reflect the current market value. 

However, there are some exceptions to the cost principle. For example, a business should record highly liquid assets (stocks and bonds) at their current market value rather than the original cost. 

This principle eliminates the trouble of adjusting your books now and then with the current market prices. However, it can result in an investor undervaluing your business if your assets have increased in value since the initial purchase. 

5. Monetary Unit Principle

The monetary unit principle states that you only record transactions that are expressible in terms of a currency. That means you can’t record non-quantifiable items like employee talent and customer service quality. 

While the monetary unit principle simplifies quantifying business transactions, it has one big drawback. It doesn’t consider inflation and a currency’s purchasing power. 

For example, the dollar’s purchasing power could increase or decrease in the future, depending on inflation. The monetary unit principle assumes that the currency you use to record transactions remains stable over time. 

6. Time Period Principle

The time period principle states that a company should report its finances over a specific period, usually annually, quarterly, or monthly. The goal of the time period principle is consistency. 

Consistent reporting for similar periods simplifies comparing your current financial status with those of the previous years. Hence, investors and lenders can make financial decisions faster.

7. Full Disclosure Principle

As the name suggests, the full disclosure principle requires businesses to include all essential financial data in their financial records. Your accountant should include all necessary financial information that may influence a person’s or institution’s judgment when deciding to lend or invest in the business. 

The full disclosure principle provides external entities with crucial details when evaluating a company’s potential success. 

8. Going Concern Principle

The going concern principle applies to businesses that expect to operate for the foreseeable future. It assumes that the businesses can generate revenue, meet their obligation, and don’t plan to liquidate soon. 

If you prepare financial statements using the going concern accounting principle, you can defer some prepaid expenses (depreciation) to a later date. 

9. Matching Principle

The matching principle requires a company to record expenses and related revenues together in the same reporting period. If an expense doesn’t directly link to revenue (depreciation), the company should record the expense’s effects throughout the years. Here are examples for better clarity. 

Example 1: A company acquires a machine for $100,000 with a useful life value of 5 years. In this case, the company should charge the machine’s cost to depreciation expense per year for five years. This ensures the business recognizes the depreciation expense over the machine’s life. 

Example 2: A salesperson earned a 5% commission on sales a company shipped and recorded in February. The commission is to be paid in March. The company should record the commission expense in February. That way, the company records the expense in the same month as the associated sales. 

The matching principle applies to businesses that use accrual accounting. 

10. Revenue Recognition Principle

This accounting principle states that you should record revenue as you earn it—not only after collecting cash. In other words, you record revenue when products or services are delivered, not when you receive payment. For example, business X sells products worth $100 on credit. 

This principle suggests that the business should immediately record the revenue upon selling the products, even if it doesn’t expect payment for several days or weeks. 

Suppose business X received payment in advance before delivering the goods. In that case, the business should recognize the revenue in their statements after it has been delivered. 

Navigating various global and Australian accounting principles can be complicated. However, it is essential for every business to prepare financial reports and bookkeeping to meet these standards. If you’d like a bookkeeping expert to help you prepare your business, get started with Visory today. We’ll make sure your books are clean and compliant, so you can focus on running your business.