How Does Bookkeeping Help a Business?

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Finding the right bookkeeper, who can smoothly apply themselves in the role they’ve been hired to do, gives your business an edge. You need to be able to trust your bookkeeper to competently handle the important financial and accounting tasks such as reconciliation, invoicing, payroll, and preparing financial statements.

When you’re a small business owner, you may prefer to be your own bookkeeper, likely because you’re still dealing with a few transactions and want to avoid the hiring cost. However, in the future, as you expand and acquire more customers, you may struggle to catch up with your books as you will not just be handling income and expenses. You will have to track factors such as assets, employees, and taxes that require an extra hand to document consistently.

Further, bookkeepers are increasingly becoming invaluable to businesses as they advance into consultancy, training, implementation, and maintenance of business systems. Growing your brand means you are wearing many hats, which limits your ability to achieve your vision. A bookkeeper will help make the transition less stressful, as they will fill in the role of sustaining your business’s lifeline.

How a Bookkeeper Can Help Your Business

A bookkeeper essentially keeps your books in order. They undertake the mundane but vital tasks that help your business stay afloat. A growing business needs good decision-making, strategizing, and planning. Maybe you need to add another line item, develop a marketing campaign, or hire new employees; bookkeepers are tasked to prepare reports such as the cash flow, profit and loss, and balance sheet, which reveals if you have the money to do all that.

A well-rounded bookkeeper will also offer you solid professional advice and be a good problem solver to rely on when going through a rough patch in the business. In the coming decade, bookkeepers, along with other financial professionals, will largely help boost the revenue and growth of many businesses by leveraging digital tools and their professional skills.

Regardless of the size of your business, a bookkeeper is important to help ease the daily pressures of being an entrepreneur.

You’ll Have More Time to Focus On Your Business Functions

Businesses spend on average 12 hours in daily meetings, making cold calls, negotiating terms with vendors, and training their staff. If this is what your day looks like, you still have to prepare a payroll, generate invoices, and file taxes, which could take endless hours of gathering and reviewing your reports. This allows room to make costly errors with your finances and taxation.

A bookkeeper could halve or completely save the time you spend collecting, analysing, and reporting on financial documentation. This frees up your time to fully take up your leadership role and come up with ways of getting your business to the next level in your industry. Most successful organisations have not reached where they are without at most delegating work to their teams.

Save Money With an Outsourced Bookkeeping Service

Cost reduction is a leading factor when organisations outsource services, according to the Deloitte Global Outsourcing survey. This trend will likely carry on into the future as more workers and organisations embrace working online and remotely, opening spaces for third-party services.

Thinking that you’re saving money by doing your own books could potentially open your business to grievous financial consequences. One of the mistakes you can make is failing to be consistent in following up on your invoices, leading to cash flow problems. Another mistake is inaccurate tracking of your payments, which will prevent you from claiming the correct GST and tax deductions to reduce your tax bill. Outsourcing to a bookkeeper may cost you upfront in fees, but in exchange, you potentially insure your business against losing money and facing a huge tax burden.

Find Business Opportunities and Optimisations With Improved Reporting

Working with a bookkeeper who is knowledgeable about accounting systems makes sure you get reports like clockwork. Your financial reports show a big picture of whether your business is failing or succeeding. A bookkeeper handles thousands of financial transactions, which need to be captured and be analysed in detail and summarised into reports that influence your decision-making. For example, when doing a market analysis to determine if you can set up a new store in a different location, a cash flow projection will inform you if it makes business sense. Your bookkeeper is best suited in preparing a cash flow projection as they are deeply involved in the operations of your business.

Reports also enable you to identify areas needing improvement to boost your business’s revenues and market position. Also, taking advantage of automation in your reporting helps your bookkeeper to give you value for your money.

Get the Most Out of Your Existing Bookkeeping Software

Many bookkeepers are going a step beyond their normal roles, like training staff on how to use accounting software. They are also helping in choosing the right software that is customised to a business’s needs.

Most cloud-based accounting software like Xero helps bookkeepers to smoothly perform expense tracking, financial reporting, billing, invoicing, and budgeting, so your business stays on a growth trajectory. However, bookkeeping software is only useful if it’s fed with relevant and accurate information, which a bookkeeper can handle without a challenge.

Outsourced Bookkeeping Is More Affordable Than Hiring a Full-Time Employee

Many growing businesses prefer to outsource to third-party providers rather than have an employee on payroll to save costs. A full-time employee can cost you thousands of dollars in training and benefits. In comparing costs, the annual salary of an in-house bookkeeper is an average of $67,500, while outsourced bookkeeping services will cost you from $500 to $5,000 per month, which is $60,000 per year if you’re a small to medium-sized business. The difference in service charges is $7,500, which is significant. 

In addition, outsourced bookkeepers have the tools and capacity that your business may lack, which translates to better tracking of spending and generating more revenue. They can also act as your trusted advisor as there’s no conflict of interest, unlike with an employee, which could expose your business to fraud.

Working With a Bookkeeper Is the Right Move for Your Business

Your team is one of the best investments for your business. Having a bookkeeper as part of this team means your accounting and financial needs will be met with the utmost professionalism and integrity. Ultimately, you have to get the right person for the work to avoid paying for messy accounting work in the future. Aside from having the right training and experience, finding a bookkeeper who is dedicated and strategic with your vision is impactful to your success.

If you’re looking for a reliable and trusted bookkeeping solutions provider, Visory is here for you. Our bookkeeping experts will help fix any issues with your books of accounts that are stopping your business from scaling up. Go ahead and get in touch with us today to learn about Visory’s bookkeeping services.

What Should You Look for in a Bookkeeper?

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As a business owner, you have a lot of tasks on your plate. When you’re first starting out with your business, you’re likely going to do everything by yourself or with a few trusted colleagues so that you can save money and get your business going. But once it’s up and running, you’ll want to start hiring out certain tasks so that you can focus on what you love: pouring into your customers and your business. 

One of the first things you’ll want to hire is a bookkeeper to help you manage your finances. You’re likely not a bookkeeper yourself, so you may not know exactly what to look for when it comes to picking the right bookkeeper. Let’s take a look at the most important things to look for in a bookkeeper so that you can find the right one for your team.

What Should You Look for in a Bookkeeper?

When looking for a bookkeeper, the main thing to find is someone who is professional and trustworthy. A bookkeeper handles your finances and spends time working in your bank accounts–if they don’t know what they’re doing or if they’re planning to steal from you, you’ll be in a heap of trouble. Here are some essentials to look for in a bookkeeper before you hire:

  1. Experience in your industry
  2. Knowledge of your bookkeeping software
  3. Knowledge of Accounting Policies and Procedures
  4. Regular reporting and financial updates
  5. Tax preparation knowledge
  6. Client and customer relationship skills

Experience in Your Industry

There are a lot of bookkeepers out there, and they all likely have general bookkeeping experience. However, for your business to thrive, you need a bookkeeper who knows your industry like the back of their hand. That way, they can assist you through the most complicated and niche of transactions and financial questions.

Find a bookkeeper who has worked in your industry before and understands any specifications to your industry that must be maintained for your success.

Knowledge of Your Bookkeeping Software

When hiring a bookkeeper, you don’t want to have to start the process of collecting your financials all over again. If you already have bookkeeping software dedicated to handling your accounts and managing your transactions, ensure that your bookkeeper knows how to use the software before you hire them.

Check if they have knowledge of Xero, Myob, Quickbooks, or whatever other resources you currently use to manage your books. It’s crucial that they can seamlessly integrate with your software and start managing your financials from there. 

Knowledge of Accounting Policies and Procedures

When running a business, it’s essential that you have a set of policies and procedures around your accounting and financial practices. Your bookkeeper should know how to manage policies and procedures, both those that you have set and those set by governing agencies such as the Australian Accounting Standards Board (AASB).

Government laws dictate financial reporting requirements, standards for non-profit and for-profit businesses, important disclosures, etc. Your financial policies should detail policies for who has access to your financials, how you hire employees, how you manage payroll, how you handle insurance, and similar topics.

Ensure that a bookkeeper has a good understanding of Australian national policies as well as your personal policies so that they can effectively run your books without breaking the laws and causing problems.

Regular Reporting and Financial Updates

If you’re going to hire a bookkeeper, a lot of your financial management will likely be taking place outside your business and knowledge. However, it’s still important that you know what’s going on in your finances so that you can make wise business decisions. When hiring a bookkeeper, you want someone who can provide you with regular reporting and updates about your finances.

With regular reports, you can keep track of what’s going on with your money. An exceptional bookkeeper may even give you advice on the financial decisions you can and should make based on their reports. Plus, it’s crucial to have regular reports ready so that when the government requires one, you don’t have to spend frantic weeks trying to put something together. 

Tax Preparation Knowledge

Managing taxes for a business can be excruciating for someone who doesn’t know a lot about taxes. Before you hire a bookkeeper, make sure they understand all the ins and outs of tax preparation, including:

  • Lodging or filing sales tax
  • Managing deductions
  • Preparing employee tax forms
  • Meeting due dates
  • Lodging income tax returns

Client and Customer Relationship Skills

While financials may be the most important aspect of a bookkeeper’s job, you don’t want to hire someone who can’t handle relationships with clients and customers. You want a bookkeeper who is willing and able to reach out to you with any questions or concerns. You want someone who can ask questions if there are financial discrepancies and who provides you with a detailed explanation of any financial issues they run into.

Plus, you want someone able to talk to you anytime, anywhere, with answers to your financial and tax-related questions. You don’t want to have to wait days for an answer to an important question! Find a bookkeeper who values communication and will keep in touch with you and your team in an empathetic, friendly, and honest manner.

Questions to Ask Before You Hire a Bookkeeper

As you’re searching for the perfect bookkeeper, there are a few questions you can ask each prospect to determine that you’ve found the right person. The questions you should focus on include:

  • What is the scope of the bookkeeping work and your needs? You should be able to thoroughly explain your needs and find a bookkeeper who understands your needs. They should know how to manage the scope of work that your business requires, no matter how big or small that scope may be. 
  • Are you registered with the Tax Practitioner Board? Ensure that the bookkeeper has met the education and registration requirements set by the Tax Practitioners Board of Australia. They must be registered as a BAS agent with the board before they can provide you with financial assistance.
  • How do you communicate with clients? Again, you don’t want a bookkeeper who’s going to ignore issues, hide financial difficulties, or leave you out of the loop. Ask beforehand how and when they will communicate with you and ensure that they meet your needs. 

Conclusion

Hiring a bookkeeper is crucial to running an effective business. You want to spend your time on what matters most, so you need help from a financial professional to take some of the pressure of running finances off your shoulders. Find a bookkeeper who is professional, communicates well, and can be trusted to take care of your money.

If you’re looking for a bookkeeper for your business, come and see what Visory has to offer. We ensure that our agents can work with your software and have expertise in your industry before we hire them out to you. And with our handy chat services, you can talk to your bookkeeper or our whole financial team at any time. 

Get in touch with us today to find out more about our services and how we can meet your bookkeeping needs to help your business thrive.

How to Run a Financial Health Check for Your Business

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Your accountant will scold you for not keeping a balance sheet or income statement. Yes, maintaining accurate reports is important for any business. But what do you do with your financial documents once they’re in your hands? Analysing your financial data is just as important as collecting it.

You should run a business financial health check periodically. An annual report is prudent for the success of your business, but you may run a check more often if you are growing quickly.

Not sure where to begin? Let’s talk about the steps to taking your financial reporting and turning it into meaningful insights about the direction of your business.

Steps to determine your business’s financial health

A financial health check helps you determine if your business is meeting its financial performance expectations. Fair warning: To do the job thoroughly, you need to analyse multiple documents and compare many financial ratios. In other words, you can’t simply look at your bank statement to determine if you’re doing well.

To run a complete financial health check for a business, you should look at your balance sheet and income statement, analyse your current cash flow, and look at common financial ratios related to your debt and equity.

Analyse your balance sheet

A balance sheet is an important bookkeeping document. This report reveals the financial liquidity of your business at any given moment in time (how quickly could you pay off your current debts?). It also reveals the state of your working capital, or whether or not you have the cash to complete day-to-day operations.

Your business’s balance sheet lists assets on one side and debts and stakeholder equity on the other side. In short: Assets = Liabilities + Equity. The two sides of a balance sheet should even out. If you are doing well, your assets will be in the positive and continue to grow over time.

A balance sheet with errors, or a series of balance sheets that trend toward more liabilities than assets, may be red flags about your financial health.

Analyse your income statement

An income statement is a bit more specific than your balance sheet. It narrows its focus to your earnings and expenditures during a certain period of time, often a financial quarter.

This report reveals whether you have experienced profit or loss during the time period covered in the document. In fact, the report is often called a profit and loss statement. Your gross profit is determined by taking your revenue and subtracting the cost of goods sold.

If your income statements have an upward trend, you are likely in good shape. However, an income statement may also reveal that your expenses continue to outpace your revenue — not a good sign.

Analyse your cash flow statement

A cash flow statement measures the money or money equivalents that are coming in and out of your business. It doesn’t look at revenue like your income statement does, but rather answers the question: Where is our money going?

You can use a cash flow statement to identify seasonal trends. For instance, you may notice that costs are higher during certain periods of time. The sale of your goods and services may also wax and wane over the course of a year. Comparing cash flow statements can help you identify when to buy materials and when to market certain products. 

There are several main components that should go into your cash flow analysis:

  1. Opening balance. How much cash and cash equivalent do you have on hand at the start of the analysed period?
  2. Cash incoming. How much money came in from sales, grants, tax rebates, and other sources? You should calculate your total cash incoming. 
  3. Cash outgoing. What did you spend on purchases, rents, marketing, payroll, and other expenditures? Calculate your total outgoing cash. 
  4. Closing balance. When you subtract the total cash outgoing from cash incoming, are you left with a positive or negative number? 

Look at financial ratios

There are several key ratios often used during a business financial health check. 

  • Profit Margins: Your business has a gross profit margin and a net profit margin. Your gross profit margin measures your profits per sale before expenses. Your net profit margin reveals that percentage of each sale that counts as profit after expenses. 
  • Coverage Ratio: Broadly, a coverage ratio measures whether your business can pay its debts. But coverage ratios are often broken down into more specific expenses. For instance, the earned interest ratio tells you whether you can make interest payments. The formula is: earnings before income and taxes/interest expenses. You should aim for an interest coverage ratio of at least 2:1.
  • Current Ratio: This figure tells you whether you can pay your debts that are due in the short term. Divide your total current liabilities by your total current liabilities. A healthy ratio is at least 2:1. 
  • Debt-to-equity ratio: Your debt-to-equity measures how many of your assets are being funded by liabilities, or borrowed money. The lower the percentage, the better. 
  • Return on equity (ROE): This formula measures how efficient you are at generating profits. ROE is determined by dividing net income by average shareholders’ equity. 
  • Return on assets (ROA): Similarly, ROA determines how well you use assets to create income. Net income is divided by total assets. 

Need help determining your business’s financial help?

As a burgeoning business, running your own financial health check can lead to honest mistakes. And, well, even an established organisation can use a lot of help. As income streams evolve and the expenses of your business change, it can be hard to make heads or tails of whether you’re on the right track. 

A trained professional can do everything from keep your payroll to offering CFO-level insights into your financial habits. An outsourced bookkeeper can keep your accounting expenses low while offering meaningful analysis and keep your documents in order. Sign up for Visory’s free financial health check to see if your business is headed in the right direction.

How Outsourced Bookkeeping Services Can Help Not-For-Profits

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Australia has a large and diverse not-for-profit (NFP) landscape. In all, there are about 600,000 nonprofit organisations throughout the country. NFP groups need to maintain accurate financial records just like for-profit companies, and they often have unique complications. Nonprofits, for instance, are often responsible for mandatory audits and report to more governing bodies than for-profit businesses. 

Having a bookkeeper on your side who is well-versed in NFP finances can be a real lifesaver. As an organisation that may not have a lot of money to spend, outsourcing your bookkeeping is probably the most cost efficient option. Outsourced bookkeeping for nonprofits allows you to tap into expertise without hiring a full-time accountant. 

Read on to learn more about how outsourced bookkeeping for nonprofits can keep your organisation’s reports on track. 

Save time to focus on your nonprofit’s mission

NFPs are bound by a variety of rules laid out by the Australian Charities and Not-for-profit Commission (ACNC). And that’s on top of the standard accounting needed to keep any organisation from going broke. Between daily accounting and payroll and annual reports — you could spend hours per month on your books. 

Outsourcing your bookkeeping needs means your back office staff suddenly have more time for what matters: your organisation’s mission. If your executives are getting stressed out about filing their own reports, it’s time to call in some assistance. You can still receive and review your necessary reports without being responsible for creating them. This means staff are still knowledgeable about your financial position, they just don’t have to labour over the number crunching. 

Minimize your nonprofit’s financial risk

Even a well-intentioned staff member can mismanage your money. And, some not-for-profits rely heavily on volunteers and temporary workers, which can make trusting people with your books more complicated. You may have a rotating carousel of workers at your NFP who are responsible for your reporting. What happens when they depart from their role and the next person doesn’t know where to pick things up?

Outsourcing your bookkeeping gives you a reliable contact who will never abandon your books. And experts are less likely to make a mistake than a part-time staff member who is already overwhelmed. 

Risks with mismanaged funds are significant for not-for-profits. A missed audit report or improperly lodged taxes can lead to serious penalties and fines. Outsourced bookkeepers are also impartial. They can do an objective risk assessment and tell you honestly where you need better financial safeguards or reporting in place. 

It’s important to keep in mind that financial errors snowball. If you lodge an incorrect 2020 tax return, some of the data on your return for 2021 may also be wrong. A bookkeeper can look over historical documents to make sure you’re not working with erroneous reports. This mitigates your long-term risks as well as correcting your current reports. 

Stay compliant with all relevant filings

Your nonprofit may be responsible for a variety of reporting. An outsourced bookkeeper can help you stay up-to-date on all necessary filings. Reports you may be responsible for include:

  • ACNC statements. If your not-for-profit charity is registered with the ANCN and has an annual revenue of more than $250,000, you must supply them with annual financial statements. The reporting must be sent within six months of the end of your financial year. NFPs who generate less than $250,000 per year still need to send an Annual Information Statement. 
  • Constitutional requirements. Most not-for-profits have a constitution which guides the organisation’s rules and regulations. This often includes how often you need to create financial reports and to whom they need to be supplied. 
  • Local regulator reports. Depending on the state where your nonprofit is located, you may also have to submit financial records to a local regulator. In New South Wales, for instance, you must lodge a Summary of Financial Affairs with NSW Fair Trading. The statement must be submitted within one month of your annual general meeting, or within seven months of the end of your fiscal year.
  • Audits. Many not-for-profits are also required to lodge a full audit of their finances to a local entity. In Queensland, your financial statements must be audited by a registered company auditor. 
  • Reviews. Some small nonprofits may not be required to submit to a full audit, but rather a review. Think of this process as Audit Lite. A certified member of the Chartered Accountants Australia and New Zealand, CPA Australia, or the Institute of Public Accountants will go over your financial statements to test for accuracy and completeness.

The intricacies of a nonprofit’s financial reporting are evolving and complicated. It’s a lot for your staff to handle when they are also tackling other responsibilities. An outsourced bookkeeper who knows a lot about your not-for-profit industry will stay current with your organisation’s legal requirements. 

Take advantage of experience and top accounting software

A not-for-profit organisation may not have access to the latest accounting software. It’s understandable for you to spend your precious resources elsewhere. But what happens when the tax codes change or your state alters the required reporting? You may be lost. 

A dedicated, outsourced bookkeeper has not only the expertise to understand the needs of a not-for-profit, but also has the newest version of important accounting software. The top accounting tools can make it easier to create and send everything from a balance sheet to accounts payable reports. With an outsourced professional at the helm, your NFP can tap into the newest ways to expedite financial reports and catch mistakes. 

Is outsourced bookkeeping right for your organisation?

Is your not-for-profit growing? It may be time to turn over your books to a professional. An outsourced bookkeeper can do everything from record your donations to lodge your annual reviews and audits. You will be kept informed every step of the way without having to put in your own elbow grease. 

To find out how bookkeeping professionals can make your organisation run more smoothly, learn about how Visory’s bookkeeping service can help your nonprofit.

Are Bookkeeping Fees Tax Deductible?

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It costs a lot of money to run a business. Thankfully, many of your organisation’s essential expenses can be deducted from your tax returns. Deductions lower your tax liability and can help keep your books in the black. 

What can be deducted on your tax returns? This is the million dollar question. 

Businesses can deduct a variety of regular business costs. This includes many of the vendors you use to keep your operation running. Electricity, land taxes, and even your bookkeeping costs can be claimed when you lodge your year-end taxes. 

Can you deduct bookkeeping fees from your taxes?

Are bookkeeping fees tax deductible? The short answer is yes. The Australian Taxation Office (ATO) allows you to deduct certain bookkeeping fees from business taxes. If you hire an outside vendor to handle your tax preparation and reporting, the expenses are eligible for deduction as long as they meet the three golden rules of the ATO. 

All business deductions must meet the following criteria:

  1. The expense must have been related to your business. If you use a bookkeeper for personal expenses, the fees can’t be deducted on your taxes. 
  2. Expenses that are both business and personal must be appropriately divided. In other words: If you use the same bookkeeper for both business and personal use, you can only deduct the portion of the fees that relate to your business accounting. 
  3. You must provide supporting documents. Be prepared to show the ATO exactly what you paid in bookkeeping fees related to lodging your taxes.

Which bookkeeping fees are eligible for deductions?

The Australian government specifically states: “You can claim a deduction for expenses you incur in managing your own tax affairs, such as the cost to lodge through a registered agent.” The fees and expenses that you might incur include anything you spend on tax reference materials, tax return preparation courses, tax agent costs for lodging your return, costs related to tax advice from a registered agent, tax return software, and any fees associated with negotiating your tax affairs with the government. 

You can also deduct any travel expenses associated with getting your taxes done. Your tax interest charges are also deductible, as are credit and debit card fees you incur when you pay taxes using a card. 

Australia also allows you to deduct some salary and wages from your business taxes. In many cases, the wages paid to a contractor (like a regular bookkeeper) who completes a service are tax deductible. Payroll tax considerations and deduction laws may depend on the state where your business is located. 

How much do bookkeeping services cost?

Bookkeeping fees depend on a variety of factors. These can include:

  • The experience of your bookkeeper. A bookkeeper who is well versed in your particular industry will likely charge more than someone who is just starting out. 
  • The needs of your organisation. If you want complex reporting and insights, you can expect to pay more for a bookkeeper than if you use outside help for payroll and basic record keeping.  
  • The nature of your relationship with the bookkeeper. If you hire someone full-time, you are responsible for annual and sick leave and superannuation. These costs add up. Contractors may charge more per hour, but you are not responsible for benefits. 
  • Where you live. Some states have higher average per-hour rates for bookkeepers than others. If you’re sourcing someone from a major city, you may pay them more. 

All of this being said, there are some average figures to keep in mind. According to the Institute of Certified Bookkeepers, a contract bookkeeper in Australia usually charges at least $55 per hour to make the equivalent of a salary plus benefits. 

Not all bookkeepers charge per hour. You may also choose to pay per project or service. With Visory, for instance, you are charged based on the services and outcomes you require. This allows you to enjoy consistent charges and a personalised bill. You can learn more about Visory’s pricing if you prefer project pricing versus hourly costs. 

What exactly is a tax deduction?

A tax deduction reduces your business’ taxable income. In turn, this mitigates your tax liability to the government. More specifically, deductions are business expenses you incurred during the tax year that can be applied against your tax burden. By deducting things like travel to see your tax accountant or bookkeeper’s fees from your total income, you can reduce your tax bill at the end of the year. 

You can deduct many business operating expenses related to payroll, retirement funds, and accounting software expenses.  Be sure to comply with requirements related to deductions before you try to apply them. For instance, to deduct regular employee wages, you typically have to comply with PAYGW (pay as you go withholding) and reporting. If you don’t meet the requirements, you will end up paying more than you expected, including potential penalties. 

How bookkeeping can help you stay on top of deductions

Asking “Are bookkeeping fees tax deductible?” is just the tip of the iceberg. You should also ask “How can my bookkeeper maximise all my deductions?”  Your bookkeeper can not only identify the deductions that mitigate their own fees, but also seek out creative ways to earn credits and deductions for other expenses. 

A good bookkeeper can:

  • Stay on top of changing tax laws. New deductions could save you thousands but only if your bookkeeper knows which new deductions and credits are available for businesses this year. 
  • File on time. You can lose a lot of money in penalties and fees for filing late or improperly. An experienced bookkeeper is working on taxes well in advance so they are never lodged late. 
  • Have all necessary records on hand. You need proof such as receipts and invoices to get approved for many deductions. A bookkeeper will collect these throughout the year and have them organised come tax time. 

Are you ready to get some help with taxes? Visory can do that and so much more. Connect with us about bookkeeping tax deductions, payroll help, and other financial services to see how you can minimise your tax liability next year.

How Bookkeeping Services Can Help Your Medical Practice

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Doctors and other privatised medical professionals have a lot on their plate already. So why add doing taxes to the list? If you’re running a medical office, you need a bookkeeper on hand. Whether you have someone on staff full-time or you use a contractor to fill in as needed, bookkeeping services for doctors are crucial to managing revenue and staying compliant with government regulations.

If you’re currently asking your front desk staff to handle the books, keep reading. Let’s talk about how a dedicated bookkeeping service for a medical practice can be a game changer.

What is the purpose of bookkeeping in a medical practice?

The benefits of bookkeeping in the medical office can’t be overstated. In order to continue offering the best possible care for patients, your practice must be able to afford top equipment and a full staff. And that’s not easy to do if you’re financially underwater.

Any financial adviser would recommend that you keep your books in order. Having a reliable bookkeeper helps your medical practice:

Improve Your Revenue Cycle Management

Tracking your revenue per hour is crucial for any practice. When you know who and what is bringing in the revenue, you can maximise your practice’s profits. For example: you may realise that you make the most money during midday hours. This piece of knowledge will allow you to schedule staff accordingly to have ample appointments available during your most profitable hours.

A bookkeeper can also figure out which practitioners are bringing in the most revenue in your practice. Access to granular information like revenue per hour by practitioner allows you to identify the source of money troubles. How can you improve the revenue for doctors with lower-than-average billables? Compare what they’re doing to the highest billing doctors to see if there are obvious differences. 

Better revenue management requires better revenue analysis. A bookkeeper can break down your revenue in creative ways and allow you to make more informed decisions for your practice. 

Outsource Your Payroll Process

On top of tracking your accounts receivable from patients, handling overhead bills like utilities, and ordering supplies, you also need to keep your people paid. A bookkeeper can also take over your payroll process. For every 25 employees your practice has, you will spend about 100 hours per year manually managing payroll. That’s a lot of time not spent interacting with patients. 

Could your front desk staff have more time for patient follow up if they weren’t also processing payroll? Consider outsourcing your entire payroll operation to a trusted bookkeeper to free up your staff to better serve your patients. 

Streamline Your Accounts Receivable and Accounts Payable

Essential bookkeeping for medical practices also includes tackling everyday cash flow. You need a bookkeeping expert to track every bill you pay (accounts payable) and every incoming payment (accounts receivable). This type of tracking lets you create accurate balance sheets and have every receipt necessary on hand to lodge your taxes properly. 

A bookkeeper will know how to code, record, and analyse your accounts receivable and accounts payable. They can even create regular reporting with notes. You’ll learn if you’re overpaying for medical supplies, which patients still haven’t paid, and other important information. 

Identify New Opportunities Using Financial Reports

A good bookkeeper can balance your books. A great bookkeeper will also offer meaningful suggestions. Medical practices should be looking for ways to grow and evolve. Industry-specific bookkeepers will be able to suggest opportunities for growth, such as adding new services or renting out patient rooms to holistic health practitioners. You want to scale up at a responsible pace, not a break-neck speed that will lead to failure. 

How bookkeeping services can improve your medical billing process

Unpaid medical bills can quickly spell trouble for your medical practice. A bookkeeper can streamline your billing processes to create a better accounts receivable record. Your bookkeeping service may institute improved policies like:

  • Automatic follow-up for unpaid bills. Are you contacting patients on a routine basis if they have a balance with your practice? A good medical billing process will send out automatic reminders to patients who need to pay their bill. 
  • Better payment processes. Increasing the number of payment methods can increase the chances that you will be paid promptly. Your bookkeeper will be able to set up new credit card and online payment systems that are easy for patients and great for cash flow. 
  • Coordinate with medical billers. If you’re one of the many Australian medical practices who work with an approved medical biller, a bookkeeper can work with your biller as needed. Using an outside medical biller can free up a part-time bookkeeper to focus on your other internal financial needs. 

Bookkeepers can improve your medical business’ financial health

Keeping track of bookkeeping in the medical office is not a job for someone without financial expertise. Even a medical practice with a small staff should consider outside help to manage billables and brainstorm new revenue streams. Bookkeepers can improve overall financial health in several ways.

  1. Getting paid on time improves your cash flow. A bookkeeper who makes sure you get paid is going to immediately improve your financial picture. 
  2. Looking for unnecessary spending can eliminate waste. An experienced bookkeeper may be able to spot redundancies in your spending or identify high-cost expenditures with a more affordable alternative. For instance, you may be able to bundle telecommunication services to bring down your overhead costs. 
  3. Breaking down revenue can reveal successes. Smart bookkeeping isn’t just about eliminating bad spending. It’s also important to spot areas where you are succeeding. If you have a particular service or set of operating hours that bring in the most success, you’ll want to make sure you’re prepared to grow those parts of your practice. 
  4. Changing bookkeeping methods helps you grow. Small operations may begin with a cash method. This means you’ll count cash as it enters your bank account. Larger practices may want to switch to accrual accounting, which is when you count revenue once the service is complete. Switching to an accrual method allows you to better forecast the short and medium-term financial future of your practice. 
  5. If you need help with medical billing and healthcare bookkeeping, consider calling in industry experts. Visory can connect you with a team of healthcare bookkeepers who know how to manage patient billing, payroll, and more with confidentiality in mind.

How Does Accounts Receivable Work?

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Accounts receivable refers to the money due to you from customers or clients. On your balance sheet, your accounts receivable (AR) go in the credit column. You will only have an accounts receivable process if you extend credit to your customers. For instance, professional services businesses  often have accounts receivables because they don’t collect final payment until after their services have been completed. 

Businesses that use accounts receivable include architecture and engineering firms, building contractors, technical and trade schools, trucking businesses, and consulting firms. Many small businesses also extend credit to clients when they’re getting started. 

Staying on top of AR is an important part of any bookkeeping practice. Learn more about accounts receivable and how it can keep your cash flow going.

What is Accounts Receivable?

The funds in your accounts receivable line item refers to outstanding debt that is owed to you. Many businesses offer customers a net-30 or net-60 billing cycle. This means that once you submit your invoice to a customer, they have either 30 or 60 days to pay it. In the intervening time, the funds are considered accounts receivable. 

Is accounts receivable an asset or liability?

Since accounts receivable represents future incoming cash, it is considered an asset. That being said, if you are unable to collect the money due to you, accounts receivable could also turn into a bad debt. 

The accounts receivable project

How does accounts receivable work? Let’s talk about what you need to do to establish a process that works for your organisation. The key is to balance your need for cash flow with an appropriate level of flexibility for clients. 

Establish Credit Practices

Before you can start offering credit to your clientele, you need to establish a set of rules. This ensures that you’ll be paid on time and can collect penalties if someone pays late. 

Your business should decide:

  • How much credit are you willing to extend to clients? Maybe you expect 50% payment up front and extend 50% credit for 30 days after the project is complete. Perhaps you set a dollar amount maximum. Identify the amount of credit you’re comfortable extending and put it in writing. 
  • Is every client credit worthy? Determine if you have parameters for who is able to take advantage of net billing. 
  • How long will people have to pay? Most organisations extend credit for no more than 60 days. This allows you to keep cash flow coming in while offering clients the appeal of flexibility. 
  • What will late payment penalties be? You need to outline terms and conditions for your billing cycle. This includes fees for paying late. You may also want to consider a discount for paying early to encourage prompt payoff. 

Invoice Your Customers

Once you have established credit practices and extended an offer to clients, you should have an invoicing process in place. Send your customers or clients an invoice as soon as your work is complete. This starts the clock ticking on their payment time period. Invoicing late will delay your incoming payment. 

Track your Accounts Receivable

You need to stay on top of your accounts receivable funds. Many businesses  choose to appoint an accounts receivable officer, especially as they grow. Smaller businesses may be able to get by with a simple spreadsheet. More advanced tracking software is available for large businesses with more complicated accounting needs. 

For every credit extended, your accounts receivable team should be tracking:

  • The amount due
  • The date the client was invoiced
  • The invoice due date
  • The dates the client was contacted for overdue payments
  • Any applicable late fees
  • Escalation efforts made to collect payment

Accounts Receivable Accounting

Accounts receivable are typically tracked as a part of your balance sheet — a document that lists your businesses’s assets, liabilities, and equity at any point in time. Once a client pays their invoice, the money may move from the accounts receivables line item to your bank account balance. It remains a credit, since it always represents money coming in, never money going out. 

The difference between accounts receivable and accounts payable

While accounts receivable reporting represents money that is due to you in the immediate future, accounts payable is just the opposite. Accounts payable are debts that you owe to someone else in the short term. For example: When you have a maintenance worker come and fix a leaky pipe, they probably leave an invoice. You would add the debt to your accounts payable tracking and make payment within the requested time period. 

Accounts receivable includes sales, services rendered, and other client projects. Meanwhile, accounts payable can be more complicated. It includes everything from utilities and rent payments to vendor invoices and manufacturer bills. Some businesses  also include payroll in their accounts payable bucket. 

How do you record accounts receivable?

How does accounts receivable work when it comes to credit and debit reporting? Balance sheets require itemisation. Depending on the size of your business, there probably won’t be room for each individual AR credit on your balance sheet. Instead, you’ll include the total current amount due from clients in the credits column. 

In another location, be it a spreadsheet or accounting software, you will want to itemise each debt. Granular tracking allows you to better follow-up on late debts. 

What happens if a client doesn’t pay?

Unfortunately, there are bound to be clients who don’t pay on time. Late fees are legal in Australia, but they do have to be considered reasonable. For instance, charging a $10 late fee is unlikely to raise any eyebrows. If you charge $500 for a payment that is one day late, the client may say it is unfair and unreasonable. When late charges are excessive, your clients can legally refuse to pay them. 

The best course of action for late payments is to send a reminder on the first day the payment is late and inform your client about late fees. If the debt remains unpaid, follow up with a letter of demand. Finally, you can take your client to court if the debt is large enough. If you’re unable to collect, you can consider the AR item a “bad debt” and may be able to deduct it on your taxes.

Help with accounts receivable 

Need help tracking your incoming payments? Visory can provide a virtual bookkeeping team to manage your client invoices. Follow-up email anxiety will be no more, and you can keep your cash flow flowing. Learn more about Visory’s accounts receivable services.

Bookkeeping vs. Accounting: What’s The Difference?

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Many people use the terms bookkeeping and accounting interchangeably. But are they actually the same? In fact, there are some nuanced yet important differences between these two finance-related fields. 

If you’re looking to hire some help with your finances, you should weigh the benefits of bookkeeping vs. accounting. You may only need a part-time bookkeeper to assist a full-time accountant. Read on to learn more about  bookkeeping for professional services and beyond, and how it differs from in-depth accounting needs. 

Key Differences Between Bookkeeping and Accounting

Bookkeepers and accountants are both important. You may grow your financial services team with a bookkeeper and then graduate to an accounting staff. Or, you may employ both types of services in tandem. Let’s talk about what each type of job requires. 

Bookkeeping tasks: What do bookkeepers do?

Bookkeeping is concerned largely with recording. This means recording transactions, invoices, outstanding debts, interest costs, and more. Bookkeeping is essential because it helps you organise daily financial transactions and benefits your long-term analysis. Some common bookkeeping tasks include:

  • Tracking all incoming payments
  • Tracking all outgoing payments
  • Reconciling bank statements each month
  • Conducting payroll tasks
  • Sending invoices to customers

Accounting tasks: What do accountants do?

Accountants often take the work that bookkeepers have done and use it to create further analysis and insights. In addition to handling yearly taxes, accountants may generate complex reports that the Chief Financial Officer can use to direct overall company objectives and make major decisions. Where bookkeepers concern themselves with recording, accountants are focused on analysis. Accountants may complete tasks that include:

  • Analysing the costs of operation
  • Preparing and lodging annual returns
  • Performing audits to catch errors
  • Advising the executives about financial matters
  • Summarising overall financial health

What credentials do bookkeepers have?

In Australia, bookkeepers may be certified through an organisation like the Institute of Certified Bookkeepers (ICB). This certificate verifies that a professional has been tested on their skills and is prepared to practice in the field. However, many people have bookkeeping experience without an official certificate or degree. 

What credentials do accountants have?

To become a Certified Practising Accountant (CPA) in Australia, professionals must do more than get a certificate. If someone is an accountant, they must have completed a degree or postgraduate award recognised by CPA Australia, finished the CPA Program (including 3 years of experience), complete annual continuing professional development activities, and comply with a code of conduct. Public accountants also finish the CPA Australia’s Public Practice Program.

Accountants may also become a Chartered Accountant (CA). Chartered Accountants belong to the Chartered Accountants Australia & New Zealand (CA ANZ). These professionals must complete an accredited degree or qualification, meet specific competency requirements, undergo a background check, and complete three years of Mentored Practical Experience to become Chartered Accountants. 

Do you need an accountant or a bookkeeper?

You know you don’t want your bank account to enter the red. And you definitely don’t want the government to issue a penalty on your taxes. But when it comes to day-to-day tasks, do you need an accountant or a bookkeeper?

Below, we explore signs that your immediate needs require an accountant. We’ll also discuss when a bookkeeper may be what your business needs. 

Signs you need an accountant

If you have your basic bookkeeping covered but you don’t know what to do with it, a certified accountant can step in and do wonders with your data. If any of the following conditions sound familiar, your business may need an accountant to help out.

  • You have lots of figures, but you’re not analysing them. If you don’t really know what to make of your auto-generated financial reports, an accountant can save the day. Accountants interpret your monthly reports and give recommendations based on what they learn. 
  • You don’t know how to lodge your taxes. An accountant can make sure you turn in your returns correctly and on time. This may help you avoid penalties. Properly prepared returns also help you take advantage of every credit you’re qualified for. 
  • Your reports are very basic. Maybe you have a lot of accounts receivable and accounts payable reports, but nothing more complex. An accountant will give you big picture insights. You can learn more about your overall financial wellness when someone interprets your reports to look for trends and opportunities. 

Signs you need a bookkeeper

Maybe you need to get back to basics. Are you a new business owner or did you get behind in your bookkeeping over the last year? Playing catch-up bookkeeping can make a big difference. If these scenarios ring true, it may be time to phone a bookkeeper. 

  • You can’t keep up with your general ledger. Your ledger tracks each transaction. A bookkeeper can step in and make sure that cash flow is being tracked and organised. 
  • You are overwhelmed by payroll. As your team grows, you will need to add new benefits calculations and other deductions. A bookkeeper helps take this off your hands so the executive staff can worry about other vital decisions. 
  • You don’t know how much money people owe you. Unpaid invoices are a major problem for many companies. A bookkeeper can catch your business up on accounts receivable and make sure you’re not leaving money in the wind. 

Should you outsource your bookkeeping and accounting?

A virtual bookkeeping service can transform the way you do your business. If you don’t have the budget to hire a full-time staff member — an outsourced contract may be the perfect solution. You can be paired with someone who knows your industry, and add new services as you need them. Someone who does online bookkeeping will become a trusted part of our team over time. You can also grow your team as your organisation grows. 

Outsourced bookkeeping is an excellent choice for growing businesses that want access to a larger candidate pool and are interested in saving money on staffing. 

The final word

Understanding bookkeeping vs. accounting is the first step. Next, you need to find a trusted partner. It’s wise to form a long-term relationship with your bookkeeper or accountant so they can learn your organisation from the inside out. Then, grow your team as you expand your operation. Learn more about how to outsource your bookkeeping needs with Visory and get started today.

Why is Poor Bookkeeping a Tax Liability?

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Good bookkeeping practices can give you a comprehensive, accurate picture of your business’  health. However, poor bookkeeping practices not only make it hard to assess your business’  current status; they can also be a tax liability.

With the right tax and bookkeeping services, you can minimize your tax liability while remaining in full compliance with all governmental regulations. In this guide, we’ll explore how bookkeeping relates to tax preparation and how you can prepare for your next tax year.

Bookkeeping’s Role in Preparing Taxes

Tax and bookkeeping services are not the same, but they overlap considerably. Bookkeeping is the process by which your financial records are maintained. This means that your business’ bookkeeper is in charge of keeping track of your bills, cash flow, payroll, and any other income and expenses related to your business.

Your business is obligated to pay taxes based on your overall revenue. Likewise, some of your expenses can be deducted from your tax bill, reducing your overall tax liability for the year. 

In both cases, you’ll need access to clean, accurate financial records to properly assess the taxes you owe or to take advantage of the right deductions.

Bookkeepers can plan ahead for deductions by keeping careful records, saving receipts, and more. Then, when it’s time to prepare your business returns, this data can be readily used to complete the necessary forms and streamline the process by which you file taxes.

That is why businesses  are increasingly turning to online bookkeeping providers , as these outsourced solutions provide accuracy and confidence that your books are clean, accurate, and up-to-date. 

This makes it easier to plan for tax season so that you can prepare taxes in a way that’s favorable for your company while remaining in compliance with all tax regulations.

What Issues Can Poor Bookkeeping Cause?

If your books are inaccurate or behind, you’ll likely be in the dark when it comes to your cash flow — not to mention every other part of your business’  financial health. But it also creates an even bigger problem when it comes to paying taxes.

Poor bookkeeping can create tax problems in at least two ways. First, inaccurate books make it impossible to assess the amount of money that your business owes in taxes. If you file with inaccurate numbers, you could be facing major problems later in the form of penalties, audits, and more.

For example, you might file returns based on your current income, but discover later that your income was actually much higher than you’d indicated on your tax forms. At minimum, this means you’ll have to invest time making the necessary corrections. But it could also leave you vulnerable to late penalties or other financial liabilities due to the initial error.

Secondly, inaccurate bookkeeping makes it harder to plan for tax deductions. Without a clear record of your business’ deductible expenses, you won’t be able to claim certain expenses on your tax return. You’ll be forced to pay more than you would if you’d been more stringent with your record-keeping.

How a Bookkeeping Service Can Make Filing Your Taxes Easier

Business owners looking to prevent these errors often turn to a virtual bookkeeping service to provide tax and bookkeeping services. Many third-party providers, like Visory, offer bookkeeping for professional services that can help you to keep your books up-to-date. They can also help you plan for tax season accordingly.

Bookkeepers are great at keeping track of your day-to-day expenses and can be a real help when tax time rolls around. But an accountant can analyze the books, look for tax credits, and prepare tax reports.

Learn More: Do you need a bookkeeper, an accountant, or both?

At Visory, we understand that many business owners find the cost of these professionals to be prohibitive for their business. That’s why our online services are designed to provide expert-level financial services at a fraction of the cost of an in-house financial team.

 A bookkeeping service can help you prepare and file your annual business taxes without costing a ton of extra money. When you outsource your accounting needs, you’ll gain the confidence that comes from knowing your tax liability has been handled with skill and care.

Avoid Tax Liability with a Trusted Bookkeeping Service

The best tax and bookkeeping services can keep your business running smoothly both in and out of tax season. After all, a thorough understanding of your business’ financial health can help you to hone your strategy for your business’ future.

Bookkeeping Tips for Construction Businesses

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Bookkeeping for construction companies requires specialised industry knowledge, in addition to technical skills. Construction accounting professionals have to understand the income and expenses of each project and how this data impacts the business as a whole.

In this article, we’ll show you why proper bookkeeping is essential for those in the construction industry, while also highlighting some of the best practices for those who are tasked with running a construction business.

Why Is Bookkeeping Important for Construction Businesses?

Construction companies have different accounting needs than other small businesses in retail or manufacturing. Construction projects typically involve multiple moving parts, such as:

  • Contractors
  • Rental equipment
  • Overtime pay

As most project managers can affirm, most construction projects come with additional, unexpected job costs that seem to crop up before the job is complete.

But bookkeeping for construction companies is more than just a matter of managing the overhead costs associated with each project. Construction bookkeepers also have to manage construction contracts, some of which can take years to complete and may require multiple phases.

Maintaining cash flow is essential for your company’s revenue, but also for securing the resources that are necessary to complete each contract.

Construction Bookkeeping Tips

How do you keep the books for a small construction business? Below, we’ll share some of the best practices for bookkeeping for construction companies.

Keep Track of Payments and Invoices

One of the most important strategies you can employ is to document everything. Every transaction should be recorded. When possible, you should retain copies of receipts for purchased materials, along with all invoices sent to clients. That way, your business can be protected in the event of an audit and you’ll have a clear record of your income and expenses.

How do you record these transactions? Every transaction should be recorded in one of three categories:

  • Accounts payable (bills and expenses)
  • Accounts receivable (money collected from clients)
  • Job costs (overhead costs such as labor and supplies)

Keeping these records up-to-date ensures that you have a clear, accurate picture of your construction company’s overall financial health, and it may even help you develop a strategy for future contracts.

Having a clear record of your cash flow can also be important if your business ever requires a small business loan. Lenders may evaluate your books to determine your eligibility. Your records may influence the amount of money you can borrow.

Use Job Costing to Manage Project Costs

What is job costing? Job costing is basically a way to estimate the cost of a particular construction project. You’ll have to account for labor, materials, and other overhead costs. These figures can help you determine what to charge for the project as a whole. 

Larger projects will have to be broken down into distinct phases. Each phase should then be broken down into a series of smaller tasks. Finally, you can estimate the cost of each task based on the following categories:

  • Labor (account for taxes, overtime, and any insurance)
  • Materials (concrete, steel, nails, screws)
  • Overhead (rent, utilities, travel costs, salaries)

Don’t make your estimates too tight. You’ll want to leave some room to account for loss due to damaged materials, as well as fluctuating costs for supplies and delivery. 

Your individual project costs can then be factored into your general ledger, helping you see how the revenue generated from each project influences the success of your business as a whole. 

You’ll also want to account for any additional overhead, such as marketing or administrative fees associated with your business.

Use Multiple Bank Accounts to Keep Finances Organized

Some business owners may find it confusing to keep their money in separate bank accounts. But using multiple accounts can make it easier to perform bookkeeping for construction businesses.

Keeping your money in one account can actually become more confusing, since it will be harder to keep track of the money devoted to income, expenses, overhead costs, and other categories. 

Instead, divide your construction company’s finances into different accounts. For example, you might consider dividing your money as follows:

  • One account for paying expenses
  • One account for payroll
  • One account for receiving payments

You could theoretically further divide your expenses into separate categories for supplies and overhead, though a three-part system keeps things simple and manageable. It will also make it easier to compare income and expenses, since the balance from these accounts will provide a quick glimpse into your net cash flow.

Use Milestone Payments to Improve Cash Flow

Earlier, we hinted that construction projects are often completed in phases, which is why bookkeeping for construction companies works a bit differently than other industries. 

But using milestone payments can improve cash flow prior to a completed contract, all while ensuring that you maintain a revenue stream to pay employees and cover the cost of materials.

Milestone payments are the payments you charge after the completion of each phase of the construction project. Obviously, this requires clear communication with the client beforehand, but having your customers make incremental payments can keep your revenue flowing and your projects moving on schedule.

In fact, some clients may appreciate the ability to make milestone payments, as it introduces a layer of accountability into the relationship. Your customers may appreciate the chance to monitor the progress made on their construction job and feel a greater sense of satisfaction as they get to oversee each phase of the project.

Choose the Best Revenue Recognition Method for Your Business

There are three revenue recognition methods you can use for bookkeeping for construction businesses.

The completed contract method records revenue once the project is complete. This can be useful for short-term projects, but it can also be used to defer any related income tax.

The instalment method is usually preferred when your clients make payments over time. You’ll record revenue as you receive these payments, which means you’ll acknowledge revenue during the period in which it’s collected rather than the time of sale.

The percentage of completion method works best for long-term projects. You’ll record revenue as a percentage of the project that’s been completed during each reporting period, which can better help you understand your gains and losses.

Outsource Your Bookkeeping

Many online firms specialize in bookkeeping for construction businesses. When you partner with an online bookkeeping firm, you’ll save yourself the time and hassle of handling your own books. This allows you to spend less time on administrative details and more time managing your projects and workers.

This also helps most business owners to save money. Compared to the costs of an in-house bookkeeper or accountant, online bookkeeping services are surprisingly affordable. Best of all, they can provide expert-level guidance without the need to commit to a full-time employee.

Outsourcing your bookkeeping needs gives you access to some of the best accounting software in the industry. The advanced reporting features associated with these agencies can provide a comprehensive view of your company, helping you make better decisions for your future.

This can be particularly important when it comes to preparing and paying your taxes. Online bookkeepers can manage your funds to ensure that you stay compliant with tax codes and can adequately prepare to pay your annual income taxes.

Constructing Your Future One Spreadsheet at a Time

The professional team at Visory has extensive experience in bookkeeping for construction businesses, and we can help you better manage your company and all its projects. Want to learn more? Explore our website to learn more about Visory’s bookkeeping for professional businesses, or sign up today to get started.