Bookkeeping is about keeping financial transactions and records accurate and up to date. Without bookkeeping a business would run into problems with planning, cash flow and tax obligations. In a busy, growing business there’s much for an owner to think about, and becoming an expert simply isn’t practical. With that said, some basic understanding of bookkeeping requirements can help avoid getting into some tricky financial positions, even if you’re not personally the one managing or processing bookkeeping or payroll for your business.
So what are some ways that businesses can help keep bookkeeping on track? We explore some of these below.
Keep financial records up to date
All transactions that go through the business need to be accurately recorded. This should happen on an ongoing basis; letting weeks and months go by without doing bookkeeping just creates a bigger job later down the track. Some of the key records to keep on top of include:
- Sales transactions, invoices, and receipts
- Bills and receipts from purchases like equipment and utilities
- Bank and credit card account statements
- Payroll records
- Tax payments, filing, and balances
- Accounts receivable and payable
- Assets and liabilities including business loan balances and payments
- Inventory (if applicable)
- Investments and stock (if applicable)
Part of keeping records up to date is having good organisation systems. In today’s world, managing this digitally is often preferred, so you don’t have to worry about physical records being lost or damaged. For receipts, these can be loaded into software, too. You’ll still want to keep a record of these physically, too.
Staying up to date on financial records isn’t typically the first thing on a business owner’s long list of to-dos. And that’s understandable, but it does need to be maintained. Luckily it’s not a requirement for the owner to do all the leg work - more on that later.
File GST on time, accurately
If you’re registered for GST (Goods and Services Tax) then you’ll want to make sure that your GST has been accurately charged, put aside and filed on time. GST returns also take into account the GST you’ve paid on business expenses so it’s important to have both sides recorded properly. Make sure to check the invoices or receipts from suppliers you buy from to make sure they’re GST registered and charging it.
Being accurate with your GST isn’t just about staying compliant with Inland Revenue, you can improve your cash flow and avoid overpaying. And as with all tax types, being late to file or pay usually leads to some sort of penalty.
Understand and apply correct payroll calculations
Payroll is a big and frequent element to a bookkeeping function; ensuring the team is paid correctly and that this information is filed to IRD on time. Payroll isn’t as straightforward as paying your employees money; there are factors like
- Leave entitlements
- KiwiSaver deductions
- Public holiday payments
- Tax deductions
- Making sure employees’ details are correct
- Generating a payslip
- Reconciling payments made to employees
- Paying out owing leave, commissions, or redundancy payments if an employee departs
Paying people on time and accurately is among the most important things to get done in a business. Get it wrong, and you can lose trust and even productivity with your team. Being punctual and on the money is a non-negotiable. Because payroll can be a bit complex at times (and time consuming), business owners will often make use of good NZ-centric payroll software. Alongside this, many will engage an outside payroll expert (like RightWay) to simply manage it all.
If you’re a business owner, ask yourself where your time is best spent - what's the opportunity cost of doing it solo instead of engaging a specialist?
Stay on top of bank reconciliations
Reconciling might not be the world’s most exciting job for most business owners but it’s simply a must. Reconciling your business bank account transactions within accounting records (and software) helps to make sure that there’s a clear, accurate financial record of the business’ activity. Reporting, analysis and paying taxes are all dependent on reconciled accounts. It’s the quickest way to determine if there’s been a mistake such as an overpayment or missed invoice.
As the business grows and transactions increase, reconciliation becomes an important tool to identify any fraudulent or unauthorised transactions. Being frequent and careful with reconciliation in your accounting software is part of a well-oiled finance function in your business.
Reconciliation is also easier to do a little of, often rather than a lot, one in a while. This is because the information on what a transaction relates to is fresher, helping it be coded and described accurately in your software.
Avoid muddying the waters between business and personal expenses
Keeping financial records nice and clean can be helped by not confusing your personal transactions with those relating to the business. Even for a sole trader it’s worth having business accounts separate to your personal ones - including cards. In a limited liability company this is absolutely critical. If you’re unsure about whether a certain expense is business related, it’s worth inquiring with an accountant who can apply their knowledge of tax to guide you properly.
A clear business-only set of accounts will make your life (and anyone else who needs to prepare or work with financial records’s lives) much less challenging. You’ll be able to get a much better understanding of how the business is performing when it has no cross over to personal accounts. Of course for a self-employed business, the tax and GST is associated with the individual, but that doesn’t mean it’s a good idea to mix things up.
Learn about your tax obligations
Knowing what sort of business you’re running from a tax perspective is so important. The Inland Revenue takes filing issues seriously given the country depends on our tax dollars to run properly. As a business owner, it’s really beneficial to do some homework or better still, chat to an expert about what sort of obligations you’ll need to meet over the course of a financial year.
How you approach tax depends on whether you’re a limited company, partnership, self employed person, a charity - the list goes on. Be careful about taking on advice from other business owners or friends who may have a different set of circumstances to your business. A reliable tax agent / accountant or IRD themselves as a starting point is your best bet.
Take careful note of the percentages and dates involved in your tax obligations as these are fundamental to not missing filing/payment dates and avoiding miscalculations. Tax is a complex subject, and we don’t expect business owners to also become proficient in this area too. That’s why we suggest chatting to qualified accountants who can guide you.
Use software to make life much easier
Despite the existence of tools like MYOB and Xero for many years now, we know that many business owners are still struggling through spreadsheets or even pencil and paper. We encourage any business owner to take a look at the features of tools like Xero such as direct linking with your bank account statements, loading in of bills and the speed at which you can reconcile your transactions. The time saved can be well worth the subscription fee. If you’ve got questions or help you need getting set up with accounting software for your business, RightWay can help.
Using manual, physical methods to run your business presents issues like susceptibility to fire or flood damage (and therefore loss of important records), security breaches such as theft or being misplaced and manual entry mistakes.
Discover how RightWay can help you stay on top of bookkeeping
We’re a team of business advisors, accountants and bookkeepers. We work with businesses of all sizes and industries, and know how to keep the numbers in check so you can focus on running things smoothly. If you’re finding it hard to keep up with your financial admin, we’d like to chat.
Learn more about our Bookkeeping support or get in touch with us today. 
