Steps to Catch Up on Your Bookkeeping

Steps to Catch Up on Your Bookkeeping

As data entry and bookkeeping are the essential functions of business accounting, businesses must continuously update and never neglect these tasks. Delayed or lagging bookkeeping will result in delayed reports preparation, leading to delayed tax filing and decision making. It will affect the business productivity and profitability and can also attract fines from ATO (Australian Tax Office). To avoid such situations, businesses can hire help from in-house or outsourced bookkeeping services. If bookkeeping is delayed, the business might face some consequences. Therefore, it is compulsory to stay up-to-date with business bookkeeping. Let us learn about some simple steps a business can take to catch up with its bookkeeping. 

Consequences of delayed bookkeeping

Ignoring or delaying business bookkeeping leads to financial losses and the risk of notice from ATO for delayed tax filing and auditing. If the bookkeeper hired by the business doesn’t update the records regularly, the business will have to accumulate a huge amount of data at the time of statement preparation. Following are the consequences of delayed bookkeeping:

  • Financial losses- 

When a business doesn’t maintain the bookkeeping regularly, there are chances of financial losses. Delayed bookkeeping leads to inaccurate knowledge about the current business position, and thus it becomes difficult to analyse the steps to be taken to maintain profitability. 

  • Legal issues- 

Bad bookkeeping means inaccuracies in the financial statements and reports. It causes issues during business auditing and also inaccurate tax filing. Such issues cause legal issues, and the business can receive notices by ATO or have to pay fines and penalties.

  • Bad decision-making- 

Lack of knowledge about current business numbers makes it difficult to make the right business decisions. When the business doesn’t know whether it is earning profits or losses and which department or part of the business needs improvement, it will be unable to make strategies.

  • Missed tax filing deadlines- 

Delayed bookkeeping causes delayed preparation of a business’s financial statements and reports, which leads to missed tax filing deadlines. Missing tax deadlines attracts heavy fines to be paid by the business. 

How to stay up-to-date with business bookkeeping

Staying up-to-date with business bookkeeping is quite easy and requires some simple steps to be followed. In-house or outsourced bookkeeping services must review and update the business records weekly to simplify the financial management process. Besides the regular reviews, a business must also follow some tips to catchup bookkeeping, including:

  • Gather your receipts- 

The first and the most important thing is to gather and store all the receipts and related documents for business transactions. Different types of invoices and receipts that a business must gather are:

  1. Customer invoices- Review the customer accounts and ensure all the invoice payments have been collected and proper documentation is available for audit and tax filing purposes. Ensure the transactions have been recorded and there are invoices for all of them, whether the transaction is done on a cash or accrual basis.
  2. Debt collections- Besides the payments collected by the business, accounting and bookkeeping services also need to review the payments still due. If the payment is not made on time, the invoice must be written off as bad debt. The proper recording must be done, with relevant documentation, for the debts collected and bad debts to ensure accuracy in the records.
  3. Vendor accounts- Like the customer accounts, businesses must also review their vendor accounts to ensure they have made full payments to them on time. Make it a point to have a copy of every transaction and payment with the vendors as they help close the books and determine the accurate payments made.
  4. Business expenses- Collect the receipts for every business purchase made during the financial year. It helps calculate the exact business expenses and also helps in availing tax deductions.
  • Reconcile your bank accounts- 

Accounts reconciliation is an activity that helps match the incomes and expenses mentioned in the accounts with the incomes and expenses displayed in the business bank account. The bookkeeping services must compare every business transaction with the bank statement and make sure everything is in order. If there are any inaccuracies or inconsistencies, they must be fixed immediately. Improperly reconciled accounts can be very costly for the business, and it will need more time and resources to correct the accounts.

  • Separate business and personal expenses- 

Mixing business and personal expenses in the same bank account directly defy the corporate veil business theory. It will result in the business owner being personally liable for business expenses and actions. It will also cause wrong tax filing as the expenses mentioned in the books are mixed up. Sorting out the expenses is a tedious and costly task. Therefore, separating the business and personal expenses from the beginning is the best option.

  • Go paperless-

Businesses can reduce the burden of tracking and recording every transaction and regularly update the payments made and collected by removing the manual process. Switching the manual process with automation keeps businesses up-to-date with their bookkeeping without much hassle. Automation goes hand-in-hand with bookkeeping services, whether in-house or outsourced. Businesses can choose from several accounting software based on their needs. Automation helps track and record transactions, prepare financial statements and reports, and file accurate taxes for the current tax year. As an alternative, you can also utilize a variety of templates like consolidated P&L templates.

  • Get expenses reviewed by a tax professional- 

If a business decides to manage its accounts independently, it is better to review the business expenses with a tax professional. In the case of outsourcing, accounting and bookkeeping services providers manage the entire accounting and taxation process. The in-house team usually doesn’t have expert tax professionals. However, outsourcing services providers have expertise and experience in accounts management, tax filing, and other financial business activities. A tax professional helps file correct taxes, fill all the required forms, and avoid any fines or penalties. 

Once the business catches up with its bookkeeping, it gets real-time knowledge about its financial health and helps make the right business decisions at the right time. Therefore, it is necessary to start the bookkeeping process on time, review it regularly, and keep the records updated. Though an in-house team can manage the process, businesses benefit more by outsourcing it to a bookkeeping services provider. The service providers are highly experienced and have a team with expertise in every field related to business accounting. Businesses must choose an outsourcing partner that meets all the business needs.