Typically, small business owners decide to record their transactions using cash-basis accounting. But it is still important to understand how the accrual method can be appropriate for certain business. By taking the time to learn the difference between the two, you, with the help of your accountant Melbourne will be able to make better accounting decisions for your business.
A lot of people seem to be confused about the difference between cash and difference. Your Melbourne accountant will readily tell you either of the two methods can be used for different purposes such as GSt, tax as well as overall accounting procedures. In this article, we will be exploring the implications of each method to help you decide which one is best for your business.
Understanding The Difference
Cash accounting is used by a Melbourne accountant to recognise the income and expenses of the business when these are physically paid instead of on receipt or during the issuance of an invoice.
Most often, a Melbourne accountant will recommend basic cash system for small business as it is easier to keep better track of the company’s cash flow.
On the other hand, the accrual accounting system is used by a Melbourne accountant to recognise both expenses and income on receipt of bill or invoice — even those that are still not due for payment. This specific system create creditors and debtors in your accounting software and will provide you a picture of what you owe and when as well as what funds are payable to you from your customers.
Given the tough financial times we have today, it is critically important to work with your Melbourne accountant especially in monitoring debtors. By having a good accounting system, in place, you will be able to significantly reduce the days you need to pay your debtors or worse write off receivables as bad debts.
Small Business Bookkeeping Good Practices
Even as a startup with a small operations, it is important for all types of businesses to hire a bookkeeper Melbourne to maintain the company’s record keeping. While anyone can perform bookkeeping work, it is ideal to hire one who has expertise and experience in setting up bookkeeping systems that will allow you as the owner to monitor everything.
A reliable bookkeeper Melbourne will not only ensure your books are up to date and are recorded accurately, he/she must be able to allow you to monitor the progress of your business and gain a general picture of the financial aspect of the business. With this in mind, you will want to hire a bookkeeper Melbourne who is adept in working with an accounting software.
Aside from the fact that you are legally required to maintain the records of your company transactions, good record keeping performed by a seasoned bookkeeper Melbourne will allow you to:
· Keep track of deductible expenses
· Identify the sources of invoices and receipts as well as the money spent and received
· Be able to access meaningful and accurate financial statements
· Separate business from non-business receipts as well as the taxable and non-taxable income
· Cut down time required by an accountant to prepare tour tax returns
· Monitor your company finances
Coordinate with your bookkeeper Melbourne in setting up systems that will allow you to conveniently and easily monitor your finances and key problem areas that require attention and action.
In summary, your bookkeeper Melbourne should perform bookkeeping functions that are designed to support income, expenses as well as credit that you report on your tax returns.