Bookkeeping Best Practice
2nd January 2017
Guest Writer – Helen Stenhouse from PBS
Most SME owners are great operators in their own right and are highly skilled in their chosen profession. The challenge is that most SME owners aren’t proficient, nor do they have any desire to be, in bookkeeping best practice. And why should they? Yet record keeping compliance is imposed upon businesses by various government bodies and if left unchecked has the potential to derail the most successful of them. Here’s why. Bookkeeping best practice begins before your accounts team or bookkeeper even get their hands on your precious receipts, tax invoices and other equally important source documents.
Thirty seconds of your time saves thirty minutes of theirs, we call this the 30:30 rule. This generalisation is applied on an individual basis to every single source document and should hopefully highlight the impact you, as a business owner, can have overall in relation to your bookkeeping fees.
Let’s assume the 30:30 rule is 100% accurate and apply it to the following scenario:
On the way to your practice you happen to stop off and pick up amenities, office stationary and petrol. That’s three separate transactions and three chances to save thirty minutes each. You’re probably wondering what could possibly take thirty seconds and result in such a time saving outcome.
The information displayed on each source document varies depending on the type, but regardless they need to clearly display:
· If a payment has been made
· Amount paid
· Account used
· Date of payment
· Business or personal
As you can see some of this information is already included, for example an EFT receipt from a petrol station will show that: a payment has been made, the amount paid, the account used, and the date of payment. Therefore, there’s no benefit in replicating this information, however for extra brownie points you can underline or highlight these key areas.
But what if along with purchasing petrol, you also purchased a beanie and a scarf because, well, you live in Melbourne. Unless you specify whether the beanie and scarf were personal or business related expenses, how would anyone else know?
A real world example we had come through our office recently was an EFT receipt from a bottle shop. The client is a highly specialised oral surgeon and with no information other than what was on the receipt we had no idea why that receipt was sent through. In other words, there was no clear indication whether it was a business or personal expense. After checking with the client we found they were hosting an event for other surgeons to be held at their clinic and were providing the drinks for the evening.
If the receipt had “networking event”, “marketing event”, or something equally descriptive it would have been processed within a matter of seconds. Instead, an email needed to be composed, proof read and sent, then we were left to await the answer.
Having to constantly switch gears, and start and stop tasks, leads to inefficiencies. Whether they’re your own employees, an external bookkeeping company or you’re managing it yourself. Eventually you’ll end up paying for the additional time one way or another.
Following these basic steps will lead to faster and more accurate reporting, an easier time during processing and an overall cost saving on your bookkeeping fees. So remember the 30:30 rule and always record the:
• date payment was made
• account used for payment
• amount paid
I hope by just reading this article you’ve had thoughts on how you can implement this within your own business.
Is your current process working?
Do you need to implement a new system for handling receipts?
How can you make the process seamless?
Author Bio: Helen Stenhouse is the Founder and Director of Professional BAS Agent Services (formerly Professional Bookkeeping Service). Established in 1983, her business is a trusted provider to small and medium business owners.
This article featured in the November Edition of Paeds Biz.