Better business bookkeeping for Profit First success

Better business bookkeeping for Profit First success

One of the reasons I love Profit First is that it allows business owners to manage their cashflow and improve their profitability without the need for complex financial reports. But Profit First can’t do all the heavy lifting! You need to give yourself the best possible chance to succeed with the system. One of the ways you can xdo this is through maintaining accurate, up-to-date business records. This is where your bookkeeping process comes into play.

Given that I spent a lot of time last week providing software implementation and training I thought this was a perfect opportunity to cover off on some general areas where software can help you keep better records.


Bookkeeping Systems

I know you hear this all the time from your bookkeeper and/or accountant, but we harp on about this stuff for a reaso…I promise! Keeping accurate, up-to-date accounting records is crucial. Business decision making requires data and your bookkeeping is a big part of that. In fact, I doubt you could find a single business that is truly successful in the long term that hasn’t treated their accounting data as a priority.

Ok, now that I’ve had my accountant rant lets be honest..bookkeeping is really boring, right? Most days you’d rather vacuum the office and scrub the toilet than sit down and do your books. I get that. Which is why it’s so important to have the right bookkeeping system in place. The system must be:

  • Easy to maintain – if it’s overly complex to use you will get lost and make mistakes..or worse, you’ll just avoid doing it altogether;
  • Affordable – Price is relative, focus on value. You can use free systems like Wave but are they accurate? Do they provide everything your business needs (for example, payroll)? Will they grow with you?
  • Connective – It’s important to have a bookkeeping system that will integrate with external platforms. The business world is shift and the ability to export/import data for analysis is more crucial than ever.


My Recommendation:

When it comes to bookkeeping systems you should always choose the option that works best for you. Having said that, if you are looking for a change and not sure which way to go I’m firmly on team Xero! The system has been designed from the ground up to be far more user friendly for people who aren’t native to accounting and bookkeeping. Myob and Quickbooks are scrambling to offer viable alternatives to Australian customers but so far my experience with them has left me less than impressed.


Expense Capturing System

The rise of cloud-based accounting systems like Xero that are driven by data sent directly from your bank has resulted in a lazy approach to bookkeeping. What do I mean by that? Many business owners (and professional bookkeepers) wait for bank data to be imported into the accounting system and then code each line to an income or expense account. This is what accountants call ‘cash accounting’. The bookkeeping system is only recording data from bank statements which means it’s only picking up payments received and made by the business.

What’s wrong with that approach and why did I call it lazy? The issue is that it only tells half of the story.

  • Your accounting records shouldn’t just show how much income has been received from customers. You need to know how much is still receivable from them and how far overdue it is;
  • We don’t just want to see how much money you’ve spent on various expense items. You need to know how much you still owe each of your suppliers and when the payments are due.

Unfortunately, cash accounting falls short here. Thankfully most modern bookkeeping programs will allow you to generate invoices directly from the platform so that takes care of the ‘how much do our customers owe us’ side of things.

What about how much we owe? This is where expense capturing apps like Hubdoc and Receiptbank come in. These relatively inexpensive programs link directly to your bookkeeping package. They allow you to easily import electronic copies of supplier invoices and ensure you have a clear picture of how much you owe.

They are literally as simple of taking a photo with your smart phone via their app. The software scans the image and pulls out the relevant data. You check it to ensure it’s accurate before exporting the data and the image to your accounting system.

As well as being a time saver these programs also allow you to throw the paper copy of the receipt away. The electronic version is sufficient for ATO audit purposes.


My Recommendation:

Right now I’m loving Hubdoc. I was previously using Receiptbank but switched all my internal procedures over to Hubdoc a couple of months ago. Not only does Hubdoc help you maintain your accounts payable and store digital copies of all receipts it also has an automatic ‘fetch’ feature. Fetching allows Hubdoc to grab copies of your bank statements directly from your bank. This means your accountant and bookkeeper will stop asking for them.


For the Best Result – Outsource!

I know many business owners ‘can’ do their own bookkeeping and in the early stages of Profit First an easy cost to cut could be your bookkeeper. My question to you is this – Just because you can do your own bookkeeping does that mean you ‘should’? In most cases the answer is no. Bookkeeping is not part of your core skill set. It can be quite time consuming, especially if you don’t really know what you are doing. I’d prefer to see most business owners find a good quality, Australian based bookkeeper to look after their records. In the long run you and your business will be better off if you spend the hours you would have wasted on bookkeeping focused on business development activities. Do what you do best and let a professional help with the stuff you’re not so good at.

A quick side note – yes, i did say ‘Australian based’ bookkeeper. I’ve had many clients use very cheap offshore options for bookkeeping. The results have been terrible and in some cases I’ve completely deleted the file and rebuilt it from scratch because it faster than trying to fix the thousand’s of errors made.


How will these systems help Profit First?

Good business records are a huge help in the Profit First process. Particularly in the initial set-up phase and during any future troubleshooting.

  • Initial Set-up: great business records make the process of calculating your Current Allocation Percentages (CAPS), setting your initial percentages and starting the process of cutting costs so much easier;
  • The moment something goes wrong: For example, you realise your Opex account is starting to fall short of paying your bills. Having accurate, up-to-date business records will allow you to undertake an analysis of your spending immediately with confidence that the data you are using is correct.


Further Information

Read our comprehensive review of Profit First here

Join the Facebook group here

5 Reasons to use Receipt Bank in your business

5 Reasons to use Receipt Bank in your business

Cloud technology has brought with it huge changes to the accounting and bookkeeping industries. Processes that once took hours can now be done in minute with the right combination of software (apps) and the right training. In addition these new software packages have produced some other, unforeseen benefits which are great for small business owners. A great example of this is Receipt Bank. A simple app which performs a simple function that has some benefits you may not have even considered.


5 key benefits of using Receipt Bank


Reduced costs

Now this may seem like an usual statement to make when we’re talking about buying an additional software package. Thankfully the numbers speak for themselves! Right now you, or a member of your team, collate and input receipts into your bookkeeping software manually. Depending on the number of expenses you have this process could take hours or even days each month. How much are you paying your accounts payable person? $25 an hour? If they spend two full days each month inputting expense receipts that is $400 a month on data entry. Once the Receipt Bank system is being used to it’s full capacity you can enter hundreds of invoices per hour. Each item is entered by simply taking a photograph of the page with your smart phone or forwarding an email.


Save Space

All invoices are processed as images or PDF files so each transaction in your bookkeeping file has a copy of the invoice attached. This means you can throw the physical copies in the bin and get rid of your filing cabinet. I don’t know about your office but in most accounting firms they dedicate whole rooms to document storage!


No more playing ‘find the receipt’

Ever needed to return an item or make a warranty claim? What is the first thing they ask for? That’s right, the receipt! With Receipt Bank you don’t need to search for that receipt anymore. The digital copy is saved in your software and it wont fade!


Improved communication with your accountant

At tax time Receipt Bank helps you avoid the pages of questions your accountant asks when reviewing your records and preparing your tax return. If your accountant is not asking questions then that’s an issue for a whole different article! Your accountant needs to decide if various amounts have been properly allocated in your records. The only way to do this is to check the original receipt. Receipt Bank saves you the time it would normally take to answer these questions. Because an image is attached to the transaction in your bookkeeping file they can view the original receipts as they work through the file without needed to request the documents.


Your business is Audit ready

If you are unfortunate enough to selected by the ATO for an audit it can be a time consuming and frustrating process. At a minimum they will request copies of a number of large receipts for expenses you have claimed during a given period. I have been involved in client audits where satisfying the ATO’s request involved working through boxes of records looking for specific receipts to scan and email. If you use Receipt Bank there is a copy of each receipt attached to the transaction in your bookkeeping records. What could have taken days previously can be done in minutes. Download the relevant receipts and send the email!


Should you take the plunge and try Receipt Bank?

At Panic Atax we are big fans of Receipt Bank. You have to give a thumbs up to any App smart enough to save you time, dramatically improve the quality of your bookkeeping records and make your life easier at time time, Especially when it only costs most business owners $20 a month. Even if you use a professional bookkeeper talk to them about using Receipt Bank. When set-up and used properly it can improve the flow of information between your business and the external bookkeeper.
If you are interested in using Receipt Bank in your business one of our team can answer any questions you have!

Xero Streaming – Setting up Superstream in Xero

Xero Streaming – Setting up Superstream in Xero

SuperStream is here! It is time to get on-board before the grace period ends and the ATO starts fining employers for failing to comply. This article with cover how to implement Superstream in Xero specifically. For a more general discussion around Superstream obligations, options and information requirements read our comprehensive article here.

Xero & Superstream – Where do I start?

The first step is ensuring you have all the relevant information regarding your employees and their superfunds.

Once your employees have provided the necessary information its time to update Xero ready for your next payrun. Xero have implemented ‘Auto Super’ across all their premium plans to make this process as easy as they can for business owners.

Step 1 – Add or Update Superfunds

Within Xero’s payroll set-up you need to add each superfund that your employees use. If you already have superfund’s added to the payroll system you will need to update these funds with any new information. In particular, the Unique Superannuation Identifier (USI) is likely to be new information.

Step 2 – Update employees information

Once all relevant superfunds have been added or updated please ensure the correct superfund has been selected for each of your employees. This will ensure the correct information is reported to each superfund.

Step 3 – Start Using Auto Super

Now you’re ready to make your superannuation payments. The system works in a very similar manner to the normal batch payment function in Xero.

– Create a new super payment batch

1. Go to Payroll > Superannuation.
2. Click + Add Super Payment.
3. From the payment details page, choose the lines to pay from the list of posted pay runs.
4. Once you have selected your accruals for inclusion in this batch, click Submit for Approval.

You will be redirected to the superannuation home screen where the batch will appear as ‘pending authorisation’. The authoriser will receive a text from Xero with an authorisation code, which is valid for 24 hours.

– Authorise the payment batch

Once you receive the SMS with a code to approve a superannuation batch payment:

1. Log in to Xero and go to Payroll > Superannuation.
2. Click on the batch which shows as ‘Pending Approval’.
3. Review the list of payments included in the batch.
• If you notice anything amiss, you can delete the payment.
• If everything looks good, click Approve & Submit, then enter the authorisation code you received in the SMS.

Once you have authorised the payment batch, it will appear as Awaiting Processing.

The payment details are sent off to ClickSuper, Xero’s third party superannuation clearing house. They will direct debit your bank account for the total amount payable for your batch and distribute the relevant amounts to your employees’ superfunds.

A Final Word

Xero has extensive how-to guides as part of their knowledge database. I’d recommend anyone using Xero that needs help getting Superstream up and running have a scan through this information. If you still need more assistance your Accountant or Bookkeeper should be able to assist further.

Working with Panic Atax

Panic Atax is an Accounting and Business Advisory firm specialising in building strong relationships with clients and removing the stress many small business owners experience around Financial Reporting, Tax and Cash Flow. If you’re looking for an accountant to build a great, long term working relationship with we’d love to hear from you.