Bookkeeping keeps a business going in the right direction without ever finding itself in a financially distressing position. Small business owners in Melbourne heavily depend on their bookkeepers to manage their finances and plan seamless accounting.
With the help of professionals, business owners can effectively manage debts and investments and continue to generate a positive cash flow.Although bookkeepers have a highly diversified role in small companies with limited resources and workforce, they also need to focus on some essential functions.
These activities are common across industries and domains and follow a standardised procedure. These are the fundamentals of bookkeeping and must be carried out responsibly to maintain stability and accurate records. So, here are the four critical activities every experienced bookkeeper Melbourne needs to undertake for business success.
1. Data Entry
It seems like a tedious task, but it has become quite effortless with the introduction of modern accounting software. Data entry is a necessity for bookkeeping professionals who need to enter the numbers correctly into the journals.
In simple terms, it is the process of recording every financial transaction taking place in the Melbourne-based business. Thus, all the money that comes into the business and goes out of it must be documented every day to know the financial status of the company.
Traditionally, bookkeepers had to note down the details of every purchase or sale made along with the date, product, and cost, and it had to be classified under the correct account in the ledger. These days automated systems have eliminated manual labour involved in data entry. The tools are in sync with the point-of-sale systems and the business bank accounts, which allows automatic recordkeeping of every transaction.
2. Managing Accounts Receivable and Payable
The second most vital activity of bookkeepers is managing accounts receivable and payable. Bookkeepers are responsible for sending out invoices to customers in Melbourne and tracking their payments.
They also have to follow up with them to get the payment before the deadline. It is necessary to get the money into the account to maintain a balance between incoming and outgoing. If the customers do not pay on time, the business will have low income, and it will affect the bottom line.
The accounting software covers the activity of invoicing and sending email reminders to customers if they miss the due date and the bookkeeper informing them about the same. The invoices prepared online have payment options and links for the customers in Melbourne to complete the payment quickly.
Managing accounts payable involves paying bills on time without delay to avoid penalties and late fees. Also, bookkeepers have to maintain a check on the balance in the bank account while allowing payments. If the incoming is low, they can delay the payments until the due date to keep the money in the business for a longer period and avoid deficits.
However, this needs to be communicated to the suppliers in Melbourne to make sure the relationship is not strained. Sometimes, bookkeepers recommend making payments early to leverage discounts offered by the suppliers for quick payments. They have to manage the cash flow and keep the bank balance positive.
3. Financial Reporting
Businesses need financial reports every month as they provide insight into the actual financial health of the entity. An analysis of these reports allows the entrepreneur to understand the strengths and weaknesses of the business. It helps in improving processing and spending wisely with limited wastage of capital.
These reports include the income statement, balance sheet and cash flow statement. The balance sheet offers the details of the assets, liabilities, and the capital available at a given point. It helps in ascertaining whether the business in Melbourne has progressed in the period or not.
The income statement is also called the profit and loss statement and it offers the revenues and expenses of the company over a given period. So, the business owner gets to know exactly how much money was spent and how much was earned through this report.
Last but not the least, the cash flow statement offers a summary of the flow of cash into the business and out of it. The report determines whether the company in Melbourne is able to pay its debt and manage its operations comfortably or not. So, the financial reports help the entrepreneur to understand the business performance and its profitability.
4. Bank Reconciliation
Accuracy is a prerequisite for bookkeeping. Thus, the professionals rely on bank reconciliation to double-check the correctness of the numbers entered in the records. The slightest error can lead to enormous confusion and losses. Thus, bank reconciliation helps in correcting mistakes and identifying missed entries. It is considered the best method to find any fraudulent activity in the company.
The bookkeeper in Melbourne has to ensure that the business bank account statement matches with the books. If there are mismatches, they get them fixed on time to avoid misrepresentation of figures. The task is now handled by accounting software which pulls out data from the bank account through the internet to complete the cross-referencing.
Conclusion
Bookkeeping is a complex business function that comprises various activities to allow smooth operations and efficient use of capital. To understand the process perfectly, you must understand its basic activities. It will help you appreciate the significance of bookkeeping for businesses.
