Accounting may be the most important part of running a business (outside of acquiring paying customers). When you’re growing as a business, your accounting operations also need to grow. Although there aren’t stringent regulations for most sole traders and small businesses, maintaining comprehensive accounts is the only way to assess the health of the business and plan for future growth. In this blog, we’ll outline what records you need to keep as a business and how best to comply with bookkeeping requirements.
What every accounting software should include
A clear and easy-to-use interface is one of the most important things to look for when evaluating an accounting system. If you have to spend hours learning how to use a tool just to record and balance simple transactions, it may not be worth your investment. Secondly, consider the features the software system offers. These could include basic accounting programs, integrations with your Point of Sale (PoS) software, GST and superannuation calculations, and capital gains tax calculator. If you’re satisfied with all of that, you should then determine whether the software vendor has comprehensive and credible security and privacy policies in place to protect your data.
Record keeping for Australian small business
You can keep records on paper, or electronically with accounting software. If you choose software, ensure it offers options to back up your records. For your record keeping process, you can choose either the cash account method or the accrual accounting method. Your accounting software should support whatever method you choose.
The Australian Tax Office (ATO) requires businesses to comply with the Standard Business Recording (SBR) system. Many accounting systems are SBR-enabled by default. This means that if the ATO needs any specific reports from your business, SBR-enabled software will automatically know which details to include in that report. If your accounting software is not SBR-enabled, you may have to do some reporting manually.
For most small businesses, the regulations on what records to keep and for how long are straightforward.
• Record and explain all income and expenses
• Maintain records in English
• Maintain invoices, receipts, bank records, previous tax returns, and GST records
• Maintain employment records that can help trace an employee's lifecycle, such as superannuation, reimbursements, workers' compensation, and agreements and contracts
• Maintain transaction records for at least 5 years, and details of capital assets, capital gains tax, and employee records for at least 7 years
• Based on your industry and nature of business, you might need to keep specific records. Use this tool to determine whether you need to maintain additional records.
Sole traders can directly record and maintain details of their transactions on the myDeductions app, built by the ATO. You can also choose to record all your business transactions on dedicated accounting software.
The Australia Accounting Standards Board (AASB) and the International Public Sector Accounting Standards Board (IPSASB) issue accounting standards for companies registered and operating in Australia. These standards are based on the global standards issued by the International Accounting Standards Board (IASB).
When evaluating accounting software for your company, consult your accountant and allow them to evaluate your options before committing. The accounting standards that apply to your company depend on the industry you’re in and the structure of your company. Public companies have additional reporting requirements, including quarterly and annual updates.
The company accountant is responsible for maintaining the books according to the required standards. The Australian Securities and Investments Commission (ASIC) enforces Australia’s accounting standards and will investigate any breaches.
Evaluating and adopting software that’s compliant, simple to use, and budget friendly isn’t an easy task. We recommend trying out a few accounting software solutions for a month or two to experience the functionality that each offers. Accounting software is for the long term—it’s a capital asset. So all the time you put in during research, trials, and setup will be worthwhile. Did you have any other major considerations when choosing your accounting software? Let us know!