Often times, we think of bookkeeping as a drudgery where external help have to be brought in….at a cost! Although it is good to get external help depending on your situation, there are some methods which you can employ from day 1.
Most, if not all, businesses usually have a basic bank account to start off with. Some might have more and also additional credit card facilities. Banks are in the industry where they are regulated and they provide one of the best forms of record trail.
Although it is important to keep receipts, invoices and paperworks for tax purposes, one of the most cost-effective way of preparing your tax is via your bank/credit card statements. Most people now have internet banking facilities where the availability of such information is readily accessible. Bank statements often provide a brief description of the nature of the income and expense.
To kick start such a process, where it is FREE, the following are some procedures where i hope it will serve you well:
- Set up a separate bank account purely for your business. If you are lazy or just do not have the time or discipline to note down what is personal or business, this would be the easiest way to keep a proper record trail.
- Ensure that all your business income and expenses goes through this bank account. Alternatively, set up a credit card for your expenses that is used for business purposes.
- Ask your financial institution for internet banking facilities. This should be standard practice for new account setup.
- At the end of each month or quarter, export the banking transactions into CSV or Microsoft Excel files. If you have other softwares like MYOB or Quickbooks, the format would be different.
- In Excel, it is quite easy to categorize transactions and grouping them into meaningful information. At the end of the financial year or during tax time, this will provide an excellent base for presenting figures to your accountants. This should in turn translate to lower accounting fees and administrative fees for your business.
Of course, no model can be used to serve ALL business situations or sizes. However, the above should provide you with a solid foundation for records and basic bookkeeping.