Tim Johnston

Tim Johnston CPA. Tim has 15 years commercial accounting experience within Australia and overseas. His experience as Financial Controller for privately owned and ASX listed companies has provided him with the expertise to ensure your accounts are managed in the most commercially efficient manner to maximize profits, reduce overheads and minimize tax.

Important Bookkeeping Reports You Must Know

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The process of keeping accurate business records, also known as bookkeeping, is very important for a variety of reasons.  Not only are you able to track all of the business transactions that occur within a specific period of time, you will also be able to use this information to create useful bookkeeping reports to help further examine the health and profitability of your company.

To give you a better idea of what types of documents you can create from your business records, below is a list of some of the most common bookkeeping reports, and how they can benefit your company.

Banking Reports: These types of report can be created from basic banking sections of your records and can pinpoint specific check details, details of all deposits that have been made over a period of time, as well as any missing or returned checks.

Budgeting Reports: A budgeting report is basically a form of a profit and loss statement.  This can show how the business is doing on the whole, as well as how the projections for the quarter stack up when compared to the actual detail.

Company and Financial Reports: There are a number of reports that can be created from basic financial data that has been recorded on the books.  Here you can examine in depth balance sheet details, cash flow, statement of cash flow, vendor expenses, detailed vendor reports, income sorted by customer, income sorted by service or product, profit and loss by job, profit and loss year to date, profit and loss by class, and other profit and loss details that are broken down by specific criteria.

Customer and Receivables Reports: Basic customer and accounts receivable data can also yield a variety of customised reports.  These reports can include account receivable ageing detail, collections reports, customer balance details, outstanding invoices, unbilled costs by job, and customer transaction lists. Inventory Reports:  Inventory reports can help business owners to track inventory status by item number or by vendor, and also perform inventory valuation.

Custom Reports: In addition to the above mentioned reports, there are also a wide variety of custom bookkeeping reports that can be created as well.  These documents can be extremely beneficial to businesses and can include reports such as payroll details, employee earnings summaries, tax details, worker’s compensation summaries, accounts payable ageing detail, sales by representative details, sales by item number, and vendor balance detail and summaries.

Did you know we do bookkeeping in Melbourne too? Contact us today on 1300 2books

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Comparing LEAP vs Actionstep- Xero Integration

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Let’s face it- most lawyers aren’t really that interested in the way Actionstep and LEAP integrate with Xero. As long as their trust account is all taken care of, they are not really worried about how the information is transferred to their Practice Accounts- that’s for the bookkeeper to worry about!

That’s fine if the firm has a strong Legal Bookkeeper but if not then the Practice Manager or Principal should understand the integration to ensure they are producing accurate management and BAS reports.

The way both LEAP and Actionstep “talks” to Xero is quite different and both have their advantages and disadvantages as outlined below:

Nature of Integration

LEAP- You need to select your method of integration based on your GST registration of either cash or accrual. You can also integrate on a “Hybrid” basis which allows you to run management reports on an accrual basis while still lodging your BAS on a cash basis. Changing between the accounting basis is problematic and requires the engagement of LEAP Consultant.

The integration works using General Journals which creates a messy ledger which can make reconciliations difficult if it gets out of balance. The hybrid integration actually creates a separate GST code that does not get picked up on the BAS reports until the invoice is paid where it reverses the original transaction and re-posts the journal with the correct GST codes.

Actionstep- The invoices and payments for both sales and purchases are replicated in Xero so there is no need for journals. This creates a much cleaner integration and allows you to run cash or accrual management or BAS reports at any time.

Xero has a brilliant bank feed function, however it can sometimes be too clever for its own good. As the invoices have been exported from Actionstep to Xero, when Xero picks up a receipt for the same amount as an outstanding invoice it tries to match it automatically to the outstanding invoice in Xero. If this is matched in the Xero bank rec before it is entered in Actionstep it will not allow you to enter the receipt in Actionstep as it will think that invoice has already been paid. This can be difficult to identify for inexperienced Xero users.

Winner- Actionstep

Credit Notes

LEAP- Credit notes export to Xero as a journal. This works quite seamlessly although their is an ongoing issue with the GST coding on credit notes so the journal needs to be manually adjusted either prior to export or in Xero.

Actionstep- Credit notes in Actionstep are applied to invoices via a payment of $0 so that the credit note can be matched up to the correct invoice. Xero can’t handle a $0 payment so it creates credit note and a payment for the value of the credit note. The payment needs to be deleted via “remove & redo” and the credit note need to be applied against the invoice in Xero.

Winner- both problematic but the LEAP solution is probably easier to handle in Xero

Debtors and Creditors Reports

LEAP- all debtors and creditors reports need to be rune from LEAP as they are only sent ot Xero in journals

Actionstep- all debtors and creditors reports can be run from either Actionstep or Xero

Winner- Actionstep

Summary

Both LEAP and Actionstep work on a one-way integration, meaning that any changes to Debtors or Income in Xero will not flow back to the Practice Management system. This means that your Legal bookkeeper should have a high level of accounting knowledge to ensure the integrity of the 2 systems.

Overall Winner– you would have to say that Actionstep has the more comprehensive and versatile integration but you need to have a better understanding of Xero if things go pear-shaped.

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Difference Between Assets and Income Accounts

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When any business begins the process of bookkeeping it is important to understand how to establish the records as well as what the different types of accounts mean. A balance sheet is laid out to track several different accounts and includes: assets, liabilities, owner’s equity, income, and expenses. Two accounts that typically cause a bit of confusion are the assets accounts and the income accounts. In order to help you understand how the two differ, it is first important to understand the definition of each.

Read moreDifference Between Assets and Income Accounts

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Bookkeeping hand image

Benefits of Double Entry Bookkeeping

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There are two main systems used by businesses when discussing bookkeeping:  single entry and double entry.  While both systems are quite adequate, choosing which one to use in your business is for the most part, up to personal preference.  That being said, unless your business is small, and only handles simple transactions, double entry bookkeeping will provide the most benefit.

Single entry bookkeeping is much like a register on your statement, where only single transactions are recorded in the form of a cash debit or credit.  Keeping the books in this manner is less time consuming, and less expensive.  However, single entry bookkeeping only makes a record of cash, accounts receivable, accounts payable, and taxes.  More in depth transactions are not recorded, which could lead to only a partial accounting of your finances.

Double entry bookkeeping makes use of generally accepted accounting principles (GAAP), and is a bit more involved.  Rather than having just one transaction in a column, there are two entries.  A credit entry is made for all income, and a debit entry is made for each expense.  These two entries will offset each other so that both sides tally to zero.

Double entry bookkeeping therefore provides the following advantages over single entry bookkeeping:

  • It provides verification that errors have not been made, including a check that there has been no theft, when all transactions are properly recorded.
  • Financial statements can be prepared easily because of the accurate calculations that figure profits and losses, When both entries are made, the company can easily pinpoint areas where money is owed, or who owes the company money.
  • The company can easily view their financial standing, and can more simply prepare for the future.
  • There are more required entries, double entry bookkeeping creates detailed records of all assets within the company, so that income is never overlooked.
  • Double entry bookkeeping also tracks internal transactions, which helps to provide more detailed information for reporting at the end of the fiscal period.

There is never the problem of omitting data that is important because every transaction is logged twice, in separate areas. As you can see, there are a number of key benefits to utilising the double entry bookkeeping system.  Just about every type of business in every industry can make use of this method, and yield exceptional results.

*Article originally posted in our old bookkeeping blog.

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Are BAS Agents Business Saviours?

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Will Cowie from Inspire Education talks about the benefits of engaging a Registered BAS Agent.. A friend of mine got fined by the Australian Tax Office. He ran a small computer store in the suburbs servicing his local community, but his story applies equally to any small business owner. To save money, he used to do keep his own books and prepare his own Business Activity Statements (BAS). Unfortunately, while he was great with computers, bookkeeping wasn’t one of his strengths. He made errors, underreported his tax obligations and ended up with a fine on top of his outstanding tax obligations. It took years to pay off and added an extra layer of financial stress on top of the normal trials of small business ownership. After being hit with that fine, he hired a bookkeeper who was registered as a BAS agent. The agent took over nearly all the recording and reporting tasks for the business. It freed my friend up from hours work each week; work that he hated doing. That was time he could use to improve his business, bill more hours, or simply go home and enjoy his Friday evenings with his family. If you think hiring a bookkeeper and BAS agent is expensive, consider the alternatives. It just might be a great investment in your business and your peace of mind! What is a BAS Agent? A registered BAS agent is an individual, partnership business or company that can provide BAS-related services like BAS preparation and lodgement or advice about BAS laws. They must meet strict training, experience and professional standards set out by the Tax Practitioners Board. If a bookkeeper is providing BAS services for a fee or other reward, then they need to be registered as a BAS agent. “BAS agents” were created as part of the Tax Agent Services Act 2009 and were first introduced in 2010. Before that time, only Tax Agents were supposed to do BAS, but many bookkeepers started to offer the service anyway. The problem is they weren’t always qualified or experienced enough, leading to a lot of costly mistakes! Clients like you got burnt, the bookkeeper was likely sued and everyone lost out. What Does BAS Agent Registration Represent? Today, bookkeepers doing BAS must be suitably qualified and registered as a BAS Agent. They need to have:

  •  A recognised and approved qualification like the Certificate IV in Bookkeeping (or an equivalent or higher level bookkeeping/accounting course).
  • Completed at least 1,400 hours of relevant work experience in the last 3 years.
  • Completed approved courses in GST and BAS principles.
  • Passed a “fit and proper person” test.
  • Professional indemnity insurance that offers you, the client, financial protection.

BAS agents must also abide by a strict code of professional conduct and can lose their registration if they don’t. They also need to keep up with ongoing education and professional development, ensuring they keep their skills up to date. Ultimately, this means you can hire a BAS agent and be confident in their skill and ability to prepare your BAS correctly. What are the Benefits of Hiring a BAS Agent? BAS agents are trained, practiced professionals. As with anything in life, practice makes perfect. Your agent will almost certainly be able to prepare your statements faster than you could, and more accurately too. Their job is to know the laws relating to GST, PAYG and other taxes reported in BAS so they can get the maximum benefits for you too. If you haven’t been keeping up to date with your reporting or tax payments (and sometimes businesses do fall behind) hiring a BAS agent is an excellent move. They can help sort out your finances and it sends a strong message to the Australian Tax Office that you’re taking the problem seriously and will do better in future. It can be a big help if you’re negotiating with the ATO and paying off fines and outstanding debts. Another major benefit BAS agents offer is an extended lodgement period. Agents can have up to 28 extra days to prepare and lodge your BAS documents on your behalf. That means you have more time to collect your information and find cash to pay a tax bill. Finally, BAS agents almost always start out as bookkeepers and most continue to offer bookkeeping services too. They can help you set up quality financial recording and reporting systems in your business; or refine and make your current systems more efficient. Why Not Hire a BAS Agent Today? Rather than wait until it’s too late, hire a BAS-certified bookkeeper today. Once you’ve got bookkeeping systems in place, recording transactions and tracking GST will be much easier. Good data can actually help you keep more money in your pocket! You’ll know exactly what you owe and your BAS agent can use that data to maximise your BAS. You’ll be able to sleep easy at night knowing your BAS are taken care of, plus you’ll have more free time in your year to spend how you choose. William Cowie is a content production specialist for Inspire Education, one of Australia’s leading vocational education organisations. Inspire provides Bookkeeping, BAS, Health and Safety, and Training and Assessment courses.

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