How a bookkeeping service can help your retail business

Bookkeeping for retail business involves keeping a record of all your daily financial transactions within an organised accounting system. Maintaining precise records of your expenses, sales, receivables, inventory, and payables ensures that you create accurate financial reports and assess your business performance. Detailed records are also what you need if the ATO reviews your business: most business records must be kept for 5 years.

Before you initiate the bookkeeping process, you must identify the best bookkeeping system for your business and decide whether to invest in in-house bookkeeping or outsource the services.

What does a store bookkeeper do?

A store bookkeeper records and maintains a business’s financial transactions, including sales revenue, expenses, invoices, payments, and purchases. Their responsibilities mainly involve using numbers, maths skills, and accounting principles.

Typically, bookkeepers handle the initial steps of the accounting cycle, which include:

• Identifying transactions
• Recording transactions in a journal
• Posting to the general ledger
• Calculating the total balance for the accounts
• Checking for errors with a trial balance
• Adjusting entries

Financial reporting requires maximum accuracy and one way of ensuring precision is by communicating with colleagues and clients. Bookkeepers collect purchase and sales documents from coworkers and handle other tasks that require them to engage with other parties.

Proper communication ensures correct documentation of all transactions and eliminates chances of omission. You can enhance your line of communication by investing in a reliable system of cash distribution, expense account reimbursement, and receipt submission.

Additionally, a bookkeeper liaises with the heads of departments to make enquiries on inventory needs. For instance, the bookkeeper can flag when stock or office supplies are running low.

Other primary responsibilities of a bookkeeper include:

• Processing payroll
• Performing banking activities
• Reconciling reports
• Producing monthly financial reports
• Handling accounts receivable
• Handling accounts payable

Some bookkeepers have expert knowledge on accounting and may take up advanced duties such as creating budgets and forecasts, preparing and lodging BAS (only if they are a registered BAS or tax agent, or work under one), training staff on the use of software solutions, and end of year reporting, particularly for small businesses.

How does bookkeeping for a retail business work?

Retail business bookkeeping involves creating a framework, choosing between double- or single-entry accounting methods, and keeping records.

For single entry accounting, bookkeepers make entries once, either as an income or expense. On the other hand, the double-entry transaction records every transaction twice, as a debit in one account and a credit in another. Your choice of entry system impacts the accuracy of your transaction records and the efficiency level of your bookkeeping process. Typically bookkeeping for a retail business entails keeping tabs on expenses, sales, inventory, receivables, and payables.

Inventory accounting

Bookkeepers use reliable systems to track and record inventory movement daily into and out of the retail business. As a result, you will have a record of the cost and quantities of all supplies you receive, along with the selling price of every product sold. In addition, bookkeepers adjust records regularly to account for damaged, stolen, or spoiled goods. This ensures that the documents show accurate numbers of the available inventory.

For many retailers, inventory is one of the largest assets and investments in the business, so it’s only reasonable to ensure that you keep accurate records that you can access when necessary.

Income

Bookkeepers keep records of all income that flows into the business and compare the figures with bank statements to identify any variation. While you may be generating income via other sources like after-sale service fees or consignment commissions, your sales revenue is your primary driver of income.

Also, bookkeepers regularly check point of sale system records against bank deposits to ensure accuracy. Simply put, bookkeepers keep receipts of all revenue earned and transfer the sum into the business accounting system.

Expenses

Bookkeeping involves tracking business expenses and comparing the figures with the bank records as often as possible. A good bookkeeping and accounting system records recurring and variable expenses, and records capital purchases such as equipment and fit-out as assets that are depreciated over their useful life. Expenses are recorded in separate accounts to make calculating profits and preparing financial reports easier. Typical expenses include rent and lease, labour expenses, taxes, fees, and purchases.

Payables and receivables

Bookkeepers handle accounts receivable and account payable. Your accounting system should remind you to clear your debts on time and manage debt collection from credit customers.

Paying suppliers on time protects your supplier relationships and credit standing, while keeping track of your receivables ensures that you have enough working capital.

Owners’ equity and retained earnings

Bookkeepers record the money and assets owners put into the business, and what they take out, in separate equity accounts. This matters when owners change, a partner leaves, or the business is sold.

Retained earnings are the accumulated profits the business has kept rather than paid out to owners. They update when the books are closed at the end of each financial year.

What types of records should a retailer keep?

To properly determine your retail store business performance and prepare for tax time, you need to have accurate records of all your sources of income, expenses, purchases, payables, and receivables. Some of the critical documents that you need to keep include:

Journal of non-cash transactions affecting accounts payable

This journal lists the amount of money you owe another business or individuals after purchasing inventory on short-term credit. It includes the actual amount owed, the creditor, payment date, and the date when you cleared the debt. This record helps you avoid paying twice for the same goods.

A journal of cash transactions

A cash transactions journal contains records of all payments you make in the form of cash. Some cash transactions include:

• Cash refunds after the return of goods sold
• Payment to creditors
• Cash payment for rent, insurance, salaries, and other expenses
• Cash withdrawal

Sales slips, invoices, receipts, cash register receipts, and other sales documents

Sales documents indicate the quantities of products you sell and the revenue your retail store makes daily, weekly, and monthly. In addition, they include the type of goods or services sold and the price of each sale. Cash register receipts, for instance, show the different forms of payments used by customers, such as card, cash, or digital wallets. On the other hand, an invoice shows the type and cost of the product you have provided to your customer. It serves as a request for payment.

Conclusion

Bookkeeping for retail business is key to business success and growth. Without proper financial reporting, chances of making business decisions based on inaccurate financial statements are high. And most importantly, the ATO requires you to keep records that explain your income and expenses, generally for 5 years. It’s never too late to get started. Book a discovery call to see how Visory can run your finance function.