How Does Accounts Receivable Work?

Accounts receivable refers to the money due to you from customers or clients. On your balance sheet, your accounts receivable (AR) go in the credit column. You will only have an accounts receivable process if you extend credit to your customers. For instance, professional services businesses  often have accounts receivables because they don’t collect final payment until after their services have been completed. 

Businesses that use accounts receivable include architecture and engineering firms, building contractors, technical and trade schools, trucking businesses, and consulting firms. Many small businesses also extend credit to clients when they’re getting started. 

Staying on top of AR is an important part of any bookkeeping practice. Learn more about accounts receivable and how it can keep your cash flow going.

What is Accounts Receivable?

The funds in your accounts receivable line item refers to outstanding debt that is owed to you. Many businesses offer customers a net-30 or net-60 billing cycle. This means that once you submit your invoice to a customer, they have either 30 or 60 days to pay it. In the intervening time, the funds are considered accounts receivable. 

Is accounts receivable an asset or liability?

Since accounts receivable represents future incoming cash, it is considered an asset. That being said, if you are unable to collect the money due to you, accounts receivable could also turn into a bad debt. 

The accounts receivable project

How does accounts receivable work? Let’s talk about what you need to do to establish a process that works for your organisation. The key is to balance your need for cash flow with an appropriate level of flexibility for clients. 

Establish Credit Practices

Before you can start offering credit to your clientele, you need to establish a set of rules. This ensures that you’ll be paid on time and can collect penalties if someone pays late. 

Your business should decide:

  • How much credit are you willing to extend to clients? Maybe you expect 50% payment up front and extend 50% credit for 30 days after the project is complete. Perhaps you set a dollar amount maximum. Identify the amount of credit you’re comfortable extending and put it in writing. 
  • Is every client credit worthy? Determine if you have parameters for who is able to take advantage of net billing. 
  • How long will people have to pay? Most organisations extend credit for no more than 60 days. This allows you to keep cash flow coming in while offering clients the appeal of flexibility. 
  • What will late payment penalties be? You need to outline terms and conditions for your billing cycle. This includes fees for paying late. You may also want to consider a discount for paying early to encourage prompt payoff. 

Invoice Your Customers

Once you have established credit practices and extended an offer to clients, you should have an invoicing process in place. Send your customers or clients an invoice as soon as your work is complete. This starts the clock ticking on their payment time period. Invoicing late will delay your incoming payment. 

Track your Accounts Receivable

You need to stay on top of your accounts receivable funds. Many businesses  choose to appoint an accounts receivable officer, especially as they grow. Smaller businesses may be able to get by with a simple spreadsheet. More advanced tracking software is available for large businesses with more complicated accounting needs. 

For every credit extended, your accounts receivable team should be tracking:

  • The amount due
  • The date the client was invoiced
  • The invoice due date
  • The dates the client was contacted for overdue payments
  • Any applicable late fees
  • Escalation efforts made to collect payment

Accounts Receivable Accounting

Accounts receivable are typically tracked as a part of your balance sheet — a document that lists your businesses’s assets, liabilities, and equity at any point in time. Once a client pays their invoice, the money may move from the accounts receivables line item to your bank account balance. It remains a credit, since it always represents money coming in, never money going out. 

The difference between accounts receivable and accounts payable

While accounts receivable reporting represents money that is due to you in the immediate future, accounts payable is just the opposite. Accounts payable are debts that you owe to someone else in the short term. For example: When you have a maintenance worker come and fix a leaky pipe, they probably leave an invoice. You would add the debt to your accounts payable tracking and make payment within the requested time period. 

Accounts receivable includes sales, services rendered, and other client projects. Meanwhile, accounts payable can be more complicated. It includes everything from utilities and rent payments to vendor invoices and manufacturer bills. Some businesses  also include payroll in their accounts payable bucket. 

How do you record accounts receivable?

How does accounts receivable work when it comes to credit and debit reporting? Balance sheets require itemisation. Depending on the size of your business, there probably won’t be room for each individual AR credit on your balance sheet. Instead, you’ll include the total current amount due from clients in the credits column. 

In another location, be it a spreadsheet or accounting software, you will want to itemise each debt. Granular tracking allows you to better follow-up on late debts. 

What happens if a client doesn’t pay?

Unfortunately, there are bound to be clients who don’t pay on time. Late fees are legal in Australia, but they do have to be considered reasonable. For instance, charging a $10 late fee is unlikely to raise any eyebrows. If you charge $500 for a payment that is one day late, the client may say it is unfair and unreasonable. When late charges are excessive, your clients can legally refuse to pay them. 

The best course of action for late payments is to send a reminder on the first day the payment is late and inform your client about late fees. If the debt remains unpaid, follow up with a letter of demand. Finally, you can take your client to court if the debt is large enough. If you’re unable to collect, you can consider the AR item a “bad debt” and may be able to deduct it on your taxes.

Help with accounts receivable 

Need help tracking your incoming payments? Visory can provide a virtual bookkeeping team to manage your client invoices. Follow-up email anxiety will be no more, and you can keep your cash flow flowing. Learn more about Visory’s accounts receivable services.

Bookkeeping vs. Accounting: What’s The Difference?

Many people use the terms bookkeeping and accounting interchangeably. But are they actually the same? In fact, there are some nuanced yet important differences between these two finance-related fields. 

If you’re looking to hire some help with your finances, you should weigh the benefits of bookkeeping vs. accounting. You may only need a part-time bookkeeper to assist a full-time accountant. Read on to learn more about  bookkeeping for professional services and beyond, and how it differs from in-depth accounting needs. 

Key Differences Between Bookkeeping and Accounting

Bookkeepers and accountants are both important. You may grow your financial services team with a bookkeeper and then graduate to an accounting staff. Or, you may employ both types of services in tandem. Let’s talk about what each type of job requires. 

Bookkeeping tasks: What do bookkeepers do?

Bookkeeping is concerned largely with recording. This means recording transactions, invoices, outstanding debts, interest costs, and more. Bookkeeping is essential because it helps you organise daily financial transactions and benefits your long-term analysis. Some common bookkeeping tasks include:

  • Tracking all incoming payments
  • Tracking all outgoing payments
  • Reconciling bank statements each month
  • Conducting payroll tasks
  • Sending invoices to customers

Accounting tasks: What do accountants do?

Accountants often take the work that bookkeepers have done and use it to create further analysis and insights. In addition to handling yearly taxes, accountants may generate complex reports that the Chief Financial Officer can use to direct overall company objectives and make major decisions. Where bookkeepers concern themselves with recording, accountants are focused on analysis. Accountants may complete tasks that include:

  • Analysing the costs of operation
  • Preparing and lodging annual returns
  • Performing audits to catch errors
  • Advising the executives about financial matters
  • Summarising overall financial health

What credentials do bookkeepers have?

In Australia, bookkeepers may be certified through an organisation like the Institute of Certified Bookkeepers (ICB). This certificate verifies that a professional has been tested on their skills and is prepared to practice in the field. However, many people have bookkeeping experience without an official certificate or degree. 

What credentials do accountants have?

To become a Certified Practising Accountant (CPA) in Australia, professionals must do more than get a certificate. If someone is an accountant, they must have completed a degree or postgraduate award recognised by CPA Australia, finished the CPA Program (including 3 years of experience), complete annual continuing professional development activities, and comply with a code of conduct. Public accountants also finish the CPA Australia’s Public Practice Program.

Accountants may also become a Chartered Accountant (CA). Chartered Accountants belong to the Chartered Accountants Australia & New Zealand (CA ANZ). These professionals must complete an accredited degree or qualification, meet specific competency requirements, undergo a background check, and complete three years of Mentored Practical Experience to become Chartered Accountants. 

Do you need an accountant or a bookkeeper?

You know you don’t want your bank account to enter the red. And you definitely don’t want the government to issue a penalty on your taxes. But when it comes to day-to-day tasks, do you need an accountant or a bookkeeper?

Below, we explore signs that your immediate needs require an accountant. We’ll also discuss when a bookkeeper may be what your business needs. 

Signs you need an accountant

If you have your basic bookkeeping covered but you don’t know what to do with it, a certified accountant can step in and do wonders with your data. If any of the following conditions sound familiar, your business may need an accountant to help out.

  • You have lots of figures, but you’re not analysing them. If you don’t really know what to make of your auto-generated financial reports, an accountant can save the day. Accountants interpret your monthly reports and give recommendations based on what they learn. 
  • You don’t know how to lodge your taxes. An accountant can make sure you turn in your returns correctly and on time. This may help you avoid penalties. Properly prepared returns also help you take advantage of every credit you’re qualified for. 
  • Your reports are very basic. Maybe you have a lot of accounts receivable and accounts payable reports, but nothing more complex. An accountant will give you big picture insights. You can learn more about your overall financial wellness when someone interprets your reports to look for trends and opportunities. 

Signs you need a bookkeeper

Maybe you need to get back to basics. Are you a new business owner or did you get behind in your bookkeeping over the last year? Playing catch-up bookkeeping can make a big difference. If these scenarios ring true, it may be time to phone a bookkeeper. 

  • You can’t keep up with your general ledger. Your ledger tracks each transaction. A bookkeeper can step in and make sure that cash flow is being tracked and organised. 
  • You are overwhelmed by payroll. As your team grows, you will need to add new benefits calculations and other deductions. A bookkeeper helps take this off your hands so the executive staff can worry about other vital decisions. 
  • You don’t know how much money people owe you. Unpaid invoices are a major problem for many companies. A bookkeeper can catch your business up on accounts receivable and make sure you’re not leaving money in the wind. 

Should you outsource your bookkeeping and accounting?

A virtual bookkeeping service can transform the way you do your business. If you don’t have the budget to hire a full-time staff member — an outsourced contract may be the perfect solution. You can be paired with someone who knows your industry, and add new services as you need them. Someone who does online bookkeeping will become a trusted part of our team over time. You can also grow your team as your organisation grows. 

Outsourced bookkeeping is an excellent choice for growing businesses that want access to a larger candidate pool and are interested in saving money on staffing. 

The final word

Understanding bookkeeping vs. accounting is the first step. Next, you need to find a trusted partner. It’s wise to form a long-term relationship with your bookkeeper or accountant so they can learn your organisation from the inside out. Then, grow your team as you expand your operation. Learn more about how to outsource your bookkeeping needs with Visory and get started today.

Why is Poor Bookkeeping a Tax Liability?

Good bookkeeping practices can give you a comprehensive, accurate picture of your business’  health. However, poor bookkeeping practices not only make it hard to assess your business’  current status; they can also be a tax liability.

With the right tax and bookkeeping services, you can minimize your tax liability while remaining in full compliance with all governmental regulations. In this guide, we’ll explore how bookkeeping relates to tax preparation and how you can prepare for your next tax year.

Bookkeeping’s Role in Preparing Taxes

Tax and bookkeeping services are not the same, but they overlap considerably. Bookkeeping is the process by which your financial records are maintained. This means that your business’ bookkeeper is in charge of keeping track of your bills, cash flow, payroll, and any other income and expenses related to your business.

Your business is obligated to pay taxes based on your overall revenue. Likewise, some of your expenses can be deducted from your tax bill, reducing your overall tax liability for the year. 

In both cases, you’ll need access to clean, accurate financial records to properly assess the taxes you owe or to take advantage of the right deductions.

Bookkeepers can plan ahead for deductions by keeping careful records, saving receipts, and more. Then, when it’s time to prepare your business returns, this data can be readily used to complete the necessary forms and streamline the process by which you file taxes.

That is why businesses  are increasingly turning to online bookkeeping providers , as these outsourced solutions provide accuracy and confidence that your books are clean, accurate, and up-to-date. 

This makes it easier to plan for tax season so that you can prepare taxes in a way that’s favorable for your company while remaining in compliance with all tax regulations.

What Issues Can Poor Bookkeeping Cause?

If your books are inaccurate or behind, you’ll likely be in the dark when it comes to your cash flow — not to mention every other part of your business’  financial health. But it also creates an even bigger problem when it comes to paying taxes.

Poor bookkeeping can create tax problems in at least two ways. First, inaccurate books make it impossible to assess the amount of money that your business owes in taxes. If you file with inaccurate numbers, you could be facing major problems later in the form of penalties, audits, and more.

For example, you might file returns based on your current income, but discover later that your income was actually much higher than you’d indicated on your tax forms. At minimum, this means you’ll have to invest time making the necessary corrections. But it could also leave you vulnerable to late penalties or other financial liabilities due to the initial error.

Secondly, inaccurate bookkeeping makes it harder to plan for tax deductions. Without a clear record of your business’ deductible expenses, you won’t be able to claim certain expenses on your tax return. You’ll be forced to pay more than you would if you’d been more stringent with your record-keeping.

How a Bookkeeping Service Can Make Filing Your Taxes Easier

Business owners looking to prevent these errors often turn to a virtual bookkeeping service to provide tax and bookkeeping services. Many third-party providers, like Visory, offer bookkeeping for professional services that can help you to keep your books up-to-date. They can also help you plan for tax season accordingly.

Bookkeepers are great at keeping track of your day-to-day expenses and can be a real help when tax time rolls around. But an accountant can analyze the books, look for tax credits, and prepare tax reports.

Learn More: Do you need a bookkeeper, an accountant, or both?

At Visory, we understand that many business owners find the cost of these professionals to be prohibitive for their business. That’s why our online services are designed to provide expert-level financial services at a fraction of the cost of an in-house financial team.

 A bookkeeping service can help you prepare and file your annual business taxes without costing a ton of extra money. When you outsource your accounting needs, you’ll gain the confidence that comes from knowing your tax liability has been handled with skill and care.

Avoid Tax Liability with a Trusted Bookkeeping Service

The best tax and bookkeeping services can keep your business running smoothly both in and out of tax season. After all, a thorough understanding of your business’ financial health can help you to hone your strategy for your business’ future.

Bookkeeping Tips for Construction Businesses

Bookkeeping for construction companies requires specialised industry knowledge, in addition to technical skills. Construction accounting professionals have to understand the income and expenses of each project and how this data impacts the business as a whole.

In this article, we’ll show you why proper bookkeeping is essential for those in the construction industry, while also highlighting some of the best practices for those who are tasked with running a construction business.

Why Is Bookkeeping Important for Construction Businesses?

Construction companies have different accounting needs than other small businesses in retail or manufacturing. Construction projects typically involve multiple moving parts, such as:

  • Contractors
  • Rental equipment
  • Overtime pay

As most project managers can affirm, most construction projects come with additional, unexpected job costs that seem to crop up before the job is complete.

But bookkeeping for construction companies is more than just a matter of managing the overhead costs associated with each project. Construction bookkeepers also have to manage construction contracts, some of which can take years to complete and may require multiple phases.

Maintaining cash flow is essential for your company’s revenue, but also for securing the resources that are necessary to complete each contract.

Construction Bookkeeping Tips

How do you keep the books for a small construction business? Below, we’ll share some of the best practices for bookkeeping for construction companies.

Keep Track of Payments and Invoices

One of the most important strategies you can employ is to document everything. Every transaction should be recorded. When possible, you should retain copies of receipts for purchased materials, along with all invoices sent to clients. That way, your business can be protected in the event of an audit and you’ll have a clear record of your income and expenses.

How do you record these transactions? Every transaction should be recorded in one of three categories:

  • Accounts payable (bills and expenses)
  • Accounts receivable (money collected from clients)
  • Job costs (overhead costs such as labor and supplies)

Keeping these records up-to-date ensures that you have a clear, accurate picture of your construction company’s overall financial health, and it may even help you develop a strategy for future contracts.

Having a clear record of your cash flow can also be important if your business ever requires a small business loan. Lenders may evaluate your books to determine your eligibility. Your records may influence the amount of money you can borrow.

Use Job Costing to Manage Project Costs

What is job costing? Job costing is basically a way to estimate the cost of a particular construction project. You’ll have to account for labor, materials, and other overhead costs. These figures can help you determine what to charge for the project as a whole. 

Larger projects will have to be broken down into distinct phases. Each phase should then be broken down into a series of smaller tasks. Finally, you can estimate the cost of each task based on the following categories:

  • Labor (account for taxes, overtime, and any insurance)
  • Materials (concrete, steel, nails, screws)
  • Overhead (rent, utilities, travel costs, salaries)

Don’t make your estimates too tight. You’ll want to leave some room to account for loss due to damaged materials, as well as fluctuating costs for supplies and delivery. 

Your individual project costs can then be factored into your general ledger, helping you see how the revenue generated from each project influences the success of your business as a whole. 

You’ll also want to account for any additional overhead, such as marketing or administrative fees associated with your business.

Use Multiple Bank Accounts to Keep Finances Organized

Some business owners may find it confusing to keep their money in separate bank accounts. But using multiple accounts can make it easier to perform bookkeeping for construction businesses.

Keeping your money in one account can actually become more confusing, since it will be harder to keep track of the money devoted to income, expenses, overhead costs, and other categories. 

Instead, divide your construction company’s finances into different accounts. For example, you might consider dividing your money as follows:

  • One account for paying expenses
  • One account for payroll
  • One account for receiving payments

You could theoretically further divide your expenses into separate categories for supplies and overhead, though a three-part system keeps things simple and manageable. It will also make it easier to compare income and expenses, since the balance from these accounts will provide a quick glimpse into your net cash flow.

Use Milestone Payments to Improve Cash Flow

Earlier, we hinted that construction projects are often completed in phases, which is why bookkeeping for construction companies works a bit differently than other industries. 

But using milestone payments can improve cash flow prior to a completed contract, all while ensuring that you maintain a revenue stream to pay employees and cover the cost of materials.

Milestone payments are the payments you charge after the completion of each phase of the construction project. Obviously, this requires clear communication with the client beforehand, but having your customers make incremental payments can keep your revenue flowing and your projects moving on schedule.

In fact, some clients may appreciate the ability to make milestone payments, as it introduces a layer of accountability into the relationship. Your customers may appreciate the chance to monitor the progress made on their construction job and feel a greater sense of satisfaction as they get to oversee each phase of the project.

Choose the Best Revenue Recognition Method for Your Business

There are three revenue recognition methods you can use for bookkeeping for construction businesses.

The completed contract method records revenue once the project is complete. This can be useful for short-term projects, but it can also be used to defer any related income tax.

The instalment method is usually preferred when your clients make payments over time. You’ll record revenue as you receive these payments, which means you’ll acknowledge revenue during the period in which it’s collected rather than the time of sale.

The percentage of completion method works best for long-term projects. You’ll record revenue as a percentage of the project that’s been completed during each reporting period, which can better help you understand your gains and losses.

Outsource Your Bookkeeping

Many online firms specialize in bookkeeping for construction businesses. When you partner with an online bookkeeping firm, you’ll save yourself the time and hassle of handling your own books. This allows you to spend less time on administrative details and more time managing your projects and workers.

This also helps most business owners to save money. Compared to the costs of an in-house bookkeeper or accountant, online bookkeeping services are surprisingly affordable. Best of all, they can provide expert-level guidance without the need to commit to a full-time employee.

Outsourcing your bookkeeping needs gives you access to some of the best accounting software in the industry. The advanced reporting features associated with these agencies can provide a comprehensive view of your company, helping you make better decisions for your future.

This can be particularly important when it comes to preparing and paying your taxes. Online bookkeepers can manage your funds to ensure that you stay compliant with tax codes and can adequately prepare to pay your annual income taxes.

Constructing Your Future One Spreadsheet at a Time

The professional team at Visory has extensive experience in bookkeeping for construction businesses, and we can help you better manage your company and all its projects. Want to learn more? Explore our website to learn more about Visory’s bookkeeping for professional businesses, or sign up today to get started.

Bookkeeping Best Practices for Law Firms

Law firms have little to no wiggle room for bookkeeping mistakes. Other professional services may face loss of reputation and take a financial hit if they make a mistake. As a law firm, you will be managing your firm’s own finances, plus clients’ money. You could end up in serious hot water if you don’t follow trust accounting laws. Bookkeeping for law firms takes the best of the best minds. 

Are you growing as a law firm? It might be time to look into assistance from experts who know about law practice bookkeeping. Read on to learn about the importance of trust accounting and more.

Why bookkeeping matters for law firms

The precise laws for managing your firm’s accounting and trust accounts will depend on where you operate. In NSW, for instance, the Legal Profession Uniform General Rules 2015 will largely inform how you record your firm’s financials and report on all trust accounts within your control. Simply put: good bookkeeping for law firms keeps them compliant. 

Beyond the need to keep a governing eye satisfied, reliable bookkeeping practices also improve your overall business. When you aren’t playing catch up with your bookkeeping, you will have a better view of your organisation’s financial health. This includes:

  • Cash flow. How much cash is actually coming in and out of your firm? Knowing this critical information helps you plan for the future and spend wisely. 
  • General ledger maintenance. Every transaction in your law firm should be recorded twice: once as a debit and once as a credit. If you spend $1,000 on paper supplies, you have $1,000 less in cash on hand, but $1,000 more in office supply inventory. Accurate bookkeeping helps you keep an honest ledger. 
  • Payroll expenses. For law firms, salaries and other benefits make up a huge portion of your overhead. You can offer responsible pay increases and bonuses only if you know what you can actually afford. 
  • Protect assets. It’s imperative for a law firm to protect its assets with smart investments and a reasonable budget. Good bookkeeping keeps your firm’s overall interests top of mind. 

Best practices for law firm bookkeeping

The needs for your firm will be unique. That being said, there are some common best practices that apply to nearly any law firm. As you begin an inventory of your law firm’s financial health, keep these must-dos on your checklist. 

Set a budget

A bank account in the red can only lead to disaster. Use insights from your bookkeeper and CFO to draft an annual itemised budget. 

Stay on top of trust accounting

In addition to setting up a client trust with the law firm’s name property cited, there are rules regarding record keeping of trust accounts. Your firm must keep, in printed or computerised form: a copy of the trust’s receipts and payments, a copy of reconciliation statements, a copy of the trust’s debts and lenders, and a list of controlled money accounts and their balances. These must be drafted each month. You must also keep detailed records of deposited funds for trust accounts. 

Use detailed financial reporting to identify opportunities

The more refined your data, the better it can inform your decisions. A good bookkeeper will generate regular reports that reflect your spending and income and pass them along to you or your CFO. Once in the hands of your highest financial executive, your reports can turn into the inspiration for new opportunities to grow your business or cut some fat. 

Read More: Visory’s Reporting and Insights

Avoid data entry errors

Data entry errors are a self-inflicted injury that needn’t happen. Double-entry bookkeeping can help you avoid many of these mistakes, as can working with good accounting software. Keep in mind that your law firm finances may require a different software than your trust accounts. There are specific software programmes available for trust accounting — these software systems are compliant with local trust rules and regulations and can assist you from making errors. 

Outsource bookkeeping for your law firm

You may need the help of a professional bookkeeper. If you don’t know where to start, a bookkeeping service is a great jumping off point. They can connect you with professionals who know all about bookkeeping for law firms and how to avoid common pitfalls. Plus, an outsourced bookkeeping team keeps your overheads low and doesn’t require you to clear out an office. 

Are you ready to make monthly accounting and annual tax returns a lot easier? Enlist the help of a trusted team.

Learn more about Visory’s bookkeeping for professional services business.

How Outsourced Bookkeeping Can Help Your Architecture Firm

Professional services organisations have a lot to keep track of. Billable hours, employee bonuses, and accounts receivable are just the beginning. Bookkeeping for architects is a big job. Many firms assume they need to hire someone full-time to manage their books. But there may be a better alternative. 

Architecture firms can outsource their bookkeeping to an online bookkeeping service that is ready to hit the ground running. Partner with someone who knows about architecture firms’ unique needs and can nail a balance sheet to boot. 

Read on to learn more about how outsourced bookkeeping can help your firm keep your reports accurate and current. 

How Outsourcing Bookkeeping Can Benefit Architecture Firms

You want to keep your financial records ready for inspection — whether by the ATO or a potential investor. Why pour hours of your leaders’ time into this task when you can outsource it?

Advancing your bookkeeping strategy is a whole lot easier if you have a dedicated bookkeeper on call. This helps your human resources staff remain dedicated to hiring and company culture, leaving payroll and benefits management to your financial expert. Plus, your executives never have to fret about reconciling bank accounts or tracking down late invoices. 

Here are some of the reasons an outsourced team with experience with businesses like yours can change your entire financial picture for the better.

Outsourcing your books may lead to faster payments

Is there anything worse than phoning your clients again and again to ask for a payment? It’s awkward and frustrating. As an architecture firm, you’re likely billing by project. You need the cheque to close out the billable hours on your end. The more you’re chasing money, the more money you continue to waste!

An outsourced accounts receivable team can streamline the payment process to make it easier for your clients to pay. They may also send out routine reminders that encourage your clients to submit payment. 

An experienced bookkeeper will also be on top of your team’s time tracking, to make sure you are always billing correct amount. Double-entry bookkeeping helps your financial team catch errors early and avoid billing mistakes. 

Getting help lets you focus on your business 

You may be spending more time and resources on your finances than you realise. As your firm grows, it will become untenable to do your own books. One-in-three small businesses say they spend at least 80 hours per year on lodging their taxes alone! Another 13% of surveyed businesses say they spend more than 10 hours per month on payroll taxes. Imagine what you could be doing with your time if you leave financial management to a trusted outsourced team.

Using a virtual bookkeeping keeps your firm financially healthy

Understanding your cash flow keeps you in the loop about your overall financial health. If your books are a month behind, you could be moving toward insolvency and not even realise it. A dedicated virtual bookkeeper will contact you when they spot any red flags or a negative trend in your cash flow. This is invaluable. 

Know Your Numbers to Maintain Your Architecture Business

There are many reasons for insolvency in any business. According to the Australian Securities and Investments Commission, however, there are some common trends for business collapse. The most recent data is about businesses that became insolvent between 2018-2019. 

ASIC says the top three reasons for a business to fail, according to data about recently closed organisations, are:

  • Inadequate cash flow 
  • Poor strategic management of the business
  • Significant trading losses 

Of those three reasons for lodging insolvency, cash flow was reported in 51% of all cases of business collapse. In other words, if an architecture firm has high spending and not enough client funds coming in — you could go under. Having a dedicated off-site bookkeeper can help you identify when you’re spending too much. A virtual CFO can even offer insights and strategy about how to get back on track. 

It’s worth noting that architecture firms and other professional services are not among the top three industries to have collapsed in the ASIC report. Still, knowing your numbers allows you to improve your business practices and make smarter investments.  

The final word

Bookkeeping for architects is a specialised practice. If you outsource your financial needs to someone familiar with project-based accounting in the professional services industry, you’re a step ahead of other firms.  

Learn more about Visory’s bookkeeping for professional services business.

How Outsourcing Bookkeeping Can Help Your e-Commerce Business

All businesses are responsible for keeping accurate books. If you start losing track of your financial health, your organisation is flying blind. Plus, you could end up with serious tax penalties. 

Online stores have additional needs and challenges. E-commerce bookkeeping requires more than the profit and loss statements, general ledger, and bank reconciliations that all businesses use. You’ll also have to navigate tricky situations like foreign sales and website merchant fees that brick and mortar businesses can often avoid. And who is handling your off-site inventory management? 

An outsourced bookkeeping service may be the answer to your hand-wringing. With the help of an off-site financial expert at the helm of your accounts, you can get back to marketing and customer relations. 

What is Bookkeeping?

Simply put, bookkeeping is the process of keeping records about your business’ financial transactions. This includes your expenses, revenue, debt, and more. Bookkeeping records everything from your monthly shipping costs to the fees you pay to third-party payment processors. Then, your bookkeeper analyses the numbers to create insights into your overall financial wellbeing. 

E-commerce bookkeeping requires regular reports. Your financial staff will need to regularly create and analyse documents that include:

  • Profit and loss statements that track your expenses and income over a set period of time. 
  • Cash flow statements that summarise the money you have coming in and out of your e-commerce business. 
  • Balance sheets that provide a snapshot of your organisation’s financial health at a given point in time. 

Your bookkeeper may also track your personnel costs, bad debts, and lodge your annual taxes. These tasks all fall under the umbrella of bookkeeping. 

Why Bookkeeping Matters for e-Commerce Businesses

As someone running an e-commerce store, you may not have eyes on your inventory or your customers. Ever. This makes tracking receipts and invoices all the more important. They are the only tangible evidence of your sales. 

Not only does honest, accurate bookkeeping help you understand the true health of your company, but it keeps you in good standing with the government. The Australian Taxation Office (ATO) requires specific records from each e-commerce business. Tax requirements include:

  • Records that have not been altered and are stored in a way that restricts the information from being changed or damaged. You can often meet this requirement by using secure accounting software. 
  • A minimum of five years of records for your business must be available. The government wants you to keep records five years from the date the records were prepared or obtained.
  • The ability to produce financial records for the ATO on-demand. You must have the ability to produce any and all records relating to your income and expenses if the ATO wants to verify the information. 

Bookkeeping for e-commerce allows you to meet the minimum legislative requirements set by the government. But other entities may also need to see your records. Business accounting documents may also be required for the following situations. 

  • Obtaining credit. If you need a business loan or want to bring on an investor to your e-commerce business, they are sure to ask for current financial statements.
  • Selling your business. If someone wants to buy your business, your bookkeeping records can convince them of how profitable your online store really is. 
  • Working with a CFO. Whether you hire an in-house or virtual CFO, your new executive will need access to financial reports. It’s the only way for them to offer meaningful insights and propose changes. 

Read More: The Ultimate Guide to Bookkeeping for e-Commerce

Why Should You Outsource Bookkeeping

As an e-commerce business, you’re dealing with enough. Website design, shopping cart glitches, and new product photo shoots – this is where your attention needs to go. If bank account reconciliation and month-end cash flow reports start to get in the way, you need help. 

Outsourcing your e-commerce bookkeeping has several advantages over hiring in-house staff. Not only can you save money, but you can access an entire team of savvy financial experts instead of relying on a single person to juggle it all. 

Benefits of Hiring a Bookkeeping Service

Here are some of the reasons you might want to hire a virtual e-commerce bookkeeping team.

  • You’ll save on payroll costs. You can hire a flexible contract bookkeeper who only works as many hours as you need them and/or can afford. You won’t put your e-commerce business in the red paying for a full-time staff member you don’t always know what to do with. 
  • Finding the right person is easier. A bookkeeping service has access to hundreds of experts. They can connect you with someone who knows the e-commerce industry, so you don’t have to personally conduct a tonne of interviews to find a good candidate. 
  • Turnover is a breeze. When you go virtual, you will probably have a few people on your account. If one person moves on, your bookkeeping service will still be familiar with your organisation and can seamlessly transition a new bookkeeper into place. You won’t have a gap between bookkeepers. 
  • It’s a major time saver. Running an e-commerce business is time-consuming enough without having to track your own receipts. Turning to a bookkeeping service frees up many hours each week for your back office staff. 

How To Hire a Bookkeeping Service for Your e-Commerce Business

Does the idea of trusting someone with your bookkeeping and accounting have you nervous? Fear not. When you connect with an experienced team, your books will be in good hands. Not only does a virtual bookkeeping team have an obligation to absolute transparency, but they can automatically create any reports you need.

You’ll want to start the process of hiring a remote e-commerce bookkeeping team by finding a service that knows e-commerce up and down. Interview your potential account manager and let them give you a customised quote and bookkeeping plan. You want to feel comfortable, because this relationship can last for years and have major implications for your business.

Sign up for our free business health check to see how Visory can help you grow your e-commerce business!

How Do Bookkeeping Services Work?

Your business may have had small beginnings, but with the right mix of patience and passion, you’ve had the privilege of watching your business expand and grow. Handling your own financial records might have made sense in the beginning, but is it time to consider partnering with an online bookkeeping service. 

Virtual bookkeeping services can provide all of the same benefits as an in-house bookkeeper at a fraction of the cost. Relying on these specialised services can help you with running your day-to-day operations, preparing your annual tax returns, and everything in between.

Today, we’ll take a quick look at how bookkeeping services work and show you how to choose the right bookkeeper for your company.

What Does a Bookkeeping Service Do?

Bookkeeping and accounting services are designed to manage and plan your company’s financial processes, helping you stay on top of your financial health.

Typically, services include the following:

  • Tracking income and expenses
  • Managing cash flows
  • Paying bills
  • Tax preparation and planning
  • Reconciling bank statements
  • Financial planning
  • Managing payroll
  • Generating financial reports

Typically, a bookkeeping service offers a three-tiered approach to handling your company’s books. The first tier is created by the bookkeeping software specialist, who will create a file that’s customised to the unique needs of your business.

Learn More: Visory’s Bookkeeping Services

The second tier is the full-charge bookkeeper, who will be the one performing many of the duties described above. They can also provide assistance in the event of a tax audit, as well as help with long-term planning to optimise your tax returns.

The third tier is known as the controller. The controller’s role is to increase your company’s financial accountability and monitor your financial statements for accuracy. The controller can also generate regular (often monthly) financial reports and bring any critical issues to your attention.

Keeping Your Financial Records in Order

Online bookkeeping services can also provide valuable assistance in maintaining and organising your financial records. This can be particularly important when it comes to tax planning and strategy. Your receipts and financial documents can be leveraged to minimise your tax debts and increase your chances of a return.

Some business owners may be concerned about handing their sensitive financial records over to a third party, worried that doing so may limit their access or expose their business to hackers or cybercriminals. But the opposite is actually true.

The advanced accounting software employed by today’s virtual bookkeeping firms can give small business owners increased access to their financial data, all while keeping it safely organised on a secure server.

Do You Need a Bookkeeper or an Accountant?

Many small business owners try to cut corners by handling their own books. This may seem like a cost-saving strategy, but it comes with a price. 

As a business owner, your focus belongs on the revenue-generating activities that will expand your business. You may actually be limiting the growth of your business by focusing on administrative details.

A dedicated bookkeeper can help you manage your cash flow, pay bills, handle payroll, and more. Not only does a bookkeeper take these responsibilities off your plate, but they can also provide you with big-picture data that can help you hone your business strategy, preparing you for growth in the future.

How Much Does a Bookkeeping Service Cost?

Bookkeepers are often one of the first employees that business owners choose to hire. Unfortunately, the cost of an in-house bookkeeper can be prohibitively high. 

According to the Institute of Certified Bookkeepers, bookkeepers in Australia start at an average of $60 per hour, with rates jumping to $80 per hour for advanced services. Hiring a full-time bookkeeper can become costly, even if you only need them a few hours here and there.

Compare that to the low monthly rate of today’s online bookkeeping and accounting services. You can outsource your bookkeeping to an online bookkeeper for a few hundred dollars per month. This can save you thousands of dollars when compared to hiring a full-time employee.

In most cases, the monthly price will be influenced by such factors as:

  • The size and revenue of your business
  • The services you need (tax planning usually costs extra)
  • The personalised attention of a dedicated bookkeeper
  • The communication options between you and your bookkeeper

But even the most expensive bookkeeping services will be significantly more affordable than hiring your own bookkeeper.

How Can a Bookkeeping Service Benefit Your Business?

The low costs of a bookkeeping service are often enough to entice frugal entrepreneurs. But partnering with an online bookkeeper has multiple benefits for your business that can’t be overlooked. 

These benefits include:

  • Niche experience and specialised skill sets
  • Faster reporting
  • Access to financial data and monthly reports
  • Personalised financial guidance and support
  • Access to the latest financial software
  • Consistent communication

Think of it this way: If your in-house bookkeeper takes a sick day or goes on holiday, what happens to your books? You’ll likely grind to a halt until he or she returns to the office. In our fast-paced business world, this can create a delay you can live without. 

A virtual bookkeeping service can help keep your business running 24/7, 365 days a year.

Additionally, it’s unlikely that your in-house bookkeeper can match the specialised experience or education of an online team. Partnering with an online firm grants you access to a more diverse group of financial professionals, some of whom may have the specialised training or experience to address complex or unique issues.

How to Choose the Right Bookkeeper

How do you choose the right bookkeeping service for small businesses? With so many choices available, it can be hard to think through your options. But there are several key features you’ll want to consider before partnering with an online bookkeeper.

Industry Experience

First, you’ll want a company that understands your industry. The financial needs of a restaurant may be very different from an online retailer. You’ll want to choose a bookkeeping service that can take these specialised needs into consideration and provide service and guidance that fits your business.

Potential for Growth

Secondly, you’ll want a company that’s capable of scaling along with your business. As your business grows, so will your needs. You may have an increased need for regular communication with your accounting and bookkeeping professionals, or you may need to have additional input regarding tax strategy. 

Learn More: Your Guide for Finding The Best Bookkeeping Service

You’ll want a company that offers services that can evolve with your changing business, one that can help you reach the benchmarks on your road to success.

Clear Communication

Third, you’ll want a company that offers clear, direct communication. You never know when you’ll have a question about your financial health or need to access a crucial piece of data. You’ll want a company that gives you access to your data through user-friendly accounting software.

We’ll Handle the Books; You Handle the Business

Have you been struggling with keeping your books up-to-date? Has tax season been a source of stress? It’s time to get your head out of the back office and back in the game. Visory can help you do that. 

Our team of financial experts can help you run your business more smoothly and efficiently than ever before. Learn more about Visory’s bookkeeping services and discover how our team can improve the way you do business.

How to Outsource Your Bookkeeping

You may realise that your books are getting out of hand, but you also know you’re not ready to hire a full-time bookkeeper. So, what is a growing business to do? Outsourcing your bookkeeping can be the answer to your financial needs. 

Learning how to outsource bookkeeping is easier than you might think. If you have experienced professionals on your side, you can get set-up with outsourced online bookkeeping in just days. A trusted bookkeeper gives you access to your financials whenever you need them, generates vital reports, and offers insights into where your organisation can streamline your processes. All at a lower cost than a full-time employee. 

Read More: 5 Ways Outsourcing Bookeeping Can Help Grow Your Business

How to Outsource Bookkeeping

So you want to outsource your bookkeeping and accounting — where do you begin? Let’s start by going over your options. You can always vet and hire a local bookkeeper to work on contract. This saves money and may allow for a remote relationship. Using a virtual bookkeeping service gives you access to an entire team and allows you to add more people as needed. 

Is one of these options right for your business?

Hire a local freelance bookkeeper

A local freelance bookkeeper has unique advantages. Your contractor may be able to come into the office periodically as needed, so you get some in-person assistance without having to provide a full office space. Your freelance bookkeeper may also know the specific needs of your industry in your area. 

Some freelancers are open to more work. As your organisation scales upward, you can ask if they would like to be hired in a more permanent role. This will allow you to bring on a full-time staff member who is already up to speed on your procedures and familiar with your books. 

Use a virtual bookkeeping service

Instead of hiring a single freelancer, you may also want to engage a remote bookkeeping firm to handle your books on a regular basis. What’s the difference? For one, you will probably have access to more than one person. And, you can add more people to your virtual team as your needs change. Likewise, you can scale back down if you want to. 

A virtual bookkeeping company may also be able to connect you with a wider pool of potential bookkeepers than you’d find in your area. You’ll work with an industry expert who can teach you things even a savvy business owner may not know about potential tax deductions or ways to save money in your field. 

How Does Outsourcing Bookkeeping Work?

If you’re wondering how to outsource bookkeeping, one of your top questions is probably “How is it different than regular bookkeeping?” And what an important question it is. The truth is, business owners can benefit from both traditional bookkeeping and virtual help. Let’s discuss how a virtual team is different from in-house staff. 

In-house vs. Outsourcing

In-house bookkeeping requires a different budget and set of tools than outsourced bookkeeping services. Here are some of the ways an in-house team differs from an outsourced bookkeeper. 

In-house bookkeepers

  • Require a dedicated office space and equipment
  • Represent an added payroll expense and mandatory benefits costs
  • May not yet be necessary for a growing business
  • Will inevitably turn over, resulting in rehiring and training costs

Outsourced bookkeepers  

  • Don’t require an equipment investment or dedicated office space
  • Charge based on a pre-contracted price per week or month
  • Are good for companies at any size
  • Can seamlessly add or change members of your team without disruption 

Is Outsourcing Right for Your Business?

Outsourcing may be the right choice for your business’ bookkeeping needs if:

  • You simply don’t have time to do your own books anymore, yet you don’t need a full-time bookkeeper 
  • You want to free up time to focus more on research, development, marketing, and sales 
  • You have limited office space to accommodate a bookkeeping team
  • You don’t want to train a new bookkeeper every few years
  • You’re not sure what your bookkeeping needs will be over the next few years, requiring flexibility

Outsourcing your bookkeeping is as simple as calling Visory. We can connect you to experts in your industry who will help with tax time, monthly reports, and other financial needs. You gain the benefits of an in-house bookkeeping expert without carrying costs of a salaried employee. Even better, you don’t sacrifice transparency just because your team members are off-site. You can see your vital reports and financial health whenever you need to. It’s the best of both worlds.

Click here to learn more about Visory’s Bookkeeping Services

Tips for Advancing Your Architecture Firm’s Bookkeeping

Business is booming — can your accounting keep up? Bookkeeping for architects requires great attention to detail. As you grow from a small firm to a thriving organisation, it may be time to recruit some additional help in the bookkeeping department. 

An architecture firm must combine project management, invoicing and employee revenue tracking to create a full picture of financial health. Can your staff handle it all? And should they have to? Your unique bookkeeping needs will demand a tonne of time and resources. Here are some tips for advancing your firm’s bookkeeping, and how to call in reinforcements.

Read More: 5 Ways Outsourcing Bookkeeping Can Help Grow Your Business

What do you need to keep track of?

Bookkeeping for architects is different than bookkeeping for retail sales or the entertainment industry. With large-scale projects billed on an accrual basis, you need to be particularly diligent about tracking your accounts receivable. Overheads in architecture and similar fields are also higher than it might be for a smaller operation. 

Here are some of the primary metrics that an architecture firm should keep track of:

  • Overhead rate: Calculate the ratio of indirect expenses to direct labour. The overhead for the architecture industry is typically over 100%; a good number to strive for is about 150%.  
  • Utilisation rate: This rate reflects how much of your employees’ time is spent on billable projects. Shoot for at least 60%. There will always be some time spent on non-billable tasks, such as training new employees, meetings and internal emails, but a high utilisation rate makes you more efficient and profitable. Accurate time tracking is key.  
  • Age of accounts receivable: Most architecture firms want to receive final payment within 60 days. This keeps your cash flow in order and limits the amount of money chasing your staff has to do. 
  • Personnel expenses: Annual leave days, sick days, and other staff benefits are an additional labour cost to track. 
  • Cash flow: This metric is one of the most crucial for any architecture firm. You can be profitable on paper, but if you don’t have enough cash flow you won’t be able to meet financial obligations. 
  • Long-term assets: Keeping an up to date balance sheet shows what you own and what you owe currently. It will also help you track assets and debts in the long term. Long term assets can be anything from valuable equipment to loans. 

Tips for bookkeeping for architecture firms

Your firm’s business development hinges on your ability to remain profitable and flush. When you’re working with billable hours, that means careful bookkeeping that highlights where you’re overspending and tracks outstanding receivables. 

These basic tips are a good place to start if you’re doing an inventory on your accounting health. Ask yourself, have you done these five things?

  1. Develop a reporting pack

A reporting system in the cloud keeps accounting practices organised and transparent. You can run automatic reports using software such as Xero or MYOB, and you can set  your software up to pull data straight from bank accounts and more. 

  1. Outsource your bookkeeping so you can focus on your business

Every minute your executives are spending on the books is a minute they are not billing to clients. Your architecture firm can become more efficient and profitable by outsourcing your bookkeeping to experts who know architecture and similar industries. 

  1. Stay on top of billing and expenses

Catchup bookkeeping should not be a regular practice. Current cash flow calculations and accounts payable data provide a realistic sense of solvency at any given moment. You also want to keep up on expenses because you may be able to deduct some of your expenses. If you don’t have proper records, you won’t be able to claim deductions. 

  1. Review your architecture firm’s books regularly

Running regular weekly and monthly reports helps you catch mistakes. Reconciling your bank statements  can ensure that you catch any missing money, forgotten receivables, and other discrepancies. Bank reconciliations are a good end-of-month routine.

  1. Maintain a chart of accounts

Itemisation helps you sort out your books client by client. You want to keep a chart of accounts so you can always tell which clients are current who have an outstanding bill. By having a digital chart of your accounts, you can properly code expenses and hours to the appropriate account. 

Do you need some help with your books? Visory offers bookkeeping for architects at all stages of business. Whether you are a budding firm or a thriving organisation with years under your belt, we have bookkeepers who can handle your finances. 

Learn More: Visory’s Bookkeeping for Professional Services