PrintEmail

Small businesses often fail because of poor administration, not poor workmanship so although it doesn't make you money if administration is done properly it can help stop you losing it. The trick is to do it as efficiently as you would a job for a client.

With the start of the 2006 financial year looming here are some simple steps you can take to gain control of your administration:

Bank Accounts

• Have separate cheque and savings accounts for your business.
• Bank all income (including cash) into and pay all business expenses from, the cheque account so there is only one place to look for all business transactions.
• Pay expenses using eftpos or cheque and ideally only use a credit card if you pay it off in full each month.
• Draw a weekly amount for personal expenses to minimize non deductible transactions.
• Transfer approximately 15% of your monthly sales into the savings account for tax to avoid spending it before it's due to be paid.

Document Handling
Income

• Have comprehensive terms of trade written on quotes and have clients sign the quote before starting any work.
• Invoice clients immediately on completion of the job using duplicate pre-numbered invoices
• Write details of their payment on your copy of the invoice

Expenses

• Have a folder for unpaid bills
• When paid, write the date and cheque number on the invoices and file permanently by month or alphabetically.
• Staple loose cash receipts to a summary sheet at month end and reimburse yourself from the business account by cheque

Bookkeeping Options

Do Nothing
Pros: Easy
Cons: Expensive as you have to pay your accountant to compile the transactions before work can start on the tax accounts.

Column Cashbook
Pros: Simple system that's widely used. Calculates the GST figures and saves the accountant time at year end.
Cons: Doesn't track debtors or creditors and manual versions require a lot of calculator work.

Accounting Package
Pros: A powerful tool in the right hands. Integrates invoicing through to banking with wide variety of reports for tracking.
Cons: You must budget for training to derive any real benefit and to avoid just using it to create invoices and your accountant being unable to use the reports to prepare your tax accounts from.

How good is your system?
Now you have got some of the basics, test your current system by tracing backwards through it, e.g. could you show someone the worksheet you did to calculate the figures in your last GST Return?

Make a new financial year resolution to give your administration the attention it deserves. You will be surprised how little time it takes to do it properly if you approach it with the same attitude you run the rest of your business!