Bookkeeping

Bookkeeping is the process of recording your business's financial transactions so that you know exactly how much you're making and where your money is going.

Good bookkeeping processes are vital to running a profitable business. After all, if you don't know how much you're making or where that money is going, you'll have a hard time finding ways to expand your profitability.

There are five bookkeeping accounts you should know and understand:

1. Assets: Anything of value in your business is considered an asset. This includes cash in your bank accounts, your accounts receivable (A/R), balance (since that is money owed to you by customers), as well as inventory, computers, and furniture.
2. Liabilities: Any debts owed by your business are considered liabilities, such as your accounts payable (A/P) balance, (since that is what’s owed to vendors), as well as any loans the business owes.
3. Revenue/income: Revenue, also called income, is simply any monies earned by your business either through products sold or services rendered.
4. Expenses: We’re all familiar with expenses. Your electric bill, your employees’ salaries, and your working lunch with a potential client are all considered expenses.
5. Equity: When you subtract your business liabilities from your business assets, you have equity, which reflects your financial interest in the business.

You also need to understand what debits and credits are before you can start to enter any transactions. Any transaction posted in your ledger or your accounting software will be a debit or a credit.

Payroll

Payroll is the process of verifying and distributing payments to employees at the agreed rate at designated award rates. While the process should be straightforward and easily automated, however, it can easily become a complicated process with lots of room for error and risk that may require help from skilled financial experts as well as Human Resources to ensure it is completed without issue or potential penalties.

The primary function of a business’s payroll department is to ensure its employees are being paid accurately. This includes the recording and compensation of salaries through Single Touch Payroll, superannuation, bonuses and deductions.

Understanding how payroll works is vital for the success of a business. Firstly, because it’s a legal requirement for businesses to do so, and secondly, because your employees deserve to be paid for the work they do.

While bookkeeping and payroll services have different functions, they are often closely related. For example, accurate payroll processing requires up-to-date financial records, which are provided by bookkeeping. Bookkeeping also ensures that financial records related to payroll, such as employee expenses and taxes, are accurately recorded and maintained.

In Australia, many businesses outsource their bookkeeping and payroll services to third-party providers, such as accounting firms or specialized service providers. This can help businesses ensure accurate and timely financial records and payroll processing while allowing them to focus on their core business activities.

If you would like help with setting up your payroll or bookkeeping processes, contact Aspen Corp and speak to one of our expert accountants or bookkeepers.