Guide to accounting for small business in Australia

Read our introductory guide to small business accounting in Australia.

Ron Pearson

Having a solid accounting strategy is crucial for small business owners. This involves keeping a detailed record of your business finances. Keeping an eye on business transactions and business bank accounts will help your long-term growth and financial security. This is why we've compiled this short guide to small business accounting in Australia.

Australian Tax Office requirements

There are certain requirements set by the Australian Tax Office (ATO). If your business employs less than 20 people, you are required to lodge reports with the ATO using Single Touch Payroll software. Also, you have to lodge your income tax return covering the period from 1 July - 30 June (tax year). According to the ATO, all businesses have to submit business activity statements on a monthly, quarterly, or annual basis. This is to determine goods and services tax, withholding tax, etc.

Lodging reports
If your business employs less than 20 people, you are required to lodge reports with the ATO using Single Touch Payroll software.

What should you record in small business bookkeeping?

  1. Tax invoices for supply
  2. Purchase and expense forms
  3. Tax invoices
  4. Year-end records
  5. Records of income and sales (eg receipts, cash sales)
  6. Bank statements
  7. Records on employees (eg payroll statements)

Other tips for small business accounting

  • Keep financial transactions handy with accounting books
  • Record entries in chronological order and in a double-entry bookkeeping system
  • Update entries at the end of each accounting period.
  • Keep accounts in the general ledger
  • Separate your accounts payable and accounts receivable records
Lightbulb drawn on a sticky note
Keep financial transactions handy with accounting books.

Step-by-step small business accounting

Get a business bank account: Always keep personal and business finances separate - this is why a separate bank account is crucial.

Carefully pick an accounting method: Choose either cash basis accounting, which records income and business expenses when receiving cash for your product or accrual basis of accounting, which records income at the point of sale. This means income gets accounted for, even if you haven’t received the funds into your account yet.

Develop your small business bookkeeping system: For most businesses, having a (small) business accounting software is a helpful step - this keeps all your statements and worksheets in a single place for reference.

Man on laptop drinking coffee
For most businesses, having a (small) business accounting software is a helpful step - this keeps all your statements and worksheets in a single place for reference.

Maintaining your bookkeeping and accounting system

Daily maintenance

We would advise you to always start your morning by checking your business ledgers. Review the current status of your bank account and estimate what income is likely to be generated throughout the day. Maintaining cash flow is crucial in accounting for small businesses.

Weekly maintenance

By the end of a work week, we would advise you to record all transactions in your accounting software or spreadsheet, document and review unpaid bills, receipts, cash payments and cheques and pay invoices owed to your vendors, of course recording the transactions.

Monthly and quarterly maintenance

As a small business owner, we would advise you to undertake the following tasks on a monthly basis:

  • Review and, if necessary, restock your inventory
  • Review due accounts receivable and chase up payments
  • Process payroll
  • Check you are paying applicable tax to the ATO
  • Review the balance sheets to see how your business is managing liabilities and assets.
  • Review your profit and loss statement to see how you’re measuring up against your quarterly budget

Annual maintenance

At the end of the financial year, the main accounting task will be to prepare the business activity statement for the ATO. We would also advise checking all reports and business financial statements, scrutinizing their accuracy and noting any areas that could use improvement.

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