Keeping receipts can be annoying and it’s easy for them to get damaged or lost, but when you think about each one as another tax deduction they take on a whole new meaning. My top tip is to take a photo of each one so you can save it electronically. The Australian Taxation Office accepts digitally saved copies of receipts that can be clearly read. Keep a plastic or material folder in your ute or van, write “Receipts” on it and put each receipt in here for safekeeping until the end of the week or month when you have a chance to enter it in your books. Once recorded, file it away in a labelled folder in date order. I keep electronic copies of all receipts, save a copy within my Xero accounting software and also have back-up copies on my laptop and a USB.
Don’t mix personal with business
One of the first things you should do is to open a separate bank account, solely for business purposes. Use this account for business spending only and ensure all customer payments go into this account. Mixing business and personal spending can turn into a headache very quickly and can be easily avoided.
As a tradie your business vehicle is probably your daily transport, storeroom, office, lunch room etc etc. You are going to cover a lot of kilometres in a year and so it’s important to get the right amount of tax deductions. There are a few different methods of claiming your vehicle expenses – the ATO website explains them pretty clearly.
You will no doubt have invested in good tools and safety equipment that are used in the running of your business. Keep the details of all this equipment. This can be done in a basic spreadsheet or Word document. Include price, brand, serial numbers and where you bought them. This will help with end of year depreciation (something your accountant can do for you) and is also helpful for insurance purposes.
Get a record-keeping system in place ASAP
This can be an Excel spreadsheet or accounting software – the important thing is to get a system early on. Your priority in the beginning may be knowing you have consistent work and enough cash in the bank to cover your immediate expenses, but down the track being able to get easy access to your financial information (most profitable services, which clients are slow payers etc) can be the difference between having a struggling business and a growing, successful one. If you have the funds I would recommend using accounting software from the beginning. A good bookkeeper or accountant can help you choose. My tip is to get a free trial, make sure it does everything you need it to and that your bookkeeper/accountant can work with it. I previously made a short video called 3 Simple Steps to Getting Your Bookkeeping Sorted. You might also like Do I Need to Use Accounting Software?
Keep an eye on your bank account
If you get into the habit of checking your bank account regularly you will get a feel for what time of the month loan payments come out, when funds are running low, if there is any suspicious activity etc. My software is linked to my bank account and every day I can see any bank activity from the day before.
Get customer contact details
Preferably more than 1 type in case you need to follow up unpaid invoices. If you are extending credit to some customers by allowing them to pay at a later date, it’s only a matter of time before you find some customers that won’t pay you on time or will try to avoid paying altogether. By having several ways to contact them (email, phone, letter) you can follow up unpaid invoices easily. My top tip – keep a written record every time you contact a late paying customer and include dates, what was agreed and who you spoke to. For more help on this topic read Top 6 Tips – Keeping on Top of Customer Payments.
Plan for tax
Open a separate bank account and transfer a percentage of your income aside each month or quarter. Tax time can be stressful when you are running a business so avoid having that extra worry of trying to come up with a large amount of money for tax in one hit.
At the time of writing this post the GST threshold is $75,000. Keep your eye on your GST turnover throughout the year to see if it’s edging towards the threshold – at which point you’ll need to register. For more of my tips on GST read Common GST Mistakes and BAS Tips for Aussie Small Business Owners.
Make sure you have the right insurances. As a Registered BAS Agent I have to have certain insurances in place in order to keep my licence and this is also the case with many other professional bodies.
Thank you to all my readers of the Savvy Bookkeeping Blog. You may have noticed I love writing about small business and not-for-profit bookkeeping. I share more useful and fun bookkeeping information and videos over on my business Facebook page – Festival Bookkeeping. Why not come over and follow me there? Love to hear from you.