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How Can Bookkeeping Reduce Tax-Time Burden?

  • Don’t mix your business and personal accounts

Did you know mixing your business and personal finances can lead to confusion? The number one rule for effective bookkeeping is to avoid mixing business and personal finances for a stress-free tax season.

  • Make sure to set up a dedicated business bank account. All your business income and expenses must go through this account. If you use business finances for personal use or vice versa, then it can complicate end-of-year reconciliations, but also risk lost deductions.
  • If you use a personal card for making business purchases, you might miss them when tax season approaches.
  • You must have accurate records of your business income and expenses. Having separate accounts can reduce confusion. Additionally, you should also match each bank statement with your business records, and for this, a bookkeeper can help you prepare a bank reconciliation statement.
  • Use accounting software

You can use a cloud-based accounting platform. Using Xero, MYOB, or QuickBooks alike cloud-based accounting software can reduce manual workloads significantly. Automation can reduce the likelihood of data entry errors, ensuring every transaction is recorded accurately.

  • Reconcile bank accounts

Bank account reconciliation is a crucial part of tax preparation. If you avoid reconciling bank accounts, you will face many challenges later. Therefore, it’s essential to reconcile bank accounts frequently to keep your business books current. If you notice any unexpected financial transaction, check and fix it before it slips your mind. Make sure to review any financial transaction that you have left uncategorised. It is essential to classify your transactions and report them accurately.

  • Organise your invoices and receipts

Tax time panic increases with missing paperwork. If you don’t have a record of your expenses, you might miss an opportunity to claim potential deductions for those expenses.

  • Prepare for BAS, GST, and PAYG obligations

For Australian small businesses, it’s essential to stay on top of BAS and GST lodgment to reduce tax-related stress. A registered BAS agent can handle lodgments on your behalf. They can ensure accuracy and timeliness, which can significantly reduce tax-time anxiety.

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