Talking Cents

Small Business Accounting for Sole Traders

Compared to other small business owners or contractors, sole traders have specific taxation systems that apply to them as a singularly run business. Due to this unique nature, accounting processes including tax can be slightly more complex and therefore benefit greatly from the expertise of a small business accountant.

In a nutshell, sole traders operate on their own. The entire business is in your hands, from inventory to sales to financials. In Australia, the sole trader structure is the simplest set up as it is free to initiate and has limited ongoing compliance costs.

Sole traders are taxed as individuals, so they must report their business income on their tax returns. If this sounds like something you will need assistance with, you can engage the assistance of a small business accountant for a range of professional services. If you do choose to manage this internally, here are some pitfalls to avoid.

Common Pitfalls for Sole Traders

Sole traders are often busy working within their business, offering the services that generate income as well as managing all of the accounting for the business. Whether you choose to go it alone or engage a small business accountant to help, there are several pitfalls to avoid as a sole trader.

Having no system in place: It is important to have a sound system in place so that you can track all of your numbers and transactions. Having professional systems encourages efficiency and accuracy in all accounting and business procedures and therefore makes for positive work practices.

Including personal finances in your business: Having only one bank account seems like the simplest way to go when you're a sole trader because most of your life and work are integrated. It is important to create a business account that is strictly for business transactions so you can streamline your bookkeeping. This will support your cashflow analysis, budgeting and provide you with an insight into the financial health of your business for future planning.

Failing to create a budget: The failure to prepare a budget is one of the most common mistakes businesses make. Investing in resources and assets wisely pays off in the long run when a budget is prepared and adhered to within the business.

If you are a sole trader in Sydney and need help with your accounting, you might want to hire a small business accounting firm. Our small business accounting company M.A.S Partners helps sole traders establish their business processes through times of set-up and growth.

We provide a wide range of business accounting services in Sydney at M.A.S Partners. The highly qualified accountants at M.A.S Partners have been providing accounting solutions to businesses of all sizes and across a wide range of industries for many years. As a result of our accounting services, you can concentrate on what you do best - running your business.

Your accounting must be managed consistently and with great professionalism to safeguard the growth and success of your company. Please visit our website to learn more about our range of accounting services here.