7 SMSF Bookkeeping Tips

 

Bookkeeping is one of the pertinent tasks that an accountant does. Any successful business entity takes bookkeeping very seriously. The term is often used interchangeably with accounting. In fact, some financial analysts do not make any distinction between bookkeeping and accounting.

What is Bookkeeping?

Bookkeeping is the process of entering the financial records of business transactions in the appropriate books. This ensures that the accountant (person who is tasked with bookkeeping) can easily keep track of the flow of finances within the organization. Parties to whom money is owed or who owe the business money can also be easily identified through bookkeeping.

The records can then be used to generate comprehensive financial documents that can be used by the management in decision-making.

What is an SMSF?

The acronym stands for self-managed super funds. An SMSF is a program that allows members to contribute money towards the fund for purposes of accessing the funds after they retire. It works almost the same as a pension scheme. Self-managed super funds are becoming more popular especially in Australia.

A study done in Australia has revealed that by the year 2012, over 450,000 SMSFs were operational with a total asset base of over $440 billion. This is roughly about 30% of the estimated total financial assets controlled by SMSF. These estimates go to show just how much Australians have embraced self-managed super funds.

The figures further demonstrate the need for SMSFs to adopt better bookkeeping practices. This article tries to look at the best accounting practices that can ensure the success and growth of these SMSFs. These are summarized in 7 SMSF bookkeeping tips as given below:

1) Update the Books of Accounts Regularly

This is the very first of the 7 SMSF bookkeeping tips. The bookkeeper should strive to update the accounting books on a weekly or monthly basis. Some transactions bear a great significance and the sooner they are reflected in the books; the sooner the changes they effect can be recognized, and relevant action taken.

The trustees need to be kept in the loop on all the transactions in time so that they can steer the superannuation in a direction that maximizes on member’s benefits.

2) Operate Different Accounts for Different Purposes

A self-managed super fund program does not hold the members funds in some bank account somewhere until they can claim their share. What it does is that it looks for favorable opportunities and invests the members funds in an attempt to boost their benefits.

As such, the bookkeeper needs to open various bank accounts for each investment made. In this way, decisions can be made on which investments are profitable, therefore, retaining them while dropping the ones that constantly generate losses. It is also easy to monitor packets of money here and there instead of the whole amount.

3) Buy the Best Accounting Software

The trend in accounting is shifting from manual to automatic bookkeeping. Software has been developed for accountants that supports real-time reconciliation of financial records. Statistics has shown that SMSFs control large sums of money. Money that needs to be accounted for with precision.

To do that, you either need to have a large number of qualified accountants or to use a set of software that best suits the organization. The cost of such software might be steep, but the long-term benefits are worth it. MYOB accounting solutions should be considered.

4) Tax Compliance

Although self-managed super funds are normally exempted from some taxes, they still have to comply with certain obligations set out by the government. The success of the program needs to be on the right side of the law to avoid lawsuits. The investments made by an SMSF using the Trustees funds are subjected to the appropriate taxes.

5) File all the Receipts

Receipts are proof that a certain transaction occurred. These should be filed and stored for at least 5 years. Receipts are used as source documents while entering transactions in the books of records. Since a self-managed super fund operates many businesses on behalf of its members, there is a need for the bookkeeper to organize all receipts.

6) Avoid Transacting with Cash

Cash is extremely hard to keep track of. A good bookkeeping practice is to make all transactions using debit cards or credit cards. In this way even if the original source document is lost or misplaced, a backup is always available.

7) The seventh of the 7 SMSF bookkeeping tips is to seek the services of an expert bookkeeper.

Sometimes it is just important to seek a second opinion from others. Especially when they are good at bookkeeping.
These 7 SMSF bookkeeping tips will help propel any SMSF to achieve its goals.