Running a trade business in Australia, whether you’re an electrician, plumber, carpenter, or landscaper, requires more than just hands-on expertise. Managing the financial side of your business is equally important to ensure long-term success.
In this guide, we’ll walk you through everything you need to know on how to set up bookkeeping for tradies in Australia.
Why Bookkeeping for Tradies is Essential
Before diving into how to set up bookkeeping, it’s important to understand why it’s necessary. As a tradie, you deal with various expenses and revenue streams, such as tools, materials, travel expenses, and payments from multiple clients. Effective bookkeeping helps you:
- Track income and expenses: Ensuring you’re aware of your cash flow.
- Stay compliant with Australian tax laws: Avoid penalties and missed deadlines for GST, BAS, and PAYG.
- Claim tax deductions: Maximise tax savings by keeping accurate records of deductible expenses.
- Monitor profitability: Ensure your business remains financially healthy.
Outsourcing bookkeeping tasks can allow you to focus on your core skills and business growth, while professional bookkeeping services manage your financial records efficiently.
By setting up a proper bookkeeping system, you’ll save time and avoid headaches at tax time.
Step 1: Choose the Right Accounting Software
The first step in setting up bookkeeping for your trade business is selecting the right bookkeeping software to streamline financial management. The good news is that several user-friendly options are designed specifically for Australian businesses. Here are some popular choices for tradies:
1. Xero
Xero is a cloud-based accounting platform that’s ideal for small to medium-sized trade businesses. It offers features like:
- Invoicing and bill tracking.
- Bank reconciliation.
- Real-time reporting.
- GST and BAS compliance tools.
Xero’s ability to integrate with apps such as job management software and time-tracking tools makes it especially useful for tradies.
2. MYOB
MYOB is another popular option, offering payroll, invoicing, and expense tracking capabilities. MYOB Essentials is a good starting point for smaller businesses and covers:
- GST tracking.
- Payroll management.
- Compliance reporting.
If your business grows, MYOB has more advanced packages to meet your needs.
3. QuickBooks Online
QuickBooks is user-friendly, with built-in invoicing, expense tracking, and GST/BAS features. For tradies looking for a simple yet effective tool, QuickBooks offers:
- Automatic syncing of bank transactions.
- Cash flow monitoring.
- Integration with apps like job management software.
Tip: All these options provide mobile apps, making it easier to handle your bookkeeping on the go.
Step 2: Set Up Your Chart of Accounts
A chart of accounts is a listing of all the accounts in your business where you’ll categorise income, expenses, assets, and liabilities. It’s the backbone of your bookkeeping system and is essential for accurate financial tracking.
Maintaining up-to-date and secure financial data is crucial for effective business management, as it enhances cash flow management and expense tracking.
For a trade business, your chart of accounts might include the following categories:
Income:
- Labour Income.
- Material Sales.
- Service Fees.
Expenses:
- Tools and Equipment.
- Travel and Vehicle Expenses.
- Materials and Supplies.
- Advertising and Marketing.
- Rent (if you have an office or workshop).
- Wages and Superannuation.
Assets:
- Tools and Machinery.
- Company Vehicles.
Liabilities:
- Business Loans.
- GST Payable.
By categorising transactions under the right accounts, you can easily generate financial reports and get a clear picture of how your business is performing.
Step 3: Track Income and Expenses
Once your software is in place and your chart of accounts is set up, the next step is to start recording income and expenses.
Managing cash flow is crucial for maintaining financial stability. This involves monitoring and categorizing expenses, separating business and personal finances, and ensuring timely invoicing.
1. Invoicing Clients
Invoicing is a key part of cash flow management. Always send invoices as soon as a job is completed, and include payment terms (e.g., payment within 7 or 14 days). Effective management of accounts payable is equally important to maintain good supplier relationships and optimize cash flow. Using software like Xero, MYOB, or QuickBooks, you can automate invoicing, set payment reminders, and even accept online payments.
2. Tracking Expenses
Keep track of all business-related expenses, including tools, fuel, materials, and subcontractor payments. Your accounting software will allow you to categorise and track each expense type.
Tip: Keep digital copies of receipts, as the Australian Tax Office (ATO) requires records to be kept for at least five years.
3. Reconcile Your Bank Accounts
Bank reconciliation involves comparing your bank transactions with the ones recorded in your bookkeeping system. This process ensures that all transactions are correctly accounted for, preventing errors or missed entries.
Best Practice: Do this regularly (ideally weekly) to avoid any discrepancies and to ensure that your accounts are up to date.
Step 4: Manage GST and BAS Obligations
Most tradies in Australia need to register for Goods and Services Tax (GST) if their annual turnover exceeds $75,000. This involves charging GST on your invoices and claiming GST credits on business purchases.
Accurate bookkeeping is essential for managing your tax liability, ensuring compliance with tax regulations, and efficiently handling GST and BAS obligations.
1. GST Registration
If you haven’t already registered for GST, you’ll need to do this through the Australian Business Register (ABR). Once registered, your accounting software will automatically calculate the GST for your invoices and expenses.
2. Lodge Your BAS (Business Activity Statement)
You’ll need to lodge your BAS regularly, depending on the reporting frequency set by the ATO (monthly, quarterly, or annually). Your accounting software can generate your BAS and help ensure timely lodgement.
Tip: Stay organised with your GST and BAS obligations to avoid late fees and penalties.
Step 5: Claim Tax Deductions
One of the benefits of being a tradie in Australia is the variety of tax deductions you can claim. Keep detailed records of the following:
- Tools and equipment: Deduct the cost of tools, machinery, and other equipment used for work.
- Vehicle expenses: Claim deductions for vehicle expenses like fuel, servicing, and insurance if used for business purposes. Keep a logbook to track business use.
- Home office expenses: If you manage your business from home, claim a portion of your home office costs (e.g., internet, electricity).
- Uniforms and protective gear: Branded uniforms and protective gear are tax-deductible, as are laundry expenses for these items.
Maintaining clear records and managing expenses are crucial for better control of your business finances. Ensure that all deductions are accurately recorded in your accounting system to maximise your tax return.
Step 6: Superannuation and Payroll
If you have employees or hire subcontractors, managing payroll and superannuation is another key aspect of bookkeeping. Outsourcing payroll services can save time and ensure accuracy in wage and benefits payments, enhancing business efficiency and growth. As of 2024, employers must pay superannuation at a rate of 11%, and this is expected to rise to 12% by 2025.
1. Payroll Software
Using payroll software that integrates with your accounting platform simplifies the process of calculating wages, taxes, and superannuation. Most payroll systems will also handle Pay As You Go (PAYG) withholding and ensure that payments to employees are processed accurately.
2. Superannuation Contributions
Ensure that superannuation contributions are made regularly and on time. Late or missed payments can result in penalties from the ATO.
Step 7: Regular Financial Reporting
One of the biggest benefits of having a structured bookkeeping system is the ability to generate regular financial reports. These reports provide insights into your business’s financial health and can help you make informed decisions.
Professional bookkeeping services not only manage your finances and ensure compliance with tax laws, but they also provide valuable insights that enable business owners to make informed business decisions regarding their operations and strategies.
Key Reports to Generate:
- Profit and Loss Statement: Shows your income and expenses, giving you a clear picture of profitability.
- Balance Sheet: Summarises your business’s assets, liabilities, and equity at a given time.
- Cash Flow Statement: Helps you monitor how cash moves in and out of your business, allowing you to anticipate any potential cash shortfalls.
Running these reports monthly or quarterly will give you valuable insights into your business’s performance and help you make strategic decisions.
Step 8: Seek Professional Help
Bookkeeping can get complicated, especially as your business grows. If you’re unsure about how to handle your bookkeeping or just want peace of mind, consider seeking professional help. Maintaining accurate financial records is essential for effective bookkeeping, as it helps identify discrepancies, prevent fraud, and manage income and expenses efficiently. At Grey Space Advisory, we specialise in bookkeeping and accounting services tailored to the needs of tradies in Australia. We can help you manage your finances, lodge your BAS, and ensure compliance with ATO regulations.
Contact Grey Space Advisory Today
Setting up an efficient bookkeeping system can be the difference between financial success and unnecessary stress. Whether you’re just starting or need help managing your growing business, Grey Space Advisory is here to assist. We provide expert bookkeeping solutions tailored to tradies across Australia, ensuring your business stays compliant, profitable, and organised.
Ready to take control of your finances? Reach out to us today for a consultation.
FAQs on How to Set Up Bookkeeping for Tradies in Australia
1. Do I need to register for GST as a tradie in Australia?
Yes, if your annual turnover exceeds $75,000, you are required to register for Goods and Services Tax (GST). Once registered, you’ll need to lodge Business Activity Statements (BAS) regularly to report your GST.
2. What deductions can I claim as a tradie?
Tradies can claim deductions for tools and equipment, vehicle expenses, home office costs, and even uniforms and protective gear. Keep detailed records to maximise your deductions.
3. How often should I lodge my BAS?
The frequency of BAS lodgement depends on your business. It can be lodged monthly, quarterly, or annually, as required by the ATO. Using accounting software can simplify this process by generating BAS reports for you.
4. What’s the best accounting software for tradies?
Popular accounting software options for tradies include Xero, MYOB, and QuickBooks. These platforms offer features like invoicing, expense tracking, and BAS reporting, making them ideal for trade businesses.
5. Can I handle my own bookkeeping, or should I hire a professional?
While you can handle bookkeeping on your own, hiring a professional service like Grey Space Advisory ensures accuracy, compliance, and efficiency. It can also save you time, allowing you to focus on your trade work.
