Small business accounting explained (in simple terms) [8/12]

Accounting for small businesses is confusing and a leading cause of small business fails in Australia. 

Australian Business Podcast episode #8 is now live on the Rask network: understanding the basics of accounting for small businesses. 

A great accountant is worth their weight in gold but the reality is no one will ever care for your business as you do – so it’s vital you understand what’s happening with your business. Lack of understanding the finances of your business is the number-three 🥉 reason most small businesses fail.

In this episode, I — Owen Rask, founder of The Rask Group — dive into the following business topics (with simple accounting case studies):

1. Why accounting doesn’t have to be a scary word
2. How you can save your business by knowing the basics of accounting
3. The difference between turnover, cash flow, profit and revenue
4. Bank overdrafts and how they can smooth your cash flow
5. What “payment terms” are and why they are so important
6. Multiple case studies

Example 1: Brady’s Lawn Care Pty Ltd 

In our Accounting 101 tutorial and spreadsheet (available in the free course) we’ve used a few examples, including Brady’s Lawn Care Pty Ltd. Brady’s Lawn Care Pty Ltd is a small business that does lawn mowing for private households, schools and other small businesses. Brady employs two people and pays himself a modest wage of $500 per week. He sends his invoices via Xero with 10 days for his customers to pay. And his since he is registered for GST (he generates more than $75,000 per year in turnover), his invoices are actually labelled as “tax invoices” and his customers can check his GST status on the ABN lookup register.

Note: it is HIGHLY RECOMMENDED you follow our accounting 101 tutorial, case studies and take our free accounting 101 quiz inside the free Rask business course.

Please note: if you’re confused about business ‘structures’, like companies, trusts, “sole trader”, etc. this is covered in episode 7 of The Australian Business Podcast — but it’s available right now in our free business course.

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