business-people-meeting-office-writing-memos-sticky-notes

Tips for keeping records for your small business.

The coming of tax season is surely not something that excites you as a small business owner. On the contrary, getting your taxes in order is, at best, an annoyance and, at worst, the least enjoyable of all the things you do for your company. At its worst, it causes you to rip out your hair in a state of despair and confusion as you try to make sense of it all.

However, tax time doesn’t have to be a miserable experience. You may ease the pain of completing duties linked to taxes and save money with the help of the following recommendations.

if you are not maintaining an up-to-date system for your company’s record-keeping? It’s possible that you’re doing major damage to your company’s future!

Time is one of your most valuable resources when you operate a small business. However, it is simple to become entombed in one’s obligations when one must attend to the needs of consumers, employees, and providers.

Keeping accurate records for your company should be a daily top priority if you want it to continue to be profitable and adaptable.

If you keep your company record keeping up to date, you will always know your precise financial condition. As a result, you are better able to plan ahead and present a genuine picture to external entities when required to do so.

These entities may include the Australian Taxation Office, Fair Work Australia, The Australian Securities and Investments Commission, and a potential business buyer should the need arise.

PLUS, you will be in a much better position to create good connections with suppliers and customers since you will be able to conduct business with them in an efficient and professional manner, which means a secure future for your company!

Getting your taxes in order is, at best, an annoyance and, at worst, the least enjoyable of all the things you do for your company.

However, if you are not maintaining an up-to-date system, you’re doing major damage to your company’s future!

The account is a record that contains all debit and credit entries of a certain kind in a company’s accounting system.

Examples of accounts include accounts payable and payroll. Many different accounting systems are widespread, and the one you use will depend on the requirements of your business.

Maintaining accurate records will assist protect your company from being audited by the ATO. If you can’t provide evidence to support your claim, you may be required to pay a higher tax rate. The client files are an excellent place to save additional helpful information, such as a customer’s preferences. It is important to keep records of all other costs, travel logs, invoices, and previous tax files. If any clients or staff cause trouble in the future, these records may come in handy.

What is bookkeeping?

Bookkeeping refers to the process of documenting and monitoring all financial activities for your organization, including sales, purchases, and payments. Bookkeepers are responsible for tracking all expenditures and income in order to assist a firm in making educated financial choices.

The purpose of accounting is to provide you with a more comprehensive view of your company’s financial state, ensure that your accounts are in balance, and facilitate more strategic cash flow management.

The basics of bookkeeping

Many owners of businesses choose to retain their financial records in-house in order to save money and maintain direct control over their companies’ financial standing. You’ll be able to keep your money organized and handle difficulties when they emerge if you do it the right way and do it on a regular basis.

An account is a record that contains all debit and credit entries of a certain kind in a company’s accounting system. Examples of accounts include accounts payable and payroll.

There are five primary categories of accounts, which are as follows:

  • Assets. A firm may acquire resources or objects of value as a result of the transactions that it engages in (e.g., inventory, accounts receivable).
  • Liabilities. Obligations and debts due by a corporation to its suppliers, banks, lenders, or other companies that supply goods and services to the firm (e.g., loans, accounts payable).
  • Earnings or money received. Profit made by the firm either via the sale of goods or the provision of a service.
  • Expenses. The amount of cash that leaves a firm so it can make payments for either its assets or its services (e.g., utilities, salaries).
  • Equity., When all of a company’s obligations have been deducted, what’s left over is the worth of an owner’s stake in the organization (e.g., stock, retained earnings).

Setting up each account in order to be able to record transactions in the correct category is the first step in performing accounting for a small business.

This is the information that goes into your general ledger. Many different accounting systems are widespread, and the one you use will depend on the requirements of your business.

However, it is probable that your bookkeeping procedures will not be identical to those of another online retailer.

bookkepping

Why should you keep records?

Keeping detailed records may be beneficial in many different ways. You might find it useful to:

  • Keep an eye on the financial standing of your company so that you can make sound judgments regarding it.
  • abide by the rules regarding your taxes and superannuation.
  • Control the flow of your cash.
  • Providing evidence of your financial health to financial institutions or other lenders.

This is the first obstacle that the majority of people who operate small businesses face.

The sheer volume of unique papers, like invoices, receipts, and other nitty-gritty paperwork that you get or send out daily, may be quite intimidating.

Some seem like a no-brainer to maintain, while others are less evident.

The problem is that some of those documents that don’t appear that vital might end up being crucial in the event that the ATO comes knocking. These are the kind of records that you ought to consider keeping:

Client files

The client file is valuable for more than just tax time.

It is of great assistance to be able to quickly view bills sent to a customer as well as any expenditures incurred as a result of finishing the task. It has the potential to save you time and assist guide any future projects involving your clients.

In addition, client files are an excellent place to save additional helpful information, such as a customer’s preferences for any future projects.

Contracts

Contracts are an essential component of every small business.

Not only do they explain what is expected from both your company and the customer, but they also make it easier to launch a lawsuit against the customer if the customer does not fulfil their part of the agreement.

Therefore, make sure these are documented so that your company can avoid any future issues caused by tough customers.

Purchase orders

You must keep track of everything that your company spends money on, and the receipts are the best way to do this.

When it comes time to file your taxes, these receipts are going to be valuable and will assist enhance your tax return.

In addition, you have a receipt as evidence of purchase, which is necessary for product warranties and exchanges in the event that something goes wrong with the item.

Emails 

Any communication within the business or to clients should be kept. If any clients or staff cause trouble in the future, these records may come in handy. While not entirely helpful for maximizing your tax returns, these records could save you in a lawsuit if the case requires them.

Employment applications

Any communication that takes place within the company or with customers has to be documented.

It is possible that these records will come in handy in the future if any customers or employees cause any problems.

Although keeping these documents won’t help you get the most out of your tax returns, they may come in handy if you ever find yourself involved in a legal dispute and need to defend yourself.

Accounting and tax records 

It is important to keep records of all other costs, travel logs, invoices, and previous tax files. Then, when it comes time to file your taxes, all of this information will be helpful in determining the deductions, returns, and tax credits to which you are entitled.

How to keep your books

Maintain and update financial records

It is critical to the success of your company that you maintain records that are correct and up to date. If you keep good records, you may reduce your losses, better manage your cash flow, satisfy the needs of any legal, regulatory, or taxation body, and increase your ability to analyze your finances.

Your accountant will be able to assist you in organizing your record-keeping method.

Bookkeeping entails dealing with numbers. The majority of the job consists of simple mathematical and accounting tasks.

The specifics are determined by the kind of company you run, but it could involve things like settling accounts receivable and bank statements, recording financial activities, issuing invoices and bills, and keeping track of wages.

  • You will also handle other concerns pertaining to finances, such as tax bookkeeping for payroll, income, employment, and even small company tax deductions. This responsibility falls under the category of “financial matters.”
  • Planning of the company’s budget to assist in maintaining progress and expanding the business.
  • Getting ready to provide financial information to stakeholders, including balance sheets, income statements, cash flow, and changes in equity.

Keeping accurate books needs thoughtful analysis and a basic understanding of legal requirements. In addition, in the event that an audit of your company is ever conducted, you want to ensure that your records are in good order and that any deductions you take are appropriate.

Keep track of what everyone is doing (and spending)

The process of keeping accurate financial records can consume a significant amount of time. You are responsible for ensuring the correctness of each financial transaction, balancing the accounts daily, and keeping track of payments received and paid out to staff.

This indicates that you need to have strong communication and organization abilities to become proficient in bookkeeping and accounting.

It is possible that on any given day, you will be required to handle travel expenses, gather receipts from employees, or pay individuals back for charges incurred.

Establishing a system for the reporting of claims and the payment of expenses helps ensure that no transaction is overlooked and that records are kept current and correct.

Use bookkeeping services to improve processes

Your toolkit of accounting resources for your small business has to include a reliable bookkeeping or accounting program. In addition, the proliferation of virtual accounting and other forms of online bookkeeping services underscores the importance for owners of small businesses to be current with developments in information technology.

Data entry can be streamlined, thorough financial reports can be created, data can be consolidated, and record-keeping can be automated if you have access to competent accounting services or software. It is also a simple method for enhancing accuracy throughout your company and removing the need to spend time performing operations that are repetitive.

How to make record keeping easier?

Keep receipts electronic

You may either take a photo of the receipt yourself or use an already existing photo in order to attach it.

You are not obligated to maintain the paper copies of your original receipts if you have kept electronic copies of those receipts and those electronic copies are an accurate and clear duplicate of the original.

You have the option to either take a photo of your receipt or upload one when using the myDeductions feature.

Get those receipts out of the shoebox that’s been sitting on top of your cabinet and scan them onto your computer. The ATO does not have any issues whatsoever with digital receipts, provided that they are accurate duplicates of the paper receipt.

There are also a lot of obvious benefits associated with using electronic records. Just by looking through a digital file, you may quickly create invoices, summaries, and reports for GST and income tax reasons.

This is really convenient. Using the search tool, which is standard on all computers, makes it much simpler to locate items if you have a naming strategy that is organized and straightforward.

Finally, by storing all of your files on secure servers located all over the world, cloud storage ensures that even in the event of a disaster like a fire or theft, you won’t lose any of your important information.

Create a file plan

By developing a file plan in advance, you will make it far simpler to save documents in the future and access them later.

In contrast, although it could appear to be the most tedious thing in the world (filing! Who wants to do that? ), it might really impact the way records are maintained in your organization.

Additionally, ensure that you have an effective naming strategy; this will be of assistance when you are searching through your information in the future.

Cash Flow

 

Keep personal expenses separate from business expenses

Although it may appear to be obvious, there is still a significant risk involved. You will be tempted to make personal purchases using your company’s credit card rather frequently, but you have to fight off that urge.

This is a poor practice to engage in, but it also causes a significant amount of hassle when it comes time to pay taxes.

You must now sift through all of your personal spendings as well, separating them from your company expenses as you go.

In addition, this will make it more difficult for you to keep accurate records as you sort through your expenditures and differentiate between the company and personal costs.

Maintain a clear separation between the money you spend on your personal life and the money you spend on your business.

Start a new file after each year

Beginning a new file at the beginning of each new year is a simple strategy that may help you save a significant amount of time and make it much simpler to go through your information. Create a new file at the beginning of each new year and save all of your records pertaining to that year in that file.

It will also make it simpler for you to delete documents that you do not need to maintain for any reason, such as after the required retention period of five years has passed.

Use accounting software

The usage of Excel spreadsheets is a significant improvement over record-keeping with pen and paper, but you haven’t seen anything yet compared to sophisticated accounting software. Because of these programs, you may quickly automate parts of your record-keeping tasks, which will speed up the process as a whole.

You won’t have to mess around with the formulae in Excel to be able to deliver ready-made reports that include everything from automatically tallying costs and income to providing the information.

One of the drawbacks of using this kind of software is that it could be too complicated to use straight out of the box. If you are in need of assistance, you might consider hiring an accountant. They are knowledgeable in accounting software such as Xero and can assist you in gaining an understanding of how to make use of it.

Record keeping tips for small business owners

Invoices, receipts, cheques, working papers, and any other documents required to explain the processes by which a company’s financial reports are prepared are considered to be “financial records” according to the definition provided by the Australian Securities and Investments Commission (ASIC), which is responsible for regulating the securities and investment industry in Australia.

The Australian Securities and Investments Commission (ASIC) requires businesses to preserve the aforementioned financial records for a period of seven years1, which can be easier said than done if your company does not have the systems and processes in place to organize and manage your information.

Five steps tips you need to know for records management compliance

Know what records you have to keep

The owners of businesses are responsible for keeping a wide variety of records, including but not limited to financial records, legal records, personnel records, policy and procedure documents, and so on. Therefore, be certain that you are only retaining the things that are absolutely necessary and that you are discarding everything else.

Understand the lifecycle of records

Every record has its own unique lifetime, which might be as short as a few days or as long as it is permanent. The length of time that a record needs to be kept in order to fulfill legal, administrative, monetary, or historical obligations is what determines the records’ lifetime. A record needs to be adequately managed and regulated over the entirety of its existence, which includes the entire duration of this procedure.

The term “records lifecycle” refers to the progression of stages that every record must go through in order to be properly handled throughout its existence. The generation or receiving of records, distribution and use, and finally disposal are the three primary processes that comprise the lifetime of records. At each stage, there are different policies and processes in place.

During the course of an organization’s operations, each document will normally pass through the following stages: creation, access, categorization, change, archiving, backup, and destruction. Understanding this life cycle will make it easier for you to develop corporate procedures and policies for records management that follow best practices.

Use free government services

There are a variety of government entities, like the Australian Taxation Office (ATO) and the Department of Industry, Innovation and Science, that provide small company owners with access to free online resources to assist with records management compliance. For example, the record-keeping assessment tool provided by the ATO is an excellent place to get started.

Keep track of your procedures

Take some notes on the processes you employ while organizing your records. This can help codify your procedures, which is crucial because you may need to delegate record-keeping to a third party as your company expands. This may be accomplished by following the steps outlined in this article.

Seek an information management professional

When it comes to managing their companies’ records, proprietors of small businesses do not need to do it alone. Instead, find a specialist in information management who can work with you as a partner to alleviate the stress associated with records management.

Embrace digital for records management

A growing number of companies are doing rid of their file cabinets and manila folders in favor of solutions that enable them to store, access, and manage digital versions of their information.

It is permissible for companies to preserve their records digitally provided that they meet the following criteria: they must be an accurate and unambiguous duplicate of the original; they must be maintained for a period of five years; and they must be open to inspection by the ATO at any time.

The records must also be stored on a computer or other device that meets the following requirements: you must have access to it (including all passwords); it must have a backup in case the computer fails; and it must let you to manage the information that is processed, input, and delivered.

Tax

How long should your records be kept?

At a minimum, you should save your tax records for a period of five years. The ATO has said that you must do this, in addition to the fact that it is beneficial to your company. This indicates that any possible disagreements with customers over earlier work might be settled with the use of these documents. In addition, such records may be utilized by your company for the purpose of future planning, which can assist in the production of a data-supported prediction of your company’s future.

Keep records pertaining to taxes for five years after they have been created, received, or the transaction has been finalized, whichever comes first.

  • Maintain your financial records for a period of seven years. Documentation for financial accounts, for instance; such materials would be required in the event that the company is put up for sale or subjected to an audit.
  • Maintain employment records for a period of seven years. Payslips, hours worked, employment status, superannuation payments, and leave balances must be kept to remain in compliance with the Fair Work rules.
  • Purchase and lease agreements, brokerage statements, and other sales documentation should be kept for a period of seven years following the disposal of a company property or stock.
  • Other records, including but not limited to those pertaining to
  • Receipts for major purchases include the following: In the event that you may require evidence of purchase in the future, you should save these with the paperwork pertaining to your insurance. Consider the following scenario: the item sustains damage, and you need to file a claim with your insurance company.
    • documents pertaining to real estate and investments: If you remodeled your business premises, you should save all of the receipts and documents of the improvements and related costs you incurred since it may have an effect on your capital gains tax.

How to master small business bookkeeping

One of the most important aspects of managing the finances of a small business is becoming familiar with and keeping track of your financial data. Because of this, if you manage a company, you will either need to take lessons in bookkeeping or find someone else to handle this responsibility for you.

The good news is that not only is it easy to learn how to handle your books, but there are also a few noticeable benefits to taking on the responsibility yourself.

Even if you are unfamiliar with keeping track of your accounts and do not have the financial means to pay a bookkeeping business or a self-employed bookkeeper, you may still educate yourself on the fundamentals and handle things on your own. This article will focus primarily on bookkeeping for online businesses and will examine it on a daily, monthly, quarterly, and annual basis.

Keeping accurate books needs thoughtful analysis and a basic understanding of legal requirements.

Establishing a system for the reporting of claims and the payment of expenses helps ensure that no transaction is overlooked and that records are kept current and correct.

The proliferation of virtual accounting underscores the importance for owners of small businesses to be current with developments in information technology. Maintain a clear separation between your money on your personal life and business.

Create a new file at the beginning of each year and save all of your records pertaining to that year in that file.

Use Excel spreadsheets and accounting software to automate parts of your record-keeping tasks quickly.

Owners of small businesses are responsible for keeping a wide variety of records, including but not limited to financial records. The Australian Securities and Investments Commission (ASIC) requires businesses to preserve financial records for a period of seven years.

This can be easier said than done if your company does not have the systems in place to organize and manage your information. A growing number of companies are doing rid of their file cabinets and manila folders in favour of digital versions of their information.

It is permissible for companies to preserve their records digitally provided they meet the following criteria: they must be an accurate and unambiguous duplicate of the original and must be maintained for a period of five years.

If you remodelled your business premises, you should save all of the receipts and documents of the improvements and related costs. Even if you do not have the financial means to pay a bookkeeping business, you may still educate yourself on the fundamentals and handle things on your own.

Are you having trouble staying on top of your bookkeeping? We are standing by to lend a hand. Bookkept is a team of highly trained accountants and business advisers that can fulfill all of your requirements in terms of accounting and business consulting services. As a result, you will be free to focus on what you do best: operating your company.

For a consultation, please get in touch with us as soon as possible at [email protected] or (03) 8568 3606.

Scroll to Top

Learn how we've helped businesses just like yours