Record Keeping: Best Practices For Small Business Owners

business record keeping, accounting, MYOB, perth bookkeepers

Time is limited as a small business owner: it’s easy to be overwhelmed in looking after your customers, suppliers, and staff. Business record keeping is important, so if you don’t have a clear process for how to keep records of your payments and invoices, your records can become quite messy and inaccurate. This can mean serious trouble for your business!


Why Is Record Keeping Important?

If your business record keeping isn’t up to date and complete, you could find your business:

1) Paying more tax than it should or not enough, which can lead to large debts later on.
2) 
Not meeting ATO (and other governing body) regulations and is at risk of audits.
3) 
Is not as financially stable as it needs to be to support steady growth or longevity.
4) 
Could cost either days of your time or many $1000’s in fees to put right each year.

If your business records are kept up to date, and you know exactly what your financial situation is at all times, therefore you are better able to plan ahead and present a genuine picture to external entities when required – including the ATO, Fair Work Australia, ASIC (and, should the need arise, to a potential business buyer).

 

What Records Do I Need To Keep?

1) Income Tax & GST

The following tax related items should all be recorded in order to provide accurate reports and supporting documents for periodic BAS and your annual small business tax return.

  • records of purchase expenses
  • purchase/expense invoices, including tax invoices
  • purchase/expense receipts, which include an ABN
  • cheque butts and bank account statements
  • credit card statements
  • records showing how you worked out any private use of something you purchased
  • year-end income tax records, including Profit and Loss Statement
  • motor vehicle expenses
  • debtors and creditors lists
  • stocktake sheets
  • depreciation schedules
  • capital gains tax records

 

2) Payments To Employees

  • tax file number declarations and withholding declarations
  • withholding variation notices
  • worker payment records
  • pay as you go (PAYG) payment summaries
  • annual reports
  • employer superannuation contributions records
  • records of any fringe benefits you provided

 

3) PAYG Withholding For Your Business Payments

  • records of amounts you withheld from payments where no ABN was quoted
  • a copy of any PAYG withholding voluntary agreements
  • records of voluntary agreement payments
  • all PAYG payment summaries including PAYG payment summary – employment termination payments
  • all PAYG annual reports

 

4) Fuel Tax Credits

  • fuel you acquired
  • eligible and ineligible fuel use
  • claim calculations
  • any fuel you lost, sold or disposed of

 

How Long Should These Records Be Kept?

  • Keep tax related records for 5 years after they are prepared, obtained – or the transaction is completed, whichever occurs latest.
  • Keep financial records for 7 years. For example: paperwork for financial statements, these may be needed in case of an audit or the sale of the business.
  • Keep employment records for 7 years. To comply with Fair Work regulations you need to keep pay slips, hours worked, employment status, superannuation payments and leave balances.
  • After the disposal of a business property or stock, keep purchase/lease agreements, brokerage statements and sales documents for 7 years.
  • Other records should be kept indefinitely, such as
    • Receipts for large purchases: Keep these with your insurance documents in case you need proof of purchase in the future. For example: if damage occurs to the item and you need to make an insurance claim.
    • Property and investment-related records: Keep all receipts and records of improvements and related expenses incurred if you renovated your business premises as it may affect your capital gains tax.

 

What Are Best Practices For Record Keeping?

1) Set aside a certain time at the end of each day to update everything. This keeps record keeping to a short daily task rather than a long, difficult chore.
2) Invest in business record keeping software such as MYOB, which will also enable you to send invoices, pay suppliers, export reports for your accountant and other features that help you stay organised!
3) Keep all records in an electronic form (PDF etc.) so that you are able to print out a copy whenever required. Ensure that these electronic copies are clear and legible, stored securely and regularly backed up.
4) When you no longer require archived paper records, purchase a shredder to destroy the documents. If you have a large quantity, hire a locked bin from a shredder company, for secure shredding offsite.

 

Learn More About MYOB!

Want to know more? Call us on 1800 803 017!


More Accounting

Source: Etax Blog
Site by AcctWeb