Better Record Keeping
We all know that record keeping is not the most exciting part of running a business but it is an essential part of any successfully ran business. However, what is the difference between record keeping and good record keeping? Let’s find out.
A business may ‘keep’ haphazard records of their transactions, for example the records are only somewhat recorded and those that are recorded may not be accurate. These disorganised records won’t serve the business properly and may fail to meet legal and tax requirements regarding record keeping.
All records relating to expenses, income, GST, wages, legal documents and occupational health and safety etc must be recorded. These records must be kept accurately and not be altered or edited. For example, the Australian Tax Office (ATO) requires a business to keep records of invoices, receipts, employee payments (including superannuation), tax return information and bank statements. Essentially, any transaction that has a financial or legal element is to be recorded. It is especially important that any information that relates to tax returns also be recorded accurately.
The way in which these records are stored and for how long is also an important factor to consider. A business is required to ‘keep’ these records in such a way that they are secure not only physically but also digitally. The ATO recommends that businesses utilise digital records where possible but whichever option you choose, the records should be stored securely and safely and must not be altered or damaged. Businesses should consider backing up their records and utilising cloud storage of any digital records. Another important thing to remember is that generally most records should be kept for a minimum of five years and should be made available to the ATO if they request them.
So, what are the benefits of good record keeping? Perhaps we should start first with what are the downsides to poor record keeping. If a business doesn’t correctly record keep they risk loosing money at the end of the tax year because of missed deductions. Not only this, but the financial reports a business produces could be inaccurate and bad decision making based on these inaccurate reports could occur. A business with poor records also risks paying their suppliers late, potentially affecting sales and/or production.
Better record keeping enables a business to have a finger on the pulse at all times, enabling its ‘health’ to be monitored and taken into consideration. Decisions, budgets and forecasts can then be made utilising only the accurate information. Legal tax obligations can be met and the business can maximise the expenses they claim and reduce their tax obligations where possible. Although a tedious task at times, good record keeping is a critical part of any well organised business.
Are you in Melbourne and need a hand with your businesses record keeping? Contact us today!
Disclaimer
This information is intended to be general in nature and is not personal financial advice. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided having regard to your objectives, financial situation and needs.
