Record keeping dos and don?ts
By Irene Chong
Keeping sound records means you can make insightful decisions about your business based on actual data rather than 'guesstimation'.
There are few people who really enjoy organising invoices and spreadsheeting everything they do. However, there are many good reasons to focus on record keeping.
By law, you must keep business records for a certain period of time. Under the tax law, you need to keep business records for five years after they are prepared or obtained. Good records will make your compliance obligations easier to meet because filling in business activity statements and tax returns is much easier when you have organised information at your fingertips. Having sound records also means you can make insightful decisions about your business based on actual data rather than a 'guesstimation'.
Here are some tips and tricks to help you keep good records.
File receipts regularly
Unless you consider sorting through a shoebox of receipts a fun afternoon inside, set up a good filing system and sort out your documents as you go. File invoices and receipts as you receive them, or keep an electronic copy in systematically named files in your electronic filing system.
Don't leave filing to the end of the year. Set aside some time each week or month to keep your records up to date.
Know what to record
Besides paperwork from customers and suppliers, there will be other records that you need in order to support claims you make for tax deductions.
If you are setting up your home office or make capital investments such as in plant, equipment, furniture or motor vehicles, make sure you keep a record of the associated costs (including legal fees, transport, installation costs, taxes and duties) so that you can accurately determine your tax deductions.
Don't mix business with pleasure
Keep a clean split between business records and personal records. One way is to keep separate bank accounts or credit cards for business and personal matters.
Figure out a system that works for you
If you're old school, you might stick to a paper record system. If you prefer to keep electronic records, however, think about what system suits you and your business. You might want to put together your own excel spreadsheets or use accounting software packages (such as MYOB, QuickBooks) or a cloud accounting system. Make sure your system keeps the data organised and secure.
If it all gets a little too much, don't be afraid to ask for help. You might want to get a bookkeeper to help you set up a system or direct you towards the right electronic system for your business. But don't forget to keep up the maintenance!
*This article does not constitute financial or financial product advice, and you agree not to rely upon this article in any way.