Many business owners are unsure how long they must keep their financial records. Understanding the duration of keeping and maintaining financial records will help you avoid issues like the disorganisation of digital documents. Proper maintenance of financial records can simplify the bookkeeping process that supports your business growth. With the right approach, a small business bookkeeper can ensure that your records are accurate and updated to keep you out of trouble with tax authorities. This blog post will clarify the important aspects of financial record-keeping.
What is financial record-keeping?
Record keeping is the process of recording, maintaining, and analysing essential financial records for a business. To properly organise your business expenses, it is crucial to maintain comparable documents or receipts from vendors. Adequate records must include the following information:
- The name of a supplier or the name of their business.
- The total expense or the asset’s value.
- A description of bought services or goods.
- The date on which the services or goods were bought.
- The issuance date of the document.
How to maintain your business’s financial records?
The Australian Taxation Office recommends the following ways to maintain your business’s financial records:
- You can keep your financial records manually or digitally.
- If you make copies, they should reflect the original.
- Make sure to keep records in English or translate them to English if the expenses occur in Australia. For expenses occured outside Australia, you can keep records in another language. With bookkeeping services in Melbourne for your business, you can keep your business books accurate.
How long should you keep your financial records?
You must keep your records for at least 5 years to cover the 5-year retention period and the period of review for assessment. For instance, the period of review for:
- An income tax return is usually 2 years for small businesses and individuals and 4 years for other taxpayers, from the day after the ATO gives you the notice of assessment.
- A business activity statement is typically 4 years from the day after the notice of assessment is provided.
- A fringe benefits tax return is 3 years from your date of lodgment.
When your assessment is amended, the period of review for that assessment will restart from the day after the ATO gives you the notice of the amended assessment. The time period for keeping records is:
- For depreciating assets, you must keep the records for as long as you have the asset, and then another 5 years after disposing of the assets.
- For capital gains tax assets, you must maintain the record until you have the asset, and then another 5 years after selling the asset.
- You need to maintain petroleum resource rent tax records for 7 years or more.
Why is record-keeping important for a business?
It’s crucial to keep and maintain financial records of your company. These records serve as the foundation upon which companies build their strategies to expand their business. Here are the benefits of accurate record-keeping for the sustained growth of your business:
- With accurate financial records in place, you can make informed business decisions and expand your business.
- Proper record-keeping can help you stay on top of your business books. Additionally, accurate records can also be beneficial at the time of tax return lodgment. If you are not an expert in dealing with tax matters, you can reach out to the top accounting firms in Melbourne, where you’ll find our accounting firm the most reliable.
- Proper and organised business records can make audits stress-free and easy.
- Accurate financial records ensure the reliability of business data and build reliability and trust among stakeholders.
- Monitoring the financial records of your company can help you know where you can save money.
- With your business records, you can see a financial picture of your business.
Conclusion
Now, it’s clear that you must keep and maintain your records for at least 5 years. It’s crucial to maintain your business records to receive several benefits for your company. To ensure accuracy in your business records, you can get reliable bookkeeping services.