Maintaining accurate and complete records will help you understand the requirements for record-keeping for businesses to meet your superannuation, tax, and employer obligations. As a business owner, you need to keep detailed records of all financial transactions related to tax and superannuation as you start, run, sell, cease or change your business. Keeping complete and accurate records will help you manage your business and improve the cash flow of your business. In today’s blog, we’ll discuss record-keeping rules for a business.
Overview of Record-Keeping for Small Businesses
As a business owner, you are legally required to keep and maintain records of all financial transactions. To meet your record-keeping rules and avoid common errors, make sure to understand what records are important for your business and perform accurate record-keeping practices. For this, you can seek help from bookkeepers for small businesses. As your business grows, you need to review what records you are required to keep.
What Records do you Need You Maintain?
The following are some important records, every business needs to keep:
- Date, amount, and character (for instance, purchase, sale, rental, wages) and appropriate GST information for the financial transaction.
- Reasons for the transaction.
- The connection between parties to the transactions, if appropriate.
Five Rules for Record-Keeping for Businesses
The following are five rules for keeping records of businesses. These rules are based on the ATO view:
- You need to maintain all the records related to launching, running, selling, changing, or ceasing your business that are related to your superannuation and tax affairs.
- If your expenses are related to private and business use, make sure you have documents to show expenses for business use.
- The information mentioned in your records must not be modified and needs to be stored in a way that can protect information from being damaged or changed.
- You have to keep records for at least 5 years.
- The 5 year retention period begins for each record when you prepared the record or completed the transactions or acts to which the records relate. Nonetheless, the law specifies that the start of the five-year retention period may alter in certain circumstances.
- In some cases, you need to keep some records for more than five years.
- You have to maintain all the information regarding any procedures you have for ruining digital records.
- You need to show the ATO your records if they ask for those records.
- Make sure you maintain information about the record-keeping system so the ATO can check that it meets legislative requirements for record keeping.
- Ensure that the information you recorded has appropriate details to meet your super, tax, and employer obligations.
- If you are recording data digitally
- using an encryption system – give encryption keys and information regarding how to access the information when asked. You also need to make sure that the legislative authority can extract and convert your information into a standard data format.
- Using passwords to protect data – give information regarding how to access data.
- Make sure your records can be identified, indexed or labelled as you store them.
- Your data needs to be in English or can be easily converted to English.
Benefits of Maintaining Accurate Records
It is important for you to keep your records accurate because these records can be used by a tax agent in Melbourne at the time of tax lodgment. Accurate records will allow you to:
- Make informed business decisions.
- Monitor the financial status of your business to know how your business is doing.
- Keep track of the money you need to pay and collect from clients.
- You can easily meet employer, super, and tax obligations.
- Monitor the cash flow of the business to help you pay on time.
- Avoid paying penalties that may apply if you fail to keep records.
As a business owner, you need to maintain accurate and complete records to get numerous benefits. If you don’t have enough time to record relevant information, you can get help from a bookkeeper. For bookkeeping solutions for your business, you can get in touch with a Reliable Bookkeeping Services provider.