Your business New Year resolution: keep good financial records
The New Year is here and many business owners are resolving to make a fresh start with their business by creating and maintaining good financial records. It is vital that you keep records of the amount of money coming in and out of your business, as it can give an indication of how well your business is going. Legally, as a business owner you are required to keep correct and honest business records. If these are kept correctly the records should explain your business’s financial performance and position, it can also help to prepare you, should you be audited at anytime.
Reliable record keeping involves the collection and organisation of financial documents such as receipts, invoices, bills and cheques. You will have to be vigilant and apply method to what is usually considered madness in order to stay on top of the piles of paper you will gather, however it will make a lot of things easier in the long run.
Organising your financial records isn’t hard and does not take up a lot of time. These days we have the option to have our financial records electronically sorted and filed, although it is recommended that you also keep hard copies and back-ups of the files in order to prevent any disasters that could occur if your computer were to fail. Some basic financial records that your business should be keeping include:
There are a variety of bank statements which ideally should be kept within every business’ financial records, some include:
• Payment summaries
• Credit cards
• Cheque and deposit books as well as the cheque and deposit butts. The cheque and deposit butts should clearly state what the cheque was spent on.
• Petty cash books.
Invoices and Receipts
Be sure to make a photocopy of all of your business’s invoices and receipts that are distributed to your clients. This will assist in keep track of your accounts receivable and will provide you a reference point for the dates sent and the amounts owed.
Keep receipts and invoices for the goods or services your business has purchased and have these well organised. By doing this, tax time can be much easier and stress free, since everything will already be in workable order. This should make figuring out what to claim deductions for, and any other tax concessions a much easier task.
When paying bills with internet banking you should always print out the confirmation page and attach it to the bill to indicate that it has already been paid. Bills paid by person should have the receipt attached and if by cheque, it should be photocopied.
Keep a record of all of the wages/salaries you pay to your employees, superannuation contributions and the monies withheld for tax. One reason as to why it is important that you have these records on file is that it can be used as evidence to dispute claims raised by employees as well as assisting with Payroll Tax requirements.
It is also important to keep records of all of your business’s tax returns, other documents submitted to the ATO, along with those submitted to federal or state entities (eg Payroll Tax documents which are dealt with by the OSR). Contracts, agreements and loans or any other documents that confirm entries in your accounts should also be included. Finally in order to maintain good financial records you will need to have an efficient cashbook that will show daily records of sales, expenses and drawings.
File the records in a safe place and organise them so you can easily find something without having to rummage through. It is a good idea to write down the method in which the documents have been filed in order to allow easy navigation for anyone who needs to access the files. Financial records should be kept for 7 years.
Your records should be filed continuously as a routine so piles of important documents aren’t just left lying around. Although it may seem time consuming, try to remember that it is much quicker and easier to organise your financial records regularly than it is to sort through several month’s worth of documents piled in no specific order! Maintaining financial records is not only important but also helps you to better understand your business’ financial situation and can allow you to easily identify potential problems or capitalise on opportunities.
If you find that maintaining well organised financial records is too difficult or time consuming it is important that you seek the help of a professional. Here at The Quinn Group our experienced team of accountants and bookkeepers can assist you with organising your financial records. For this or for any other accounting issues submit an online enquiry or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.