Smart Tips for Record Keeping from Your Bookkeeper
How does your business keep all those important records needed to complete your Business Activity Statement?
In a shoebox, scattered over the desk, some over there while the other over here or are you meticulously organised but you are the only one who knows where anything is? We often see paperwork get out of hand as owners can be so preoccupied with running the business, the administration side slips. A small pile of paperwork gets gradually larger. You miss your first ATO mandated quarterly payments and the record keeping continues to get neglected.
Good tax record keeping may be the most important task you do for your company. You don’t want tax time to roll around and have to panic because your company does not have its tax records in order. Tax records in disarray can cost you deductions and if you would be audited, may cause a problem and cost money. After all, you want to get all the deductions you can and be able to back them up.
- What Records Do I have to Keep Legally Firstly let’s look at what records you are required to keep. To help with this the ATO has a Records Keeping Evaluation Tool to find out what records you should keep and evaluate how well your business is keeping records. However the records you keep should include any transaction that has a financial element such as:
* copies of invoices and receipts you provide for goods sold or services rendered
* invoices for goods or services you purchase or bills you pay such as rent, rates, insurance, license fees etc
* payments to employees and to other organisations on behalf of employees e.g. super funds, PAYG tax
* financial statements including profit and loss statement and balance sheet
* tax return information
* bank account and credit card statements
* end of year stock take records, assets register etc
* anything else with a monetary value to the business.
- Keeping Your Records Logically Once you have your records you then need to keep them in order. Here are some practical tips to help with small business record keeping and to ensure another financial year doesn’t slip by with only a shoebox full of receipts to show for it:
* Set up a good accounting software system.
* Sort source documents into the 12 separate months. If you are operating on a cash basis, the source document will belong to the month that you actually paid it.
* Always use a red pen when writing on source documents and initial and date anything that you write.
* Record the date you processed any transaction on the source document.
* Clearly circle the date and payment amount.
* Create a file in your email inbox called Finances with subfolders for the financial year and save all online financial transactions there for later retrieval.
- Reduce the Administrative Burden
* Use a dedicated business credit and debit card. If you are a sole trader this may be unnecessary for you. But processing your records is going to be a lot easier if you have a personal debit card that you only use for business transactions, and likewise for your personal credit card.
* Request that all statements, including debit card, credit card, and petrol accounts, are sent on a monthly basis. That’s because the key aspect of processing your financial documents is reconciling them on a monthly basis.
The benefit of these last two suggestions is that nearly all of you income and expenses will be captured in statements from both your bank account and credit card account.
So once all of these tips have been implemented you will feel better about entering them into your accounting software package, or handing them across to your bookkeeper or accountant and you can get on with growing your business.
Here at Irena’s Bookkeeping, we welcome the opportunity to help you put these practical tips into practice.
Call us today (02) 9011 5337