Record keeping essentials for business owners
EPISODE 96
Notes
As a business owner, keeping accurate and up to date records of your transactions is not only a legal requirement but also crucial for the success and growth of your business. So in this episode, I’m sharing some essential record-keeping responsibilities that every business owner should be aware of and why establishing good record-keeping habits is essential.
Understanding Record Keeping Obligations
In Australia, you are legally obligated to keep records of all your transactions related to tax and superannuation matters. This includes revenue and expense records such as invoices, bills, and receipts. You must also maintain documents that outline decisions, choices, estimates, determinations, or calculations made for your business's tax and superannuation affairs. In short, every transaction and relevant documentation must be recorded and retained.
Maintaining accurate and complete records is not just about meeting your legal obligations; it also has a range of benefits for your business. Effective record keeping allows you to monitor the health of your business by keeping track of your income and expenses and helps you comply with any regulatory requirements. Keeping accurate records will also keep you well-prepared for tax time and ATO audits, should they come knocking. Trust me, The Australian Taxation Office has robust data-matching capabilities and conducts regular audits to ensure compliance.
Use Accounting Software
I highly recommend using Xero as your accounting software to streamline your record-keeping process. This software allows you to link your business bank account, ensuring all transactions are automatically recorded. On the topic of bank accounts, make sure you separate your business and personal expenses to simplify your financial management and also protect your privacy.
Have Support Documentation for Each Transaction
While the bank feed in your accounting software provides a great overview of your transactions, it is essential to support each entry with relevant documentation. For sales, provide invoices sent to clients or data from underlying sales systems. For expenses, keep receipts and tax invoices from suppliers. Remember, to claim GST on expenses, you need to have a tax invoice from the supplier.
Leverage Technology
Take advantage of innovative applications like Hubdoc or Dext to streamline your record keeping. These tools allow you to capture and store documents electronically, providing a centralised location for all your records. They also extract relevant data, facilitating smooth bookkeeping into your accounting software.
Organise Your Documentation
Establish a systematic approach to document storage using cloud-based platforms such as Google Drive, OneDrive, or Dropbox. Create folders for different areas of your business, such as finance, HR, legal, and insurance. Within each folder, organise documents by financial year or relevant categories. This structured approach ensures easy retrieval of information when you need it.
By adopting good record-keeping practices, you not only ensure compliance with regulatory requirements but you’ll also gain a clear understanding of your business's financial health. So stay organised, follow the rules, and keep proof of your compliance. These small steps will protect you from potential penalties, make financial management more efficient, and contribute to a good night sleep every night.
LINKS:
Register your interest in the Bookkeeping it Real Mentoring Program here.
About the
Author
Bec is a chartered accountant who worked at Australia’s big firms and banks for 15-years. Faced at a crossroads in her career, she backed herself, left her corporate job and launched Straight Up Bookkeeping. 3 years and 5 staff later, Straight Up Bookkeeping is one of Australia’s leading virtual bookkeeping businesses for creatives, with a mission to free business owners from financial stress so they can grow their empires.
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