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Record Keeping for Small Businesses - Guide

As a small business owner, it’s important to know what records you need to keep and for how long. The Australian Taxation Office (ATO) requires records going back five years in case of an audit, which puts the burden on you as a business owner to maintain detailed files.

When you have detailed, correct records, it can make the end of the financial year a lot easier too. The question is how can you maintain your records accurately without adding extra stress to your daily routine while trying to keep up with all your bookkeeping responsibilities?

Keep reading to find out what to keep, how to keep it, and for how long.

Bookkeeping basics

Bookkeeping is the action of recording a company's financial transactions to maintain accurate financial records.This allows businesses to make critical decisions about operations, investments, and financing. Having clear information regarding your organisation's finances can help you make educated choices. Additionally, it’s necessary when you file taxes and report to the ATO.

Bookkeeping software, like QuickBooks, is an ideal way to help you keep track of your financing.

Generally, you need to keep track of:

  • Inventory
  • Obligations and debts to suppliers, lenders, etc.
  • Net profits
  • Outgoings, including utilities and other overheads and staff salaries
  • Retained earnings


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What records do small businesses need to keep?

By law, your records need to explain all transactions your business undertakes. Here are some records that you should consider keeping.

Employee & contractor records

If you employ workers or contractors, you will need to keep records like contracts. Contracts outline the obligations of your business and the worker. In case anyone breaks a contract, you need to maintain these files until they expire, and then for a few years afterwards. They might come in handy at other times, such as in the case of a difficult employee, client, or lawsuit. 

You will also need to have a record of your employee's tax file number (TFN) declaration, taxes withheld, superannuation contribution, fringe benefits, salary/wage paid, allowances and other payments made.

Expense records

You need to record everything your company spends money on. Receipts are the easiest way to record expenses, so make sure you have a record of all your receipts for the last five years. It can also include tax invoices and diaries to record small cash expenses.

Keeping receipts is not only helpful for tax purposes but also serves as proof of purchase to avail product warranties, which can be useful in the event of a product breaking. 

If some purchases are used for both business and private purposes, it is important to keep a record that shows the proportion you used privately.

Year-end records 

You must record expenses relating to buying, maintaining or repairing business assets. You will also be required to have a worksheet that shows how you calculate depreciation for your assets. 

Other records you may also need to keep include a list of people who owe you money and people you owe money to. You may also need to have a record of capital gains tax and a stocktake sheet.

Income records

You will need to keep a record of transactions that lead to income for your business. This can include a tax invoice issued to clients, a receipt book, cash register tapes and records of sales.

Bank records

If your business is a partnership, company or trust you are required to have a separate business bank account. Sole traders do not need a separate business account but it may make record-keeping easier. 

You may need to maintain banking records which can include bank statements, credit card statements, deposit slips, loan agreements, etc.

Depending on your business structure and the taxes you are required (like a goods and services tax) to pay the record-keeping rules may vary so it is important to check with the ATO or a tax professional on what records your business needs to keep.

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How to maintain your records

It’s important to maintain records that explain all transactions that are in English or a form that is easily converted. You can keep electronic or paper records, but it’s also essential to maintain them in a form that cannot be tampered with, which means a secure system is vital.

You can use accounting software to keep track of everything, ensuring you keep everything in one place. This includes digital receipts, which saves you from having to file stacks and stacks of paper records. Notably, the electronic copies of any paper documents must be accurate and clear replicas.

Electronic documents have other advantages, too. Namely, you can use them to generate tax documents, invoices, summaries, and reports. They save you time and storage space, but make sure you store everything on safe and secure servers.

To learn more have a look at our guide to document management.

How long to maintain records

Generally, you must keep all of your small business records for five years. This period begins when you prepare or obtain the record, or when you complete the transaction.

However, some records must be preserved for longer. For example, if your business owns assets subject to capital gains tax (CGT), you must keep your records for five years after the CGT event occurs. 

Furthermore, the Australian Securities & Investments Commission (ASIC) requires you to maintain records for seven years.

How QuickBooks can help

Accounting software from QuickBooks helps you keep your records up-to-date and accurate. Not only is there a way to store all of your records online, but you can also snap receipts and expenses on the go using the mobile app. The dashboard lets you see how your business is performing in real-time, too. Sign up for a 30-day free trial today.

While every care has been taken to ensure the accuracy of the information presented as at 01 May 2023, Intuit is not providing you with professional advice and we recommend you obtain your own professional advice. Intuit is not liable for your use of the information presented.

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