Good record keeping is vital to the success of any business. It helps a business owner understand how the company is performing and ensures they meet their tax and legal obligations. As an accountant, you’ll need to make sure your clients have efficient record-keeping systems in place and that these records are appropriately maintained.
What is record keeping?
The Australian Taxation Office (ATO) requires businesses to keep records of all their transactions. These records can be kept manually on paper or electronically, and they must be in English. Businesses must keep their records for at least five years; if they fail to, the owner could incur hefty financial penalties.
How do you keep records?
Manual record keeping can be time consuming, so most accountants use an accounting software, such as QuickBooks Online, to keep electronic records. Along with automatically recording and categorising incoming and outgoing transactions straight from a business’s bank account, it also securely stores payroll, Goods and Services Tax (GST) and Business Activity Statements (BAS) information in one place.
Which records do you need?
There are two types of records a business needs – financial records and business records.
Financial records include:
- Copies of invoices and receipts issued to customers or clients
- Copies of invoices and receipts for business-related expenses
- Payroll statements that list the payments to employees and contractors
- Details of superannuation contributions and PAYG income tax payments
- Profit and loss statements and balance sheets
- Bank account and credit card statements that show all business transactions
- End-of-year stocktake records that list how much stock the business has on hand
- An asset register that records the value of all the assets the business owns
Businesses records include:
- Legal documents such as contracts and insurance policies
- The lease agreement if the business premises are rented
- Any licences, permits, or certifications
- Employee timesheets, pay slips, and employment contracts
- Occupational health and safety (OH&S) records, reports, and risk assessments
As an accountant, small business owners will often call on you for advice about record keeping. Ensuring that your future clients keep and maintain the correct records will not only make sure they are meeting all their legal obligations, it will also make your job much easier come tax time.