There are many responsibilities, actions, and jobs that must be completed when it comes to the smooth running of a business. Buying and selling merchandise, paying employees, covering all expenses, and understanding cash flow. However, none are more important than the accurate keeping of all of your financial and accounting records.
As a small business owner, if you’re looking for record keeping tips and tricks that will keep your company’s finances in good stead, then continue below to find out the essentials!
What is Financial Record Keeping?
Financial record keeping is the act of writing down and tracking all transactions of a company within an accounting system. Also known as bookkeeping, this is an essential aspect of accounting. Recording all financial transactions must be thorough, accurate, and precise for a business to succeed and for their finances to meet all regulations and the required standards of operation.
Financial and accounting records refer to all of the documents involved in the preparation of a business’s financial statements. Small companies should keep track of all records pertaining to their business, including:
- General ledgers
- Trial balances
- Financial statements
Why is Record Keeping Important?
Maintaining tidy and accurate records is a necessary action for companies for internal and external purposes. Financial documents must meet the requirements and standards of governing bodies to allow businesses to function and run legally. Audits, compliance checks, and other business regulations and licensing requirements could call for the analysis of your accounting records.
Companies must also keep on top of their finances and transactions to show the precise depiction of their business to receive backing from investors, loans from the bank, and for the overall running of management. How do you know if your business is successful without the documentation that illustrates your assets, liabilities, and cash flow?
How Long Should You Keep Your Records on File?
Not only is it a question of how long a business should keep their financial records on file for their owner reference, but also for the use and analysis by the Canadian government, or other regulating bodies.
CRA Record Keeping
The Canada Revenue Agency (CRA) has specific guidelines for businesses and individuals regarding the best practices for organizing and keeping records. An essential aspect of maintaining good records is ensuring all financial documents are filed correctly for tax return and tax records purposes.
As far as maintaining financial records go, the CRA recommends holding onto all income tax records and relating documentation for a business for at least six years. In some instances, records must be kept indefinitely.
Paper Records vs. Electronic Records
In this age of COVID, the debate between keeping paper records vs electronic records has become central to businesses everywhere. As more companies shift their workflow to remote work and cloud software, electronic records’ need has exponentially increased. But for some, the traditional format of paper records is more up their alley. Which one will work best for your business?
Accessibility of Financial Records
Uploading accounting records online has become streamlined with the use of cloud software and the proliferation of online accounting and management systems across the globe. We live in an age of technological development that can save us time, money, space, and the environment.
Electronic copies can be accessed from anywhere around the world- something remote workers need now more than ever. Researching, referencing, and editing financial records for internal and external purposes is easy when you can quickly access everything online. It will take much longer if you have to drive to where the physical copies are stored.
Protection of Financial Records
The number one concern people face when digitizing their records is the fear of a security breach or hack and the destruction of essential information. Security software and encryption services have rapidly developed into a leading sector of the technological world. These advancements in coding and encrypting data offers peace of mind.
The destruction of accounting records can happen whether they are stored online, or within an office filing cabinet. There is always the possibility of a fire or water leak that can lead to damaged records. In case of destruction, electronic records typically have a failsafe, or backup which can be restored. Paper records, on the other hand, are often the only copy available- once they are gone, they are gone for good.
Storage of Financial Records
The storage of information online is infinite, whereas the storage available in your office is finite. Thanks to technology, we can fit hundreds of thousands of transactional records and financial documentation in our pocket with hard drives and USBs. The same number of paper documents would physically need to be stored in larger offices or warehouses.
Whether you decide to store your business’s records electronically, or physically, is up to you. Take into account the size of your company, and the length of time you must keep your records stored. If you choose to move your record management online, numerous record management systems can work for you.
The Best Software for Records Management
There are many document management systems today that can help small businesses keep secure and meticulous accounting records. The electronic organization of documents through cloud-based management systems allows for quick filling and referencing for your company.
Those looking to go paperless can easily do so with Hubdoc Small Business Accounting App. This software allows businesses to sync all of their financial documents across the board. What makes this app so great is its ability for seamless integration with the QuickBooks Online software to keep your financial data at your fingertips.
FileHold can quickly scan and upload your documents for easy storage. Depending on how many users your business has, you can opt for the Express or Enterprise for more users. This cloud-based system integrates smoothly with Microsoft for excellent records management.
With QuickBooks Self-Employed, this accounting software makes it easy to organize cash receipts, sort your expenses, and prepare your taxes for accurate and in-depth record keeping. The software comes with free support and a QuickBooks community to help users become proficient in every feature- so why not try it free today?