Keeping Financial Records

As a business owner, it is a legal requirement that you keep record of all your business transactions for a period of at least five years.

Recording your transactions manually can be as simple as using an exercise book or cash book ledger. However, it can be very time consuming and difficult to go back and find entries or keep track of debtors. It will also often cost more in accounting fees, depending on your records.

Keeping records electronically refers to the use of an electronic spreadsheet (templates are available from us on request) or a software accounting package (there are various commercial packages available, ranging from simple systems to complex ones). These can take more time in the initial stages as you learn the program, but in the long run they will be more efficient.

Keeping well-prepared business records will assist with:

  • completing your activity statements and the preparation of your annual income tax and fringe benefits tax returns (if applicable)
  • monitoring the health of your business and making sound business decisions - for example, by keeping track of debtors and creditors
  • managing your cash flow so you can pay your debts when they fall due
  • demonstrating your financial position to banks and other lenders, and also to prospective buyers of your business
  • reducing your accounting bill by providing well-prepared records rather than a shoebox of paperwork

The advantages of an electronic record keeping package are that it:

  • helps you record your business transactions, including income and expenses, payments to workers, and stock and asset details
  • automatically calculates amounts and provides ready-made reporting
  • can produce invoices and provide summaries and reports for GST and income tax purposes
  • keeps up with the latest tax rates and tax laws, and rulings
  • requires less storage space
  • allows you to back up records and keep back-ups in a safe place in case of fire or theft
  • is more time efficient

Keep in mind that with electronic record keeping:

  • it may initially be more expensive to set up
  • you will need to know how to operate a computer and use the software
  • you will need to be familiar with accounting principles and understand how the software calculates and treats your information or employ a bookkeeper (we can recommend one for you).

Business records you must keep

In relation to income tax and GST:

  • sales records
  • records of purchases/expenses
  • purchase/expense invoices and receipts, including tax invoices and ABN’s
  • cheque butts and bank account statements
  • credit card statements
  • records showing how you worked out any private use of something you purchased
  • year-end income tax records
  • motor vehicle log books & mileage records
  • debtors and creditors lists
  • stock take sheets
  • depreciation schedules
  • capital gains tax records

In relation to payments made to employees:

  • tax file number declarations and withholding declarations
  • withholding variation notices
  • worker payment records
  • Pay as you go (PAYG) payment summaries
  • annual reports
  • super records
  • records of any fringe benefits you provided

In relation to PAYG withholding for your business payments:

  • records of amounts you withheld from payments where no ABN was quoted
  • a copy of any PAYG withholding voluntary agreements
  • records of voluntary agreement payments
  • all PAYG payment summaries including PAYG payment summary – employment termination payments
  • all PAYG annual reports