Keeping Financial Records
sjsmith.com.au - blog
Why it matters
Along with running your business day to day comes the added responsibility of having to keep your financial records. Legal requirements vary from country and to country so it’s worthwhile getting to grips about what the requirements are for your area.
In Australia, you generally need to keep all relevant financial records for five years to satisfy the tax department. What are relevant records? Well pretty much anything that supports your tax filing documents. For example, for one of my businesses, I report and pay gst (similar to v.a.t) quarterly. I would need to keep records that support those figures for at least five years. I would also need to keep details of all sales and expenditure amounts plus any tax remitted.
There is one caveat, for records relating to staff, such as wages, time sheets, and on costs like superannuation (pension) payments, I need to keep those records for seven years.
Why does it matter? After having been twice audited by Fairwork Australia (routinely they say) and once had a full tax audit, trust me when I tell you that keeping your records matters. You may also have staff come back to you because they’ve lost their copies of some of their records. Having easy access to past documents made the process so much easier, and faster, for everyone.
While it may seem like an unnecessary burden, it is a legal requirement. You can keep your records electronically but there are always some records you receive in a paper format. If you are keeping electronic records you need to ensure that you can maintain access to them. If you upgrade your computers or your software you must be able to access those past records so bear that in mind.
Many of my records are still kept in paper format and these are kept in archive boxes, secured within large plastic bags (just in case) and kept locked away. Don’t forget your duty of care when maintaining secure staff records!
If your not sure what records you need to be holding onto, ask your accountant or check with your tax office or inland revenue department. Ignorance of what you must do is no excuse.
Till next time,