Keeping your business’ records is one of the most important tasks for any small business owner. But sometimes it can be tough to know where to start and what documents you need, especially if you are a new entrepreneur. In this post, we will discuss how to keep records for your small business in an organised fashion so that nothing falls through the cracks.
But why keep your business records?
Not everyone likes filing! And we don’t think of the importance of it until we need to look up something years down the track.
Apart from legal requirements all business owners should establish a filing system to keep documents in a safe place and be able to find them again when we need them. Ideally, we should keep all business records on file, these are payroll related documents, employment agreements, emails, contracts and everything else related to business activities.
If anything goes wrong, it’s much easier to prove your case if you have all of the information documented in a way that makes sense and is easily retrievable.
The key to good recordkeeping is to be organised and efficient.
What are the record-keeping requirements for businesses?
Now, we must understand what the requirements are for our business to meet tax, superannuation and employer obligations. Keeping accurate and complete records will also help you manage your business and cash flow.
Your records should be kept for at least 5 years for ATO. Keep in mind that other organizations may have different requirements. For example, the Australian Securities & Investments Commission (ASIC) requires companies to keep records for seven years.
To meet your record-keeping requirements and avoid common errors, ensure you understand what records are needed for your business and make accurate and complete record-keeping practices a part of your daily business activities.
You are legally required to keep records of all transactions relating to your tax and superannuation affairs as you start, run, sell, change or close your business, specifically: any documents related to your business’s income and expenses.
As your business changes or grows, you may need to review what records you need to keep.
You need to keep good records to meet your tax, super and employer obligations. Remember, you could refer back to some details some years down the track. And equally important you must make sure that the ATO has access to these details when they are needed.
Best tools for record keeping
Businesses are still receiving a portion of paper based documents, so it would be valuable to have an organised filing system. Each business is different but the principle is the same. The purpose is for you to retrieve information quickly when needed. Arrange the records by type, and in chronological order.
Backup your data
This is obvious but sometimes overlooked because you’re too busy managing day to day operations. And if you backup data to an external hard drive it is not as safe anymore. As you would imagine there are unlimited ways that can wipe out that device.
Plus, you’ve to manually transfer the files across to the device. And ideally stored the device at another location for that extra location. If the information is so sensitive that it can not be stored online then we’d use this method of storage otherwise it’s too labour intensive.
Cloud storage for small businesses
Cloud technology could help you store business documents digitally with ease. So if you’re using cloud accounting software, your files can be stored online and be accessible from anywhere with a connected device.
Apart from cloud accounting systems, there are other options to choose from that will be sufficient for your needs. Most have upgrade paid plans if you need more storage space.
Some of the prominent free cloud based storages are:
- Google Drive
- MS OneDrive
- Apple iCloud
If you like to scan all your documents so they can be integrated to the accounting software then you might find Hubdoc a built-in feature in Xero to be a time saver. How it works is this, you upload the document, receipt, bill or invoice, it recognises the key information and translates it into a transaction in Xero or QuickBooks Online. Information such as company name, date, invoice number, amounts. The source document would also be attached to the transaction.
The transaction would then be matched with a bank feed in the accounting software. You just need to check it’s assigned to the account correctly. Saving you valuable time in manual data entry. The system remembers how these transactions are created for repeated bills and invoices.
Hubdoc: stores documents, converts data into Xero. Source: Xero
There are 3 ways to load documents to Hubdoc:
- Using the Hubdoc mobile app take photo of the document
- Email the document to the Hubdoc assigned email address
- Upload the scanned document into Hubdoc
The documents can be then stored in folders and tagged.
If you aren’t sure how this information applies to your situation, ask your account or BAS agent, or contact us for help.