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The Not-so-simple Science of Good Business Record Keeping

Good business record keeping is not only essential for legal reasons and company compliance, it’s part of good management. But your business uses so many different types of documents and probably completes a range of transactions each day, so it can be difficult to know which records you need to keep and why.

This is why you need the right information – and the right processes in place. The result? Good business.

Good business record keeping helps you run your business

There are many ways that keeping good business records can help you run your business:

  • Keep track of your cash flow, profit, and expenses. You can take control of how your business is going and identify any potential issues before they become larger problems.
  • See how your business is performing so you can make better decisions.
  • Make it easier to show lenders, suppliers and potential buyers how your business is performing. This can help you get access to financing, more favourable payment terms and even a good price for your business.
  • Respond to any questions asked by the Australian Taxation Office (ATO), the Australian Securities and Investment Commission (ASIC), the Fair Work Ombudsman (FWO) or other government authorities quickly. It can also help you show them that your business is run well and may protect your business and keep any potential costs or penalties to a minimum if there are any issues.

What business records do you need to keep?

As a business owner, you must keep a wide range of documents about your business. You may be asked to provide these documents to several government authorities, like ASIC, the FWO and the ATO.

The records that you need to keep must include information about:

  • what income your business earns and what it spends
  • who works in your business
  • where you run your business from
  • what your business does

FINANCIAL RECORDS

These are many records that show how your business is performing financially. These documents may include invoices or receipts for goods or services your business has bought or sold, bank statements, a list of all the assets your business owns (and how much those assets have depreciated), business activity statements (BAS), tax returns, and documents that show what loans and credit arrangements your business has.

LEGAL RECORDS

These include any formal documents that show what legal arrangements your business has entered into or that are required to run your business. These documents include any contracts your business has for loans, leases, rent or purchases, your business registration documents, insurance policies, minutes of board and shareholder meetings that have been held, and, if your business is a company, your company’s constitution.

EMPLOYEE RECORDS

Any documents about people who work for you and what they have done at work must be kept. These include their names, contact details, tax file numbers, superannuation details, payroll records, staff attendance records and rosters, and information about any injuries that have happened at your workplace.

Policy and procedures

Most businesses need to document how their business operates. This helps people who work for you and anyone else know what you do and how you do it. This includes health and safety plans, sexual harassment policies and your operating manual. These should also be given to people who work for you so that they’re aware of them. These documents also need to be updated whenever the law changes.

Any other business records

Depending on the type of business you operate you may have other records that should be kept. These may include details about your customers and what they have purchased from you, any customer complaints and how they were dealt with, any issues that you have had with other businesses, marketing and advertising activities, and any quotes or estimates that you have given to customers.

Looking after your business records

Keeping track of your records can be challenging – that’s why many businesses put in place special systems to help them. Your records must be kept:

  • in writing, electronically or on paper
  • in English
  • with explanations of transactions

As you can imagine, keeping paper records can take up a lot of space and may get damaged over time. But sometimes paper documents are required as evidence in legal proceedings or if there is an issue with electronic copies.

Electronic copies can be much easier to find, thanks to the wonders of digital technology, and don’t take as much physical space to store. There are even some apps that let you upload your invoices and receipts directly from your phone. Electronic records still need to be kept somewhere that you can access and control easily, and you need to make sure they’re backed up, just in case your computer fails or is corrupted.

It’s good to use software that meets the Standard Business Reporting requirements. They may even let you lodge some of the documents you need to provide government authorities online.

Privacy laws that affect how you keep records

Australia has fairly strict laws about collecting, using and storing personal information. Sometimes this may seem at odds with record keeping requirements.

Generally, information is personal if it may identify someone. This could include their name, address, phone number and date of birth. This type of information could be on a wide range of documents that you need to keep, including customer invoices and employee details.

The privacy laws specifically allow businesses to keep personal information about their employees as long as it is about their current or past employment relationship. You do need to make sure that you keep this information private and confidential.

To meet your obligations under the privacy laws, make sure you put policies and training in place – so that everyone in your business knows how to look after this type of information. This may include making sure only specific people have access to this information and that you know where any copies are kept.

How long do you have to keep business records?

There are several different regulatory authorities that require you to keep documents and each expects you to keep them for different amounts of time:

  • The ATO needs you to keep your records for at least five years after they were created. You may need to keep some records for longer if they are still relevant to your taxation obligations, like if you purchase a property that may attract capital gains tax when you sell it.
  • ASIC needs you to keep your company records for seven years.
  • The FWO requires you to keep your employee records for seven years.

There are people to help you keep good business records

If you’re concerned about the number of documents that your business needs to have and maintain, don’t worry, help is at hand. An accountant or bookkeeper can help you with your financial records and there are specialists who can make sure you have all the legal and employee records that you need.

If you need help with your business record keeping, get in touch with CCASA. We specialise in company compliance and make company compliance easy.

This information is general in nature and we recommend that you seek legal and/or accounting advice to make the best decisions for your business.

 

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