I bet when you started your business you envisioned all the people you would help, the autonomy you would have and the passions you would be able to follow. If you are like most entrepreneurs the thing you didn’t look forward to, or perhaps even consider was record keeping and paperwork.
It is a necessary evil for business owners especially those that are doing it alone. With any luck you will grow your business to the point where you can outsource some of your admin and accounts tasks but it’s still important to have a base knowledge of what your obligations are.
Record keeping means you have a clear picture of where your business sits financially and allows you to easily see where and when you may need to make adjustments. Making business decisions easily and providing financials to banks for loans etc is a big benefit. It also means completing your tax and BAS reports is much easier as you already have the information at your fingertips.
There are several records that are compulsory for small businesses including:
- Income tax records
- Banking records
- GST records
- Payments to employees and contractors including superannuation
- Business expenses and income
- Fuel tax credits
- PAYG withholding
The ATO states:
By law you must keep business records:
- for a minimum of five years or longer after the record is created, updated or the transaction is completed (whichever is most recent)
- in English or in a form the Australian Taxation Office (ATO) can understand.
You’re able to store your records electronically, but you must make sure they are:
- a true and clear copy of the original
- kept for five years
- able to be reviewed by the ATO at any time.
The records must also be on a computer or device that:
- you have access to (including all passwords)
- is backed up in case of computer failure
- allows you to control the information that is processed, entered and sent.
Read more from the ATO on record keeping here
So how do you best keep track of these records, there are a few options available to you:
- Excel spreadsheets – great if you are confident with excel, have a small amount of transactions and don’t have the funds for an accounting package. The downside is they can be time consuming and reporting may not be tailored to your needs.
- Free software like Wave – a great option especially if you are not GST registered and want to pull in your transactions automatically. Drawbacks are GST is a fiddly process as it is a US program and it can be slow to load. Check out this blog for more on Wave’s benefits and downfalls.
- Paid computer based software like MYOB – a great option if you have the funds to buy the program outright. You will be able to use it for a long time in the future and it will provide great functionality. There are also monthly online options as well. The only issue would be that they can be costly.
- Paid web based software like Xero – like computer based program the functionality is the big plus here but web based software also allows you to access the information anywhere as well as providing access for a bookkeeper or accountant. The risk here relates to the security implications of having your financials on the web. The other downside is again cost.
Whatever you decide to use for your record keeping it is vital to keep in mind the ATO’s requirements as well as choosing a system that best suits yours and your business’ needs.
Need some further advice about record keeping for your business? Book your complimentary financial consultation today!