In part 1 of this blog, I looked at why you should keep records, for how long and the types of documents you should be keeping whether you are a business owner or not. In part 2 of this blog, I will revisit the “Why” of record keeping and also provide you with some record keeping tips which you can start using today.
So besides it being the law to keep your records, there are other reasons why you should do so. Here are a few of them:
- Organised records assist your Tax/BAS Agent to complete your returns more efficiently and quickly which means that your accounting costs will be reduced.
- Allows your Tax/BAS Agent to spend more time on providing you with personal and business tax advice and financial planning as opposed to just sorting out your paper mess!
- Ensures that you don’t miss out on potential tax deductions – you can’t make a claim for an expense that you’ve forgotten about because you didn’t keep the receipt!
- Makes life so much easier for your bookkeeper – again a money-saver for you.
- Helps you find documents you need quickly.
- Helps you keep track of your business health e.g. keeping track of debtors and creditors and stops things from falling through the cracks.
- Assists you in being able to demonstrate your financial position to banks and other lenders if you require a loan or are trying to sell your business.
- If you need to make an amendment to your BAS or tax return, your records will assist you to do so.
- If the ATO request to see certain documents to verify your claims, you will be able to do so easily.
- If the ATO audits you, good record keeping will make the process so much easier and may even help to reduce potential penalties.
Record Keeping Tips
To help you get started with good record keeping habits, here are some useful tips:
- Choose a record keeping system that works for you. This can be electronic or paper-based. I recommend an electronic system. See my blog on how my electronic (paperless) system works.
- If you are running a business (or even if you’re not), definitely purchase an accounting software program. Such a program will become the foundation for much of your business records and is acceptable by the ATO as evidence of income and expenditure.
- Get yourself a good bookkeeper to assist you in operating the software to ensure that your business records are set up correctly.
- Choose a day or half-day to organise your records, enter data into your software and file away paperwork etc. – the more you do it, the easier it will become.
- Make sure you document your record keeping system so that others may access documents etc. in the event that you are unable to do so.
- Always ask suppliers for tax invoices at the time of purchase. Remember, no receipt = no deduction and/or GST credit.
- Make sure that you enter data correctly into your software, as mistakes can be costly. Again, a good bookkeeper will assist you here.
- Keep personal and business records separate i.e. don’t use personal bank and credit card accounts for business transactions and vice versa.
Need More Help?
The ATO have written a document to assist small business owners with record keeping. Download here: Record-Keeping for Small Business
A Tip To Leave You With
Don’t wait until things get out of control. Get on top of your record keeping today! If you need help, invest in the services of a good bookkeeper. This will be money well spent!
For part 1 of this blog please click here