Bookkeeping: How Do You Keep Good Business Records?

Bookkeeping is one of the most important aspects of any business, large or small. Maintaining accurate and up-to-date records is essential for making sound business decisions, tracking growth and progress, and preparing tax returns.

But bookkeeping can be confusing and intimidating for business owners who are unfamiliar with the process. In this post, we will outline the basics of bookkeeping and provide tips on keeping good business records. We hope this information will help you manage your finances more effectively and streamline your business operations.

It's important to keep good records. Bookkeeping is a process of tracking your business income and expenses to make informed decisions about your finances. There are many different ways to keep track of your bookkeeping, and it's important to find one that works best for you.

In this post, we'll explore some of the most popular bookkeeping methods and discuss the benefits of each one. We'll also provide tips on how to get started with bookkeeping in your own business. So whether you're just starting or looking for a better way to manage your finances, read on for advice on how to keep good business records!

If you're running a business, bookkeeping is critical to your success. It's important to keep good records of all your income and expenses to make informed decisions about your business.

But tracking everything can be a time-consuming task - especially if you're doing it manually. Fortunately, many tools and services are available to help make bookkeeping easier. This article will give you a brief overview of some of the most popular methods for keeping track of your business finances.

Let's get started!

Conditions set by the ATO

It is possible to keep business records in either paper or electronic forms. When it comes to reporting tax and superannuation obligations, the ATO strongly suggests making use of electronic forms as it transitions into electronic reporting and Single Touch Payroll (STP).

Once you've set up your system, maintaining electronic documents should make certain jobs simpler and save you time overall. Keeping records for the ATO in an electronic format is usually sufficient, unless a particular statute or registration demands a paper or hard copy instead. The next step is to investigate whether or not the law mandates the retention of paper copies for the judicial system.

An electronic version of a paper record can be submitted to the ATO for approval as long as it is a true and clear production of the paper record and satisfies the criteria for record-keeping. You will not need to maintain the paper version if, for instance, you have already digitised and saved a copy of it; in that case, you just need to keep the electronic copy.

A piece of advice for those who keep records is to keep them in a safe and secure location that is guarded by passwords, and to back them up both on a hard drive and in the cloud in case your computer should ever malfunction. The ATO recommends that you have access to your hard disc and that you control the process of information entry and transmission.

What Does "Financial Record" Mean?

Financial records can include:

• invoices
• receipts
• cheques
• books of prime entry
• working papers and other financial documents.

These records may exist in electronic form, but they must also be capable of being printed out (for example: printed as paper copies).

It does not matter if your records are kept by another party (such as your accountant or registered agent), if you are an officeholder in the company, you are still responsible for giving copies of your records to auditors and anyone else who is legally permitted to inspect your records.

In order to comply with the requirements of Section 286 of the Corporations Act, a company must keep its financial records for a period of at least seven years after the transactions that those records cover have been finalised.

How Long Must You Be Responsible For Keeping Records?

In most cases, you should plan on keeping your records for a period of five years. You are required to retain records dating back to either the beginning or the end of the transactions (or acts they relate to). On the other hand, you'll need to retain your records for a longer period of time than five years if your company holds any assets. The Australian Securities and Investments Commission (ASIC) mandates that businesses must maintain their records for a period of seven years.

You are required to maintain all of your records and documents for a period of time that varies from one government agency or organisation to the next based on how long they will need access to the material.

• The Australian Securities and Investment Commission (ASIC) mandates that businesses must maintain their records for a period of seven years.
• The Fair Work Ombudsman (FWO) mandates that you maintain personnel data for a period of seven years.
• You are required by the Australian Taxation Office to preserve records for a period of five years after they were first made. On the other hand, you can be compelled to maintain your records for a longer amount of time if your company has physical assets.

Utilising a professional record-keeping software application that is in accordance with Standard Business Reporting is a wise decision (SBR). Without previous experience in bookkeeping, however, it may be challenging to organise your record-keeping system properly. If you are having trouble starting your business or if you have outgrown your current procedures, there are businesses that can assist you with your business records and set up the most effective system for you.

What Records Must You Maintain?

When you run a business in Australia, you are legally required to retain a variety of records, any of which the Australian Taxation Office (ATO) may request to inspect at any time.

These are the following:

• financial records
• legal records
• employee records
• policy and procedures
• other business records.

1. Financial Records

Your company's financial records will describe how you file your tax return, as well as indicate how your cash flow and the financial situation of your company have changed over time. These documents consist of the following:

• receipts and bills for the products and services that you have provided to customers.
• agreements reached with several vendors
• bank statements
• a record of the assets owned by your company
• schedules for calculating depreciation
• documentation required by the government, such as your Business Activity Statements (BAS) and your annual tax returns
• loans for businesses and stock ownership

2. Legal Records

The following are examples of legal records that document how you run your business:

• registration documents
• leases
• contracts with suppliers and clients
• insurance

3. Employee Records

You will need to demonstrate to the ATO that you are able to pay your employees in a manner that is compliant with their tax and superannuation requirements. There is a possibility that insurers, the Fair Work Commission, or a state Work Health and Safety organisation will need you to disclose them employee records.

If you have staff members, you will be required to keep records of the following:

• payrolls, time sheets, and attendance records
• bank accounts, facts about your tax filing number (TFN), and information about your superannuation funds
• contact info
• performance at work and previous experiences

4. Policy and Procedures

When new employees start working for you, you will be required to give them a copy of your policies and procedures, and these documents can also be incorporated into their employment contracts. In addition, when working on site, several sectors will enquire about your company's policies and operating processes. Last but not least, make sure that your policies are always up to date and reflect any changes in the law.

These records consist of the following:

• plans for health and safety in the workplace
• clothing standards
• sexual harassment policies
• instructions for daily operations

5. Other Documents Relating to the Company

There is a wide variety of other corporate documentation that needs to be kept, including the following:

• registries of customers
• complaints that were obtained
• disagreement specifics
• the quotes that were offered and won
• advertisement and marketing campaigns
• insurance policies

What Else Must I Think About?

Additionally, businesses should think about compiling monthly financial accounts in order to monitor their financial performance and locate potential dangers. The following are some examples:

1. A complete and thorough income statement

This gives an overview of the company's revenue and expenses, as well as the profit or loss that was generated as a result.

2. A statement of the company's current financial situation

This offers a summary of the company's equity as well as any debts that it is currently responsible for.

3. A statement that outlines the cash flows

This is a rundown of any cash that has been received or spent.

If you are uncertain about the kinds of documents you ought to preserve, it is strongly suggested that you seek the guidance of an accountant or another qualified professional in the field of business.

Manual vs Electronic Bookkeeping

In manual systems, data is recorded in a succession of books or ledgers that can be purchased from a newsagent or an office supply store. They are less likely to become corrupted, are easier to use, and are simpler to keep track of. Setting them up is easy and inexpensive.

The quantities are automatically calculated by electronic systems, reports are simple to prepare, and electronic systems are simple to back up. Electronic systems take up less actual room to keep. Spreadsheets, accounting software, and other web-based and client-server-based systems are examples of electronic formats.

Software

Your transactions can be recorded, your GST can be calculated, ledgers can be updated, financial statements can be prepared, and invoices can be generated with accounting software, which may be purchased off the shelf or customised to your needs. The Australian Taxation Office (ATO) advises local companies to make use of software that is compatible with Standard Business Reporting (SBR).

Web-based

Web-based software applications allow you to update your books from anywhere in the world and provide a storage system for your financial dealings that is hosted in the cloud. They may be less expensive than a digital option, but they come with more danger to your data's safety.

Point-Of-Sale Systems

It's possible that you'll need to update or switch to a Point-of-Sale (POS) system as your company expands, especially if the structure of your firm has been reorganised.

These systems are able to make adjustments to records of sales income and inventory automatically, as well as generate receipts and tax invoices, process EFTPOS transactions, as well as credit and debit card sales. However, these systems may be rather pricey, so you should seek the advice of an expert before making a purchase of this kind.

If you do not have a history in bookkeeping, it might be challenging to set up your record-keeping system. ITP is able to assist you with getting your business records in order and setting up the most effective system whether you need assistance getting started or have outgrown your existing procedures.

Take Advantage of Digital Records Management

Many companies are getting rid of their file cabinets and manila folders in favour of digital alternatives that will allow them to store, access, and manage their information.

If a company meets the following criteria, they are allowed to maintain their records electronically:

• a copy that is faithful to the original and unambiguous;
• held for a period of five years; and
• open to inspection at any time by the Australian Taxation Office.

Additionally, the files need to be stored on a computer or other device that possesses the following characteristics:

• you are able to access (which includes having access to all passwords);
• is stored off-site in the event that the computer fails; and
• permits you to maintain control over the information that is processed, entered, and transmitted.

Advice for Owners of Small Businesses Regarding Record Keeping

Invoices, receipts, checks, working papers, and any other documents that are required to describe how a company's financial reports are created are considered to be "financial records" according to the definition provided by the Australian Securities and Investments Commission (ASIC).

The Australian Securities and Investments Commission (ASIC) mandates that businesses preserve the aforementioned financial records for a period of seven years, which can be easier said than done if your company does not have the systems and processes necessary to organise and manage your paperwork.

1. Understand the records you must maintain

The owners of businesses are responsible for keeping a wide variety of records, including but not limited to financial records, legal records, personnel records, policy and procedure documents, and so on. Make sure that you are just keeping the things that are necessary to you and that you are discarding anything else.

2. Learn the stages that records go through

The life cycle of a record in an organisation often consists of numerous stages, including creation, access, classification, modification, archiving, backup, and eventual deletion. If you understand this lifecycle, it will be easier for you to develop corporate processes and policies for records management that follow best practises.

3. Make use of publicly provided resources

There are a variety of government entities, like the Australian Taxation Office (ATO) and the Department of Industry, Innovation and Science, that provide small business owners with access to free online resources to assist with records management compliance. The evaluation instrument for record keeping provided by the ATO is an excellent place to begin.

4. Keep a record of your actions

Take some notes on the processes you employ when organising your records. This can help formalise your processes, which is crucial since as your company expands, you may need to delegate record-keeping to a third party. Having formalised processes will help.

Consult with an experienced information management expert.

When it comes to managing their companies' records, proprietors of small businesses do not need to go it alone. Instead, look for an expert in information management who can work with you as a partner to alleviate the stress associated with records administration.

Benefits of Maintaining Good Records

The majority of people only keep records around tax season, but if you have a solid record-keeping system in place, it can also assist you in keeping track of how well your company is doing overall.

Keeping detailed records can provide you with a more realistic image of your company, allowing you to evaluate how well things are doing and identify any possible issues at an earlier stage rather than later.

The following categories of records need to be maintained by you:

• all income (including cash, EFTPOS, credit or debit card, online sales and other payments you may receive)
• expenses (such as running expenses, business travel expenses, and payments you make to workers and contractors, including any cash compensation) (such as operating expenses, business travel expenses, and payments you make to employees and contractors, including any cash wages)
• bank statements
• documents relating to the acquisition of goods for the business or the usage of its stock for personal purposes (to help you work out the business portion to claim as a deduction and account for the stock used).

Finding a system that works for you is the most important step in maintaining accurate records; record-keeping does not have to be difficult. The following are some suggestions that will make it simpler to keep records:

• Storing documents in an electronic format (if possible)
• Always be sure to retain records of your transactions.
• Take photographs of your receipts to prevent records from becoming unreadable.
• Keep all of your company's records, including those pertaining to income, expenses, and bank transactions.
• Always keep your personal records and your company records separate.

Keep in mind that if you do not keep adequate documents, come tax time, you may find that you are unable to claim anything to which you are legally entitled.

Good record-keeping instruments

You can use the myDeductions service provided by the ATO to keep track of your income and deductions throughout the year if you are a lone proprietor with straightforward tax obligations.

Reviewing your record-keeping procedures with the assistance of the ATO's evaluation tool can help you determine whether or not you are still headed in the correct direction.

Record-Keeping Procedures To Think About

1. Decide on electronic record-keeping

If you are still keeping your books manually, now is the moment to transfer all of your financial information to an electronic format. You will be able to save resources, such as time, money, and effort, as well as gain an additional layer of security and convenience by acting in this manner.

2. Use cloud accounting software

When it comes to preserving and organising your information, in particular, we recommend making use of accounting software that is hosted in the cloud. For instance, the majority of accounting software can create invoices for customers and keep track of accounts receivable.

The fact that it is automated is undoubtedly one of the many advantages of this. Because of this, there is no longer any need for you to manually enter your data.

One possible real-world implementation of it is as follows:

The process of incorporating your banking information into your programme. The information regarding your sales, revenue, or purchases will be uploaded in an automated fashion to your cloud accounting software. There is no reason to spend hours manually transcribing these data or to take the risk of making mistakes while entering the data.

The following items are included among the most effective cloud accounting software for the majority of companies and accounting firms:

• Xero
• QuickBooks Online
• FreshBooks
• Sage
• Netsuite

How about utilising Excel or some other legacy software?

It is still possible to organise record-keeping requirements by making use of older technologies and spreadsheets created in Excel. However, you should be aware that these choices may come with a number of restrictions.

For example, if you want to instal it, keep it up to date, and maintain it, legacy accounting software will require a larger budget. Because it is installed directly on your personal computer, it is possible that you will be unable to access your data when you are away from the office. Additionally, as time passes, it will become out of current, which will necessitate a greater financial investment on your part to acquire its upgrades.

On the other hand, keeping records in Excel requires a significant amount of time and effort. Users also need to hold a significant amount of expertise regarding this software in order to make the most of its automatic functions. Include in this the possibility of errors occuring during data entry, which could result in financial harm to the organisation.

An option for sole traders

For sole proprietors, the Australian Taxation Office (ATO) suggests using the myDeductions service instead of paper forms. This cost-free application provides a straightforward and uncomplicated method of documenting one's income and expenditures, complete with screenshots of one's invoices and receipts. You can also put this to use for some of the things linked to taxes.

The fact that it is a free service means that it does not have nearly as many features as paid cloud accounting software.

3. Establish a reliable method for managing documents and records

The elimination of inaccuracies in data collection and processing is one of the primary goals of an effective document and records management system.

Your daily data capture, storage, editing, and file-sharing activities conducted through the use of a cloud-based system are all included in document management. Its purpose is to hasten the process of document approval and automate repetitive operations in order to cut down on the amount of manually entered data.

On the other hand, records management refers to the policies and standards that your organisation abides by when it comes to handling the many sorts of documents. It is essential to carry out the following in order to develop a reliable records management system:

• finish compiling the inventory of the records,
• the owner of each record should be identified,
• find out how long you are supposed to retain these records,
• implementing the finest record-keeping procedures will ensure that records are preserved over the whole lifecycle of the record.
• handle document disposal,
• develop a strategy for responding to emergencies, and
• review and revise the operating procedures in order to strengthen any areas that need improvement.

Here Are Some Ways A Good Bookkeeper Can Benefit Your Company

A competent and skilled bookkeeper or bookkeeping solution is something that you should be offered when it comes time to "pull the trigger," also known as "pick up the phone and hire a bookkeeper to do your books for you."

1. Availability

It is essential that you are able to get in touch with your bookkeeper in a timely manner and receive a response that is of assistance. If, on the other hand, your bookkeeper takes an excessively long time to answer emails or goes on vacation without providing you with advance notice, it may be time to look into other service providers.

2. Clear, easy communication

Bookkeepers need to be able to communicate not only with accountants and other bookkeepers but also with the general public and other bookkeepers throughout the world. Jargon should never be used to the extent that it makes it impossible to grasp what is being said in a conversation. Make it a priority to collaborate with a bookkeeper who is not only able but also ready to provide you with an explanation of your books in a language that you can comprehend.

3. Tax-ready financial statements

Working with a professional allows you to receive up-to-date financial statements, which you can then use to plan company movements or prepare your taxes. This is one of the most significant benefits of working with a professional. If your bookkeeper is unable to meet your needs, this is a clear indication that you need to look into other options.

4. High-security standards

If an assault causes your bookkeeper's computer to go offline along with your company's financial data, then it doesn't matter how good they are as a bookkeeper. Your bookkeeper needs to be able to verify that they have all of the necessary security measures in place.

Symptoms That You Should Hire A Bookkeeper

1. Keeping up with the books will prevent you from making progress on your business

When you realise that you are devoting a significant amount of your day or week to keeping the financial records of the company and following up on other financial transactions, it is time for you to hire a bookkeeper to assist you with these responsibilities.

You will be able to devote more of your attention to other elements of your company if you hire a bookkeeper to handle tasks like tracking down clients for payments, ordering products, examining invoices from suppliers, and maintaining the balances and activities of your bank accounts.

2. You don't stay current on all business dealings

The amount of paperwork and record-keeping that needs to be done also increases as your company expands.

Every owner of a small business is strapped for time, or at least the majority of them are, and as a result, they frequently put off the necessary but time-consuming duty of keeping their records up to date until they are forced to do so (usually for BAS or tax time). It's possible to go into difficulty without even realising it if you don't keep your records up to date and if any potential problems with your finances aren't spotted as soon as they arise.

If you find that you are falling behind in the maintenance of your records, you should consider hiring a bookkeeper.

3. You are unsure of the accuracy of your record-keeping

If you are spending time looking at your books and worrying if they are accurate or correct, it is time to call in the expert – a bookkeeper. You can't be an expert in everything, so if you are spending time looking at your accounts, it is time to bring in the expert.

Bookkeepers have the expertise and experience that will save you a great deal of headache and give you more time to improve other aspects of your company's operations.

4. The complexity of your tax and other compliance is increasing

The legislation and other standards (like accreditation) that are necessary for your business must be complied with, but doing so can be a highly time-consuming process. Your company must comply with these policies and requirements.

You will need to remain up to date with changes, such as the ongoing changes in superannuation law, and update the procedures and records of your firm in order to fulfil your obligations. A competent bookkeeper who participates in ongoing training can help you save time and guarantee that your company continues to comply with applicable regulations.

5. Your accountant is doing the bookkeeping, but they are also billing you

An accountant has a higher level of specialised training than a bookkeeper does, and as a result, an accountant will charge more money for their services.

If you use your accountant to keep your financial records up to date, produce your BAS, or fulfil any other compliance needs, you might be paying more than you need to for these services. On the other hand, an experienced bookkeeper will be able to complete all of these chores at a more affordable rate.

It is seldom easy to pinpoint the precise moment at which you should bring in outside assistance for your company. Therefore, as soon as you see even a hint of a problem, you owe it to yourself to do yourself a favour and get a qualified bookkeeper.