What does every successful small business have in common?
The answer: good record keeping!
Running a small business is no walk in the park. While your operations mightn’t be as large as other businesses out there, that doesn’t make it any easier. In fact, in many ways running a small business is even harder – especially if you’re doing everything by yourself!
Keeping on top of your financial records is one of them. Good record keeping is essential for anyone running a business – needless to say, it’s a pretty big deal!
This week, we look into the importance of record keeping and some tips that every small business should consider.
Why is record keeping important?
It’s essential that businesses big and small maintain accurate records… and in particular, it’s important you keep accurate financial records.
Well firstly, because the law says so!
All businesses in Australia are required by law to hold on records for a period of five years for legal and tax purposes.
Furthermore, business owners like yourself are obliged to keep these records even after you close or sell your business. Failure to keep the right tax records, and you could incur severe penalties.
Records help you run your business
More importantly however, accurate records help you run your small business.
Cash flow, overall financial health, expenses, margins… how are you supposed to make the right decisions for your business without these records?
The art of the deal
Here’s a question: would you work with a supplier that’s close to bankruptcy?
If you want to prove to suppliers and lenders that your business is worth partnering up with, you’ll need the records to prove it. Accurate records quickly demonstrate your business’s financial health to potential partners or investors.
Record keeping tips for small businesses
If you’re like most business owners, the thought of record keeping makes your eyes glaze over.
Yes, financial records aren’t exactly at the top of every business owner’s list of hobbies.
Many even choose to ignore it, which is exactly what leads to so many bookkeeping-related problems!
To avoid your business running into any financial pitfalls or tax compliance issues, try implementing these record keeping tips at your small business. Not only will they make record-keeping easier, but they can make it painless to boot!
Set-up a good accounting and bookkeeping systems
If you want to keep accurate records of your business’ finances including your tax records, you’ll need a good system. This is where a good accounting and bookkeeping system comes into the picture.
Not only do they record your finances accurately, but best of all they do it automatically!
Keeping source documents
Like we mentioned before, the ATO requires all businesses in the country to keep financial records for five years.
While keeping physical copies of these records for an extended period doesn’t sound very practical, there’s a solution: keep copies online or use online reporting tools.
Make sure you keep records of the following documents for future when the taxman comes around:
- Receipts or proof of all sales and purchases
- Tax invoices
- Salary and wage records
- All GST-related documents
- Any records of sales and purchase of business assets
- Records of tax returns, fringe benefits tax (FBT) returns and employee super contribution
Avoid backlogs and stay updated
No-one likes entering financial records. It’s mind numbing work, not to mention it can take up hours of time you could be spending on the things you do best.
So many businesses just don’t. Many put it off thinking “I’ll get around to it later.”
Next thing you know, one receipt can snowball into a filing cabinet full of unprocessed records!
Clearing backlogs can take just as much (if not more) time – and we haven’t even got started on the delays and inaccuracy it can cause in your reporting.
To ensure that this doesn’t happen, it’s important to make a habit of updating your records and keeping accounts clean.
Don’t have time to input data? Fortunately, cloud bookkeeping systems can help you avoid backlog by updating all your records automatically. Talk to us about getting set up with Xero or MYOB systems today!
Does your small business in Melbourne need help with record keeping?
Let Maximum Business Solutions help!
As a professional bookkeeping service, we understand the importance of accurate record keeping for your business.
We also understand how difficult it can be to keep on top of your records, especially with everything else on your plate!
If you are one of many small business owners who needs a little help when it comes to record keeping, Maximum Business Solutions is here for you. From simple invoicing to complete clean-up, we help businesses all over Melbourne’s southeast fix their record keeping problems – no matter how big or small.