How Good Is Your Small Business Record Keeping?

Thursday, 15 Oct 2020

Businesses cannot be run on hunches and guesswork. They require proper planning and a systematic approach to manage daily activities. Keeping records of every task is a necessity for creating reference points for the future and making analytical inferences.

Besides securing data of all the client projects and customer details, the business owner also needs to store information related to the financial transactions. Record keeping must be a robust procedure which should be performed without fail for every big and small cash transaction.

Most entrepreneurs hire bookkeeping services in Melbourne to ensure good record keeping. If you are maintaining the books yourself, then you need to be cautious about the accuracy of the financial records.

The data comes handy in managing the cash flow, filing tax returns and understanding the financial well-being of the entity. If you want to know which is the best way of record keeping, then take a look at the information given below.

How To Maintain Records For Small Businesses?

All the financial transactions must be recorded by the bookkeeper since these records are required for fulfilling tax and superannuation obligations of your company in Melbourne. According to the Australian Taxation Office (ATO), you need to save all the financial records without making any changes to them.

They should be tucked away in such a protective system that doesn’t allow any changes to be made to the information or causes any damage to the records.

Most of the records need to be kept safely for five years from the date of the transaction. The bookkeeper must be able to identify the information requested by the ATO and present it to them when needed.

The records must be maintained in English or should be effortlessly translated to it when required. There are not too many obligations when it comes to recordkeeping in Melbourne.

However, you need an efficient bookkeeping service to keep everything organised and protected. If you want to evaluate the record keeping performance of your business, then you can make use of the evaluation tool to know how good you have been at it until now.

The ATO can charge you with penalties if it identifies loopholes with the tax records. Thus you must be well-organised and hire an experienced bookkeeper to take care of the obligations and requirements and free up your time for other important work.   

Which Records Do You Need To Keep?

Every financial transaction should be logged by the small business in Melbourne. Here are the documents that need to be safeguarded.

  • Keep copies of all the invoices you offer to customers for the goods and services sold to them.
  • Save the bills of all the payments you make to the landlord, suppliers and vendors. You must also include the receipts of payments made for insurance, utilities, licenses, etc.
  • Maintain records of salaries and wages paid to the employees and payments made to organisations on the behalf of your workforce, including lodging for super funds and PAYG tax.
  • Creating and saving financial reports, including the profit and loss statement and balance sheet helps in efficient record keeping which is one of the benefits of hiring an external bookkeeper for your business.
  • Saving all the data related to the tax submissions.
  • Logging all the statements of the business bank account in Melbourne and credit card.
  • Keep note of all the assets and the inventory records at the year-end.
  • Besides these, you need to maintain business records which involve keeping all the contracts, insurance agreements, lease agreement, licenses and permits, and other legal documents safely.
  • You must also maintain the records of the employees that includes the copies of their pay slips and timesheets.
  • Also, you must have the safety records and log of other business activities that are legal obligations for specific business types in Melbourne

Tips for Quick and Effective Record Keeping  

If you think that your record keeping methods are not up-to-date, then it is the right time to make some transformations. Here are some tips that will help you to adopt the best practices for recording financial information.

  • The ATO has been making a shift towards electronic reporting for tax filing and superannuation submissions. You can lodge the taxes online and get rid of the hassle of storing all the paperwork and manual submissions. Your bookkeeper can help you find the best accounting software in Melbourne to adopt this efficient way of managing financial information.
  • The bookkeeper aids in professional record keeping by preparing and utilising the profit and loss budget and cash flow forecast. Customised accounting software helps in recording all the transactions and calculates goods and services tax. It updates ledgers and generates accurate financial reports and even assists with invoicing.
  • If your small business in Melbourne has capital assets which can lead to capital gains tax, then you need to keep your records for more than five years. Your bookkeeper can enlighten you about the same. As per the Australian Securities & Investments Commission (ASIC), companies must record the statements for seven years.
  • Cloud computing software allows you to update the books at any time and from anywhere. The books are safeguarded and can be accessed by authorised users like the owner and the stakeholders besides the bookkeeper and the accountant.
  • The digital medium provides vast and cost-effective storage space and is protected from threats like fire and natural disasters. It provides you with a suitable off-site backup.
  • If you have to keep paper records because you are obligated by the law to do so, then you can keep them safeguarded electronically. The ATO readily accepts the clear images of original documents that are legible. It helps in doing away with the pile of papers, which is challenging to organise, store and segregate.  

Advantages of Effective Record Keeping

You can benefit from a well-managed record keeping system in the following ways:

  • It aids in the creation of error-free and professional financial documents.
  • A business owner in Melbourne can easily determine the sources of money and understand where it is being spent the most and the least.
  • It makes it easier for you to file tax returns with all the organised data.
  • The business owner gets a fair idea of the actual financial position and can make informed decisions related to investments and spending on new projects.
  • An effective record keeping system helps in the identification of business and non-business bills and taxable and non-taxable income.

Conclusion

Most small business owners are too occupied to concentrate on planned record keeping. An expert bookkeeping service in Melbourne can take away all the worries of financial management by maintaining effective records and providing sound advice.

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