Record keeping isn't just good business practice, it's a legal requirement. You are required by the Australian Taxation Office (ATO) to keep business records for a minimum of five years, in plain English and in a way the tax office can access if they need it.
A well organised filing cabinet is the best way to keep all your records filed. The recommended way to fileis by date to help with your tax return as it's logical and easily understood, but you can choose whatever method works for you.
The ATO has a Records Keeping Evaluation Tool to find out what records you should keep and evaluate how well your business is keeping records.
The records you keep should include any transaction that has a financial element such as:
- copies of invoices and receipts you provide for goods sold or services rendered
- invoices for goods or services you purchase or bills you pay such as rent, rates, insurance, licence fees etc
- payments to employees and to other organisations on behalf of employees e.g. super funds, PAYG tax
- financial statements including profit and loss statement and balance sheet
- tax return information
- bank account and credit card statements
- end of year stocktake records, assets register etc
- anything else with a monetary value to the business.
Business record keeping
In addition to your ATO financial records requirements other government departments require you to keep records relating to your business and employees.
When setting up your record keeping system you should also file records such as:
- contracts, insurance agreements and other legal documents
- your lease if you're renting
- licences and permits
- employee records including time sheets, copies of pay slips etc
- safety records e.g. risk assessment for occupational health and safety
- any other records which are 'business activity' specific and required by law for the operation of your business e.g. for a café your food safety plan.
Tip: Write down the method you use for filing so if someone has to do it for you they know how to. As your business grows, this is a job you could give someone else to do.