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30 Nov
2017

Cate Palmer

Freelance writer
 

Starting a new business comes with a lot of challenges, and inspiring entrepreneurs are giving their best to overcome them in a timely manner. Once you launched your startup, it would be great if you already hired some employees, found the office and designed the website. Besides that, you’ll need to think about inventory, storage space, and marketing.

With all that in your mind, it can happen that you forget to pay attention to accounting and bookkeeping. Unfortunately, there are a lot of small business that didn’t manage to go through the first year because they missed keeping their records properly. Don’t be one of them and start focusing on this area of business.

What is record keeping?

Think of it as one of the most important responsibilities you as small business owner have. Keep in mind that the success of your company, and therefore, the profits, will depend upon an effective record system. You’ll need to create and maintain this system regardless of the type of your company. Whether you’re listed as a corporation, partnership or proprietorship, your record keeping should be a state of art.

There are plenty of ways to store your records, and they vary from simple folder filing systems to detailed on-line electronic ones. Either way, you’ll need a system that is easy to use, so the one using it can retrieve, enter and edit information quickly. Of course, it won’t be enough to just copy someone else’s system since your company is different and unique. Record keeping must be done the way it meets all needs of your new business.

Why should you keep good records?

Record keeping is crucial if you want to fulfill all legal requirements and regulations, but that’s not all. The effort you put into creating and maintaining record keeping system will provide you with the information about the past, present and the future of your startup. With good records, you’ll be able to track a great amount of information which is important while working with your clients. You’ll know what you have in stock, who are your biggest buyers, and how to project the growth of your company based on sales.

How to meet basic legal requirements?

Start building your record keeping system from the obvious: get prepared to meet elemental legal obligations. In order to record all cash payments and receipts, you’ll need a financial accounting program or a simple cash book. Make sure to keep and maintain all your bank accounts, including bank statements, cheque and deposit books.

In addition, you should pay attention to your employees and make sure all their working hours are recorded as well. Besides that, your record system should contain their personal details, contact, superannuation benefits, leave, overtime. Basically everything about them.

Write down all occupational training records for you and your employees. Those records should include attendance at training about evacuation, emergency, and everything else considering education in the area of health and safety laws.

Don’t forget to keep clean and detailed sales records such as invoice and receipt books, credit card information, cash register tapes etc. Keep all cheque butts from larger purchases, and petty cash system for the smaller ones.

At the end, pay a lot of attention to work, health, and safety (WHS) records. Those include risk register and management plan, names of people who are in charge of WHS, first aid incident register and workplace incidents. The experts from WithstandLawyers strongly recommend creating good worker compensation program, so your employees can be taken care of in case of work-related injury.

How to get ready for the end of the year?

If you want to meet all legal requirements, you should prepare your records at the end of financial year and provide them to authorities. Before you do that, make sure to maximise your tax return or decrease tax bill by keeping the records listed below:

  • All details of stock on hand, with emphasis on the beginning and end of the year

  • List of creditors and debtors for the whole tax year

  • Details about capital gains, such as asset purchase dates and contracts, disposal and proceeds received, improvements made to an asset, legal expenses, sale records. Basically, everything that can help you to calculate capital gain or loss.

  • Deprecation information, such as a depreciation schedule, transportation expenses, item installation costs, and all original tax invoices or purchase agreements.

  • As mentioned before, you’ll need to keep the record of all expense records as well. Save all cheque butts, details about all payments, invoices, receipts and cash register tapes.

  • Information about staff and wages. Keep all employment contracts, details of wages, fringe benefits, superannuation, holiday and sick pay.

  • At the end, your record system should include loan, rental, lease, franchise, trading and all other agreements you signed during the financial year.

For how long should you keep records?

As you can see, in order to file a tax return, you’ll need to keep the records for at least one year, but the best practice is to hold on them between five and seven years. That way, you will meet all legal requirements with ease and have an insight into the way your company is changing through the years.

Keep all employee accreditation certificates and licenses, performance reviews, customer records, quotes given and won, insurance policies, customer complaints, details of disputes with other companies, position statements, and job advertisements. All of that will help you to see the state and health of your startup. If you know your history, it should be easy to improve in the future.

Final thoughts

Make sure to gather as much information about your business as possible since your record keeping practices will affect your overall success as an entrepreneur. Get well educated about the laws and give your best to meet all needed requirements. As you can see, there is plenty to work on when it comes to record keeping, so it is highly recommended that you hire a professional accountant so you won’t waste much time on it.

Of course, you should be aware of everything that happens in your company, but it’s easier to read accountant’s report than to work on all details. Your focus should be directed toward company growth, which will be possible if you know how to advertise, sell and invest.

 

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