There are many reasons for good record keeping in business. Good record keeping can help you to manage cash flow, meet your tax obligations and understand how your business is performing.
If you fail to keep the right tax records you can incur penalties so it is important that you are following the law by keeping records that:
Explain all of your transactions
Are in writing (either electronic or paper)
Are in English or easily converted, and
Are kept for five years (although some records may need to be kept longer)
A cloud accounting system such as QuickBooks Online is an excellent way to keep your records for many reasons. You can easily store your records for five (or more) years without taking up storage space, your records will be quickly and easily found, and they won’t be damaged in a natural disaster. You can also produce summaries and reports for GST and Income Tax purposes.
If you would like to test your current record keeping system, the ATO has a Record Keeping Evaluation Tool that is completely confidential and easy to use. You simply answer some questions and you will get a report evaluation how well you are keeping your business records.
Also, if you would like more information on good record keeping, the ATO offer a Record Keeping Workshop in their series of Small Business Workshops. For more information, head here.