Records Management

Records management is the first important task in the process of sound financial management for a small business operator. Accurate and regular financial information allows you to monitor the success or failure of your business and provides you with information to evaluate the consequences of your financial decisions.

Why keep financial records?

To be successful it is essential that you know the precise financial condition of your business. Accurate and regular financial information allows you to monitor the success or failure of your business and provides you with information to evaluate the consequences of your financial decisions. Regularly monitoring your business activities will help you operate more efficiently, control your cash flow, and increase your profitability.

Useful information about your business depends on complete, accurate, and timely record keeping practices . Your financial records will allow you to:

♦  identify your income and expenses to create a profit and loss statement

♦  identify your business assets and liabilities to create a balance sheet

♦  identify the timing of income and expenses to create a cash flow forecast

♦  compare your business operations with industry benchmarks

♦  prepare accurate business activity statements and tax returns so you don't over or underpay your taxes.

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Record keeping obligations

By law, the Australian Tax Office (ATO) requires small business operators to keep certain business records for tax purposes.

You are required to keep records for five years after they are prepared, obtained or the transactions completed (whichever occurs later), and in English.

Employers in the West Australian state industrial relations system also have legal obligations in regard to time and wages record keeping. Read Time and wages record keeping: Employer obligations

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How to keep the financial records

Maintaining good financial records on a regular basis requires time and effort that you might believe would be better spent on running your business. However, doing the bookkeeping yourself, to begin with, could minimise your costs and allow you more control of your financial information and operations.

♦  Our easy-to-follow Understanding Business Financials workshop will help you to get on the right track with keeping financial records. You'll also receive a resource book that provides examples and templates of all the financial records you need.

♦  The ATO provides record keeping for small business tools, examples and templates on their website.

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Record keeping systems

Creating a system for collecting revenue, paying employees, suppliers, and taxes correctly and on time is a vital part of operating a small business. There are many systems available from manual to electronic. Each has advantages and disadvantages which you should think about carefully before choosing a system. Read more...

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What's next…

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