Having a system for keeping track of the financial receipts and records for your business is a vital part of managing your business; not to mention necessary for meeting your tax and legal requirements. The Australian Taxation Office (ATO) requires taxpayers to store their records for at least 5 years from the date your tax return was lodged. The Australian Securities & Investments Commission (ASIC) requires companies to store their financial records for 7 years. Given how long you need to store these records it is imperative you have a systematic way of managing and storing your receipts or you will never be able to find what you need when you need it. Many small business owners are at a loss on how to organise their financial records and receipts and end up putting them in a shoebox, drawer or file to be dealt with at some later point in time. Deepak Chopra said: “Instead of thinking outside the box, get rid of the box”. To be fair he probably wasn’t talking about a box of receipts but it is still good advice to follow!
Here are 5 reasons why you need something more than a shoebox to store your receipts.
- “If you can’t measure it you can’t manage it” Peter Drucker. Reviewing your financial records on a regular basis is an important part of managing your business. You can’t have a solid understanding of how your business is performing if your receipts and records are not systematically organised and reviewed. If you are not reviewing your finances regularly you will be less likely to notice services you are paying for but not using, areas where you are spending money but not getting any return or areas where you are paying much more than you realised. The quicker you act on these things the more money you will save in the long run.
- You will miss receipts. When you organise and reconcile (tick off against a bank statement) your financial records regularly you are much more likely to remember that you paid for parking for a seminar in cash from your wallet or that you purchased stationary for your office while doing your weekly grocery shop and include these things. If you wait until the end of the year you won’t remember or have the receipts available to claim on your tax.
- Cash register receipt fade. If you stick cash register receipts in a box or drawer or folder until tax time you will probably find you are no longer able to read them. Scanning your receipts and filing them electronically is a much better idea. Please note that if you are storing your financial records electronically you must make sure you are backing up your files to an external hard drive or to the cloud on a regular basis. If you are using a cloud based accounting software such as Xero or Saasu you can upload your receipts with each transaction.If you do want to keep a paper filing system make sure you photocopy those shiny cash register receipts so they can be read for years to come.
- Your record keeping will become unmanageable. Leaving all your record keeping until the end of the year means that it is becomes a huge job for you or your bookkeeper or accountant. If you organise and record your receipts on a monthly basis it is a much easier and more manageable job.
- It will cost you more. If your records are disorganised you will pay your bookkeeper or accountant more money at the end of the year to do your annual accounts and tax returns than if you provide them with organised, accurate records.Don’t put it off any longer. Decide on a system for managing your financial records and receipts and start implementing it today.
