Keeping Records: What & Why?
Businesses should ensure that documents necessary to provide title to assets are safely kept indefinitely. This includes documents relating to physical assets (contracts, title deeds and the like) and also intangible assets such as intellectual property (copyright assignment or license agreements, for example). Similarly, any documents supporting or relating to insurance policies, claims, or potential litigation should be regularly reviewed and retained as appropriate.
In the era of digital records that are readily searchable, sharable, and practically unconstrained by storage limitations, the concerns are more of compliance and continuing business relevance. In this regard every business is different and it is best to review and tailor record management solutions on an individual basis. The following discussion outlines some of the areas that should be considered:
The ATO provides extensive guidance regarding business record keeping requirements and practices. We recommend that businesses should be familiar with the ATO’s expectations:
ATO – record keeping in detail
In summary, under tax law, you must keep records:
- That specify and explain all transactions. This includes any documents that are relevant for the purpose of working out your tax liabilities. You should make records of transactions as they occur or as soon as possible afterwards.
- Relating to all taxes for which you are liable. This may include income tax, goods and services tax, pay as you go taxes, capital gains tax, fringe benefits tax…
- Relating to any election, choice, determination or calculation made under a tax law, including the basis on which any were made.
These records must generally be kept for a minimum of five years.
Other retention obligations relate to specific parts of the Income Tax Assessment Act (ITAA).
Records relating to payroll tax must be retained for five years after completion of the transactions to which they relate and this period increases to seven years in relation to Fringe Benefits Tax.
The Corporations Act (2001) requires that any “company, registered scheme, or disclosing entity” retain financial records for a minimum of 7 years after the transactions covered by the records are completed (Click here to see the Act).
Suitable financial records and reports are also often required in support of various business evaluation and financing activities.
Beyond statutory requirements, additional document retention obligations may be imposed by contracts to which you are a party or legislation relating to your particular industry. The nature of these obligations will depend on the specifics of the contract/ legislation/ industry concerned. All businesses should aim to be familiar with any such obligations they may have, or retain appropriate legal advice. Responsibilities for relevant record keeping requirements should be clearly defined.
The scope and duration of records required to be kept for employees differs according to State industrial legislations and specific industry obligations. These requirements may impose extensive record-keeping obligations on employers and, beyond basic payroll functions, it is considered best to seek advice from a Human Resources specialist.
Keeping Records: Data Integration
Electronic imaging, tagging, data extraction, meta-data analysis, document association and other related features have dramatically changed the nature of records management and information review. The ease of searching for terms in electronic text, whether email, word processing document, or PDF is vastly more effective than searching through indexes, content pages, and paper filing systems. However, the ease of use and convenience of data storage are just some of the most basic advantages of electronic records management.
A key advantage of integrated financial data is the ability for a business to quickly review it’s financial performance and obligations. Combining advanced project and job management software such as Workflow Max with an accounting package such as Xero provides significant time savings, providing detailed and systematic task development and review through all stages of the business (WorkflowMAX). The capacity to ‘drill down’ through all stages of a job or project through to invoicing, cash-flow management, payments, and reports from a single platform affords significant benefits to both understanding and managing the finances and resource allocation of a business.
For other businesses, the flow of information between systems can drastically simplify the day-to-day monitoring of different areas of the business. Rather than data being handled as separate ‘silos’ of information that must subsequently reviewed, reconciled, and assessed, it may rather be integrated from the outset thereby reducing double-handling. For example, the integration of point of sale data (POS) and banking transaction data (EFTPOS) with an accounting package (EFTPOS for Vend POS) can greatly reduce manual reconciliation requirements.
Combining the data from separate databases has long been the purview of relatively complex spreadsheets (pivot tables, multiple worksheets, etc.) and long-suffering business managers (or their administration assistants) to compile disparate information sources into trends, KPIs, and business performance summaries. Such value added information is now relatively easy to generate with integrated data. This may range from simple and easy to review performance dashboard to advanced budgeting, forecasting, and reporting features with real-time data streaming. Such tools transform data into truly accessible and business specific information that, when properly setup, can provide significant benefits.
It is important for every business to maintain a database of both their suppliers and customers, simply for communication and invoicing if nothing else. Traditional paper records may consist of a Rolodex of business card or a stack of filing cabinets for different contact groups. While most businesses will also utilise a database or email contact list, this is rarely associated with sales or expense information. However, such integration of data can allow a business to more effectively market to their clients and manage project expenses and supplier accounts. Once again, this may range from simple review, collaboration, and contact grouping features or extend to advanced data mining and customer feedback, surveys and polls to improve sales and service delivery (data mining, Customer Sure).
As the owners of a small trade-based business our bookkeeping skills were somewhat lacking. When we engaged Nathan from Intersect over four years ago, our books were in a far from desirable state. Nathan worked diligently to ensure that not only were our books and associated affairs brought up-to-date but so too that our business continued to run at optimum efficiency with the use of various online based applications; Xero, Shoebox, Drop Box etc. We continue to be appreciative of Nathan's ongoing support, advice and technical input and would recommend Intersect to anyone contemplating outsourcing bookkeeping services.
Jian Chen and Kobi Bradshaw-Chen - Agyle Gutter Solutions
Contact Intersect now to help make your accounting more accurate, less stressful, and less time consuming than you ever thought possible!
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Nathan Major | Principal