You have a lot to keep track of when you run a business. Not only do you have to worry about financial records, but you have to keep accurate employment records as well. Maintaining organised business records is not just a good practice for the overall running of your business, but some legal proceedings also require it. Otherwise, you could face significant penalties for failing to keep accurate and easily retrievable records. The type of business you have and the industry you trade in will likely also affect the kinds of documents you need to keep. This article will explain what business records you need to maintain, the importance of record keeping and how to do so efficiently.

What Record Does My Business Need to Keep?

You need to keep business records for seven years, and they need to be in either English or Māori. As the owner of a business, you can manage business records yourself, or delegate the task to one of your staff. However, it is your responsibility to know what documents you need to keep, and you should make sure you know how to find them. A good rule to follow for determining vital business records is considering what it proves. It is generally a good idea to keep records relating to how you calculate:

  • income tax;
  • GST, if you are eligible; and
  • tax returns.

Records to Keep

You should make sure that you keep easily retrievable records of the following:

Core Records

  • cashbooks;
  • wage books;
  • who you owe money to; and
  • who owes you money.

Income

  • invoices; and
  • all cash and non-cash sales.

Expenses

  • receipts; and
  • invoices for purchases.

Banking Records

  • deposits;
  • credit card statements;
  • interest statements; and
  • loan details

Financial Accounts

  • balance sheets; and
  • final profit and loss statements.

Worksheets

Showing calculations for:

  • tax returns;
  • home office expense claims; and
  • vehicle logbooks.

Legal Documents

  • sale and purchase agreements;
  • lease agreements; and
  • intellectual property documentation.

Asset Register

  • depreciation schedule; and
  • calculations.

You should also keep an up to date list of your assets and liabilities, as well as dividend statements. If you are an employer, you need to keep current records of your employees’ wage records and leave information. You may also need to keep other kinds of documentation specific to your business, like till records if your business runs a till. If your business is a company, you will need to keep accurate company records.

Tip: If you work from a home office, you can claim some of your utilities as business expenses in your tax returns. So, it is a good idea to keep accurate records of home expenses where applicable.

Why Is It Important to Keep Good Records?

Good record keeping can ensure that your business is running smoothly, and keeps your affairs organised. You can avoid some legal penalties if you keep your records accurate and easily understandable. Consequently, good record keeping makes your job easier when it comes time to work out your expenses and tax returns. 

Keeping organised and easily legible records is also essential because good business records can support expense claims in your tax proceedings. Likewise, you are less likely to miss things if you organise your business documentation, and you can avoid potential penalties. By regularly updating your records, you remain aware of how your business is faring. You can also correct things as you see them. 

Additionally, accurate records mean less work for your accountant, which means lower costs for your business. If your business needs an audit or inspection for any reason, you can avoid fines associated with the process if you keep accurate and up to date records. 

Further, up-to-date records will make it easier and faster for you to file tax returns and get loans approved. Good business records will show accurate profit and loss margins, meaning you have a clearer picture of your business. Finally, up to date and organised records makes it easier for your business to grow. When you reach a point of wanting to sell your business, legible business records will make your business much more attractive to buyers.

How Do I Keep Good Records?

The key to good business records is accurate and comprehensive organisation. Tracking your records in a spreadsheet is a good idea. There are also many packages and apps designed for maintaining good business records, and you can claim these as business expenses on your tax returns. A good idea is to keep your records in a cloud service that Inland Revenue approves of and keep backups of your records as well. You can track what you send to Inland Revenue through MyIR, and make sure to keep your own copies as well.

Tip: When you buy something for your business, make sure to keep a record of the cost, date, description, and supplier.

Key Takeaways

Nobody likes paperwork, but good record keeping is a must for your business. Maintaining up to date and accurate records of your business means that you are more aware of its current state, and you can avoid severe legal penalties if you are audited. If you would like more information or help with your business’s record keeping, contact LegalVision’s New Zealand business lawyers on 0800 005 570 or fill out the form on this page.

FAQs

How do you keep good business records?

You can keep good business records by noting down what your business does on paper (or electronically) and making sure that is easily accessible. This means keeping all statements related to your income and expenses and organising important documents. Employing a bookkeeper is a good idea, and there is software that can help as well.

How long do I need to keep business records?

You need to keep business records for seven years. So, if you have a receipt after purchasing an important asset for your business, you need to make sure you can access it seven years in the future as you need.

What are the methods of record keeping?

Methods of record keeping can include tracking your incoming and outgoing cash flow and keeping track of your expenses. It is a good idea to keep records relating to your income tax and tax returns up to date and easily accessible.

What is the purpose of record keeping?

There are many purposes to record keeping, like keeping your business organised. If your business is audited or inspected for any other reason, you can be fined if your business records are not adequate.

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