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If you are running a business in New Zealand, you need to keep certain records. Your responsibility as a business owner includes keeping a record of your income and expenses, bank records and financial reports, amongst other files. Organised and up-to-date records are not only required by New Zealand’s Inland Revenue but help to prevent your business from being liable to fraud and theft. Good record keeping is also a good practice. This article will discuss what records you need to keep and what they should contain. 

What Business Records Must I Keep?

Anyone running a business needs to keep certain records. This includes small businesses and sole traders. You need to keep the following types of records:

Record Books

These records need to include the details of your staff’s wages, your business’ deposits, your business’ petty cash and cash books.

Income and Expenses 

These records need to cover your business’ daily income (revenue) and expenses (costs).

Bank Records

Your bank statements can cover these records can show the money you put into and take out of your business accounts.

Financial Reports

If you run a certain type of business, you may need to prepare financial accounts (this include profit and loss statements and balance sheets).

Personnel Files

If your business has employees, you need to keep records of your employees’ contact details, leave entitlements, salaries, and days worked.

Who Are the Accounts For?

As a business owner, you must keep these types of records for yourself. It is challenging to run a successful business if you do not know when money is coming in and out. If you fail to keep track of this, you may be vulnerable to fraud and theft by your employees or bookkeeper. 

Inland Revenue Department (IRD) also requires you to keep certain records, generally for seven years, in case they choose to audit you. If you are keeping your records on a computer, you need to make sure they are stored in a format that the IRD can decipher.

The IRD are not the only people interested in your records. The New Zealand Government may want to see your records to confirm that you comply with certain laws, such as minimum wage requirements. Records of amounts paid to your employees will be vital if an employee claims that you have underpaid them.

You must keep certain records for a certain length of time. Most financial records need to be kept for seven years. 

What Information Must My Records Contain?

It is important that you keep complete and accurate records of your business operations. Set out below are some examples of what your records should look like.

Income and Expenses

All businesses need to keep records of their income and expenses (also known as your businesses revenue and costs). Bank statements are not always sufficient. 

For tax purposes, you may need to recognise income before you actually receive the cash. For example, your business may provide a service or goods to your customers. In this case, you should recognise the amount they owe for those services or goods as income. This should be generally recognised once you have completed the service or delivered the goods. This is the case, even if they haven’t paid you the cash yet. This is an example of where going by your bank statements is not going to be adequate.

Similarly, there are many expenses that you can recognise, even if your business has not paid cash for those expenses, for example, depreciation expense. You need to keep records of all these expenses, particularly if you intend to claim them in your business’ annual tax return. 

Preparing Financial Statements

You have to prepare financial statements, depending on your business. You will have to prepare financial statements if:

  • your business’ total assets exceed $60 million (for the last two years); or
  • your business’ total revenue exceeds $30 million (for the last two years).

For the purposes of calculating your business’ assets and revenue for the tests above, you need to include the revenue and assets of any subsidiaries of your company.

You may also need to prepare financial statements if you have more than ten shareholders and have not followed the correct procedure for opting out of preparing financial statements. 

Key Takeaways

Running a business involves keeping organised and up-to-date business records. You should consider:

  • what records your business needs to keep;
  • what those records should contain; and 
  • how often you need to prepare those records.

If you have any questions about record keeping, contact LegalVision’s corporate lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What kind of business records do I need to keep?

Running a business involves keeping many different records. This includes details of your staff’s wages, business’ deposits, your business’ petty cash and cash books. You should also maintain a record of your income and expenses, profit and loss and balance sheets.

What does Inland Revenue want with my business records?

Inland Revenue requires you to keep certain records, generally for seven years. Keeping records on file and organised is important in case they choose to audit you.

Do I need to prepare financial statements?

You will need to prepare financial statements if your business’ total assets exceed $60 million (for the last two years); or your business’ total revenue exceeds $30 million (for the last two year.

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