Small Businesses – The Importance of Record Keeping
by Ian Morella, Director of Accounting Services
Small Businesses – The Importance of Record Keeping
The Australian Taxation Office (ATO) has warned they will be targeting the cash economy over the next few years. Over the last few years, the ATO have implemented a system of small business benchmarks which they utilise to establish whether businesses are correctly reporting all their income and to ensure they are not claiming on illegitimate or excessive expenses.
If you are a small business owner, it’s imperative you maintain the correct records. By law, businesses must keep records:
• For five years after they are prepared, obtained or the transaction is complete (whichever occurs last)
• In English and in a form the ATO can access and understand to work out the amount a taxpayer is
liable to pay
An Example – Retail Business
Using a retail business as an example, the ATO would expect the business to:
• Record each individual sales transaction through their cash register or point-of-sale system
• Conduct a daily sales reconciliation between the end-of-day report and cash (also EFTPOS and credit card
transactions) in the register, taking into account cash taken from the register for business expenses and
personal use
• Transfer daily sales totals into a cash receipts book
• Perform bank reconciliations between bank statements and cash receipts book, at least monthly
• Retain for a period of five years:
- The end-of-day or point-of-sales system reports
- Daily reconciliations
- Bank records and cash receipts book
- Till rolls or end-of-day reports that record details of each individual transaction
• Maintain a filing system to keep track of paid and unpaid accounts
Ensuring Compliance
Ensuring you are meeting all your obligations as a small business owner is essential to ensure you are complying with the ATO’s legislation and not in breach of any regulations.
If you would like advice on your business reporting systems or obligations, or would like any further information on any of the above, please contact our office on 1300 726 082 and ask to speak with a John Hopkins Taxation Accountant who can assist you further or click here.