Record keeping, you all have to do it. You may not like doing it. You may not see the point to it. You may curse bureaucracy at the very thought of it. No mater what you think about it, record keeping is something you should do. Not only that, if you do it well then you can save your business from a lot of potential hurt in the future.
So what is a record and why do we have to keep them?
The National Archives of Australia (NAA) say:
All information created, sent and received in the course of your job is potentially a record.
You should keep the records that support your business decisions.
Records provide proof of what happened and who made the decisions.
Make or keep a record if you need to show:
- what happened, when it happened and who was involved
- what was decided or recommended and by whom
- what advice or instruction was given
- the order of events or decisions.”
The NAA do tend to look at records from a government organisation point of view. However from someone who has had over 14 years experience in looking after organisation records (both the Public and Private sectors) I’d say their definition fits perfectly well into the private sector.
Put simply, a record is evidence that something happened.
Why might you, the small business owner, want to keep a record?
There are number of reasons why you might want to keep a record for your business. However the main ones are:
- Keeping the tax man happy.
- Your business may work under various Acts of Law which require you to keep records. (You will most likely know which should apply to your business – if you are unsure email me).
- Avoiding any disputes between you and your client and/or suppliers/contractors.
Which is better to keep: electronic or paper?
If this question was asked 15 years ago the answer would be ‘paper’. Seven years ago, better keep both … today, electronic for most instances; however, in some case paper is best ( especially when it comes to reason #3).
These days the question of what type of record should be kept isn’t about the format of the record, but the format of the original source of the record. Sounds a bit jargon-y I know but it is a definition which has helped many a person in a court case.
What do I mean by original source? Well simply put, it is the format you originally made the record in or the format you originally received it. An example below of an invoice can easily explain this:
I complete a research job for a client then send off the invoice by email, the original source for the invoice is the electronic version I created the invoice from. However if I take my client out for lunch and want to claim it as a business expense the receipt I am given is a paper docket and I go home and scan that receipt then save it on to my computer, the original source is the paper docket.
Printing out an electronic version on to paper is not an example of original source. it is also an example of poor record keeping. This practice which was quite common 5–10 years ago is mainly redundant today.
The ATO say that keeping your invoices electronically (regardless of the original source) is fine. In most cases I would agree, however If you want to protect yourself in case there is any dispute, then my advice would be to keep all the paper invoices you receive.