What business records do I need to keep?
As you’re probably aware, it’s a legal requirement to keep your business records for at least 7 years.
For many, the threat that IRD may want to conduct a routine audit is a key motivator for keeping good records. But there are other advantages too including making things easier to find for insurance claims, explaining variances from your budgets, or answering questions and requests when your accountant compiles the year-end accounts. In each of those instances good records could save you significant time, stress and money.
To save yourself a headache, we’ve put together some tips and tricks to help keep your business records in order.
What to keep?
These records can include:
- Purchase invoices and receipts for all costs incurred
- cash books or computerised accounting records;
- details of all income received (copies of invoices issued etc);
- cash register tapes and day books/diaries
- wage books
- details of entertainment expenses for clients, staff or suppliers
- petty cash records
- banking records – bank statements, cheque books and deposit books
- vehicle logbooks
- a list of business assets and liabilities;
- Lists of debtors and creditors
- Interest and dividend statements
- credit and debit notes;
- any records of home office expenses claimed such as power bills, phone bills, mortgage interest statements, insurance notices
- any other necessary documents to confirm entries in your accounts.
- IRD Tool for Business has some good information on keeping good business records and provide a Record Keeping Checklist Some important notes:
- For GST you do not need a tax invoice for purchases costing less then $50 – but you may need the invoice for income tax purposes – so just keep all invoices!
- Entertainment expenses – in addition to the invoice or receipt for an expense incurred, IRD will expect you to record the date, names of people entertained, business they represent, position they hold, and reasons for the entertainment
- Travel expenses – IRD would expect to also see specific details around these claims including reasons for the trip, date, your itinerary, travel, accommodation and meal expenses and also time spent on business and non business expenses
If you’re wondering where you’re going to find the room to store all this paper, fear not. Electronic records are acceptable to IRD now, but there are some specific rules. The records need to be securely stored with back up and recovery procedures in place. If you have stored records within accounting subscriptions, you need to retrieve and save all records if you cancel your subscription. The records need to be easily retrievable in the event of an audit.
If you’re a Xero subscriber you can take advantage of the “Files” feature which is free with your Xero subscription.
This is an excellent facility, and we’ve provided detailed instructions on how to use this.
If you need help with getting your business records in order, contact us here