Why Keeping Accurate Financial Records for Your Business Matters

With companies increasingly held accountable for their actions, it is important to abide by regulations. A business can be more organised and legally protected by keeping accurate financial records. Further, by keeping healthy and updated records, this will increase your chances of receiving a loan from the bank, and can help with lodging tax returns.

Your Company’s Financial Standing

Keeping financial records will help you have an idea of your business’s profit levels and what expenditures need to be cut back. Financial records also help to track inventory, because it will highlight which items are popular.

Financial records include:

  • Contracts with suppliers
  • Bank statements
  • Documents of how the business is financed

Other records such as legal, employee and customer complaints should be kept too. For a full list of required records, visit here.

Register your ABN now

Start your new business with LawPath in minutes.

Tax Obligations

Different states have different tax requirements, so it’s important that you meet these to avoid legal complications. Tax records should include gross earnings from your business, other money received, and expenses you will claim as a deduction. For an extensive list of what this includes, visit here. If you fail to keep accurate financial records, then you may end up paying more tax!

Generally, records need to be kept for a minimum of 5 years. Additionally, the Australian Government provides a Record Keeping Evaluation Tool to help you know how well you’re keeping your business records.

Legal Implications

The Corporations Act 2001 requires all companies to keep accurate and written financial records. This responsibility generally comes under a company’s director, and ASIC will take action if this is breached. The law requires honest financial records to increase transparency and accountability.

The Corporations Act 2001 recognises that handwritten documents are not as common in the modern age of technology. Therefore, it’s important to be mindful that if records are stored electronically, section 288 of the Act requires electronic versions to be convertible into hard copy format. To ensure records can always be accessed, most companies resort to a “cloud” system, to prevent any documents being lost in the case of a fire, or malfunctioning of a storage device.

It is essential to keep accurate financial records, because it exhibits the company’s financial standing. Therefore, in cases of insolvency, a director can be found personally liable for any debts incurred. We recommend speaking with a tax lawyer today, if you are uncertain of any implications you may face.

Keep Accurate Records

By keeping accurate records, you are complying with the law, as well as having a clearer vision of your company’s financial health. Evidently, legal consequences can occur if accurate records are not maintained. Additionally, it’s important to keep records for at least 5 years for purposes of ASIC investigations. Accurate financial records can be what makes or breaks your legal case.

Unsure where to start? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.

Most Popular Articles
You may also like
Recent Articles

Get the latest news

By clicking on 'Sign up to our newsletter' you are agreeing to the Lawpath Terms & Conditions

Share:

Register for our free live webinar today!

Drafting & Negotiating Contracts: Essential Tips to Protect Your Small Business

12:00pm AEDT
Thursday 10th October 2024

By clicking on 'Register for webinar' you are agreeing to the Lawpath Terms & Conditions

You may also like

Read about all key statistics from 2023 for small businesses in Australia: employment, industries and failure rates.
Thinking about managing your trust using a company as trustee? Read our guide on how to create a corporate trustee structure.
How to prevent yourself as a company director from being personally liable: 101 Guide

Thank you!

Your registration is confirmed. Keep an eye on your inbox for an email with details on how to watch the webinar.