Are you aware of the importance of keeping good records? No matter your profession it is essential that you uphold the necessary precautions and requirements of good record keeping ensuring transparency within your business and to protect yourself. No matter how thorough you believe you are being, you can never be too prepared.
Whether you are an individual, small or large scale company good record keeping can be critical for your business and here is why:
1. Risk Management
Good record keeping assists with managing cashflow, prevents fraud and enables you to meet the legal requirement that comes along with owning a business. If your business handles sensitive information, the importance of this practice becomes even more imperative; as demonstrated by the recent security breaches of personal information at both Optus and Medibank.
Ask yourself this, if a claim was to be levelled against you, would your business be able to show clear evidence and a seamless communication trail? When a case ends up in court can you provide up-to-date records and coherent notes of the work you have carried out?
If the answer is no, then you have found yourself in a position where it should now be a priority for you to implement good record keeping within your business.
Some best-practice tips are:
- Document your phone calls – where required send an email as a follow up to sensitive phone conversation, so you have a written record of the discussion and agreement
- Request a ‘read receipt’ on email – so you have confirmation that the recipient has received and acknowledges your correspondence, especially when matters are time critical.
- File your records – the key is making sure you have documentation in an organised format, that is readily accessible for future reference, if you are called upon.
Remember that your business is operating in an ever-growing digital field. It is vital to use your records to form a clear picture of the interaction you have with clients and customers in all aspect of your business. There is also insurance which can be taken out. Professional Indemnity (PI) insurance could be a valuable investment for your business and often mandatory in a lot of professions.
2. Tax Office Purposes
The Taxation Office has a wealth of data and information, provided by other government agencies and non-government organisations. The purpose of them collecting this data is to identify contrasting data sets which may instigate further review or audit from the ATO. It is essential that when inputting and storing information within your business everything is legitimate.
Data matching of departments compares information against each other to ensure all sources that are sharing and providing this information are correct. If you are declaring information within your business, it is critical that the data is accurate. Data matching within a business creates a seamless function by merging or discarding duplicated data and ensuring nothing gets missed.
Increased data accuracy is important for any business to succeed. Every business, one way or another stores personal information and it is detrimental to a business that quality management is upheld to avoid an audit. ATO data matching technology aims to shed light on individuals and business who have undeclared income or information missing come tax time.
The ATO collects data about you! They collect data from:
- your employers,
- your bank and other financial institutions (now including banks overseas),
- health insurance funds,
- Transport Departments,
- BAS Statements,
- Superannuation accounts,
- and the property information your state may have.
The ATO hold a wealth of information which assists with detection of misleading and fraudulent behaviour. As a business it is vital that you implement the practises of good record keeping to ensure the data you are providing is compatible and matches all protocols.
3. When you Sell the Business
When it comes time to sell it is imperative that you can show good record keeping was an integral part of your business. We have said it once and we will say it again, good record keeping is fundamental in monitoring the progress of your business. These records will determine the sale price of the business, and if you have not maintained accurate financial records then you are doing yourself no favours.
Countless times businesses have tried to claim additional tax deductions to save tax, not realising this is decreasing the business profits. The end result from decreased profits, is a decreased sale price. Owners are disappointed and attempt to argue the business is more profitable, the figures just aren’t showing that, and the outcome is a reduction in eventual sale price.