An easy way to keep business records

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Businesses create a lot of paperwork, and if you dont have an efficient system for recording and storing the necessary records, your business can quickly turn to chaos. A simple system to keep business records under control
Buy seven cardboard A4-size storage boxes. Label them:

Bank statements, cheque books, deposit books Invoices paid Invoices unpaid (that is, your Bills unpaid (that is, your debtors) creditors)

Bills paid (including invoices for purchases, credit card purchases) Petty cash receipts Others. Each box should be dated for the current tax year. Youll also need:

A wages book for employees A cashbook for day-to-day operation

A business diary. How you actually file things is up to you.

A suggested simple method to file things

Invoices Make two copies of each invoice you send out. Send one to the person/business who owes you money and file the other copy in the 'Invoices unpaid' box. When payment is received (perhapsa cheque arrives or payment is made electronically) pull out the relevant invoice and write the date and relevant the cheque number on it, then transfer it to the 'Invoices paid' box. Store these paid invoices for seven years, as required Inland Revenue, and then recycle the box back into your system.

Bank statements Check these against your cheque butts and then store them in the 'Bank Statements' box. Before you store them, transfer the information concerning bank charges, automatic payments etc into your cashbook, and then do a bank reconciliation.

Its a good idea to code the entries on the statement so your accountant can check them quickly. For example, the telephone payment might be coded 01, the power payment 02, car expenses 03, and so on. The best way to save money on accounting fees is to use the same code as your accountant (so its familiar to them), so ask them for their coding system before you start. Keep your used cheque butts and deposit books in this same box. An accountants tip: the clearer the details on your deposit and cheque butts, the easier it is for your accountant to follow what youve done. That means lower accounting fees. So remember to fill in those cheque and deposit butts with a full explanation of what the money was spent on, or where it came from (in the case of a deposit) and which invoice it settled. If you are paying using internet banking, include as much information as you can in the references boxes (such as which invoice you are paying) as this will show up on your bank statements. Bills When tax invoices arrive, file them in the 'Bills unpaid' box. As you file each bill, make a note of the amount and its due date on the relevant page of your business diary. Jotting down due payment dates for bills in your business diary helps you:

manage your cashflow (you can page through the diary to check on your future

cash commitments) pay on time and thus keep your credit lines secure avoid missing any discounts on offer for early payment. When youre ready to pay the bill, take it out and write the date paid and your cheque number on it. If you are paying using internet banking, then print out the 'confirmation' page and attach it to the invoice in lieu of a cheque number. Then transfer the invoice to the 'Bills paid box' and keep it for the required seven years. This box should also contain invoices for items you paid for using eftpos, credit cards or internet banking. Remember, if you buy something using eftpos or your credit card make sure you get a tax invoice as well as transaction record as you need this for invoice for your records. Others This box can be used to store other information you are required to keep. Some of

this information may be kept electronically. But you may want to print out hard copies for back-up purposes.

cashbook (and other any bookkeeping workings such as journals and ledgers) wage book, if you're an employer details of entertainment expenses for clients, staff or suppliers till tapes and day books stocktake figures list of debtors and creditors interest and dividend statements list of assets and liabilities depreciation schedules final profit and loss statements and balance sheets any other documents that confirm entries in your accounts, such as

worksheets.

Summary
If you use this simple office in seven boxes approach, you wont need a complicated filing system. Four simple boxes take care of your debtors and creditors (paid and unpaid in each case), with two extra boxes storing bank statements and petty cash receipts, and the last box storing other records. Inside the boxes you can arrange items alphabetically or by date. Filing by date can make it easier to find out who has owed you money the longest, and who you owe money to the longest. Most importantly, you need an efficient cashbook system showing the daily recording of sales, expenses and Page last reviewed: 23 June 2006 drawings.

Plain English Explanations for Terms on this Page

Bank reconciliation
Bank reconciliation is the process of ensuring everything that is on the bank statement has been included in the cashbook.

Cashbook
The cashbook is a basic recording system which records all of the payments made by the business and income received by the business.

Creditors
Creditors are people, businesses or organisations that you owe money to.

Debtors

Debtors are people or businesses who owe you money.

Drawings
The money that you, the business owner takes out of the business to live on. Tax is not paid on drawings taken out of the business as it is payable on the net profit.

Keeping business records

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What records to keep, why keep them, and for how long.
The two main reasons for keeping the right records and storing them correctly are:

1. 2.

Legal requirements. There are penalties if certain records arent kept, and if

your business is audited the time and expense will both be considerable. Business requirements. Previous pricing policies, contracts, marketing tactics

and a myriad of other valuable documentation in paper or digital form make up the operating history of your business. If youre starting in business, the golden rule is: if in doubt, keep it. It is frustrating realising that you cannot claim for a legitimate business expense because you have not kept the appropriate records. An example would be house-related expenses if you run an office from home. For example, a bill for repairing the roof of your house should be kept as you may be able to claim a portion of it as a business expense. Ensure that before you start your business you have systems in place for keeping essential records.

Advantages of having all records on hand when you need them

Saves you money (on accounting fees, Inland Revenue late payment penalties) Saves you time (you can find the information) Gives you the information you need to make the important decisions in your

business.

How long do you have to keep records?

Inland Revenue requires you to keep records for seven years. You can make this the standard storage time for all your business records (unless you have plenty of storage space and you can safely archive older records).

What records do you need to keep?

1. Tax records

For example tax invoices, deposit books, petty cashbooks, records of expenses, keeping records for aduit purposes. Read more about which records to keep on the Inland Revenue website 2. Business expenses Keep all receipts and invoices relating to business purchases. For example business entertainment (such as taking a client to lunch), environmental expenditure, expenses related to use of your home where you use it for business, motor vehicle expenses, rent if you pay it for your business premises, travel expenses for business-related travel. Note: You can only claim business expenses if you keep the right records (receipts and invoices) of all your expenses. Find out more claiming business expenses on the Inland Revenue website Read more about keeping a vehicle logbook Here are some tips to make record keeping of tax records simpler: 1. Make sure that all invoices you pay have the full details of the business

supplying the goods and services, including a GST number. If you get till slips (for example, from a petrol station) then make sure the items are clearly legible. 2. It is useful to staple small till slips to a larger sheet of A4 paper so they dont

get lost. You can then, for example, enter a summary all fuel purchases at the end of each month. 3. Using a business credit card can make it easier to keep track of small

expenses as these will be itemised for you. 4. For clear banking records it helps to have a separate bank account for your

business dealings. All business transactions should go through this account. In other words, keep separate bank accounts for business and personal use. 3. Employee records Keep records relating to employees, such as wages, holidays, sick leave and bereavement leave. Read more about record keeping relating to employees on the Department of Labour's website 4. ACC records Keep details of ACC payments and claims. Find out more about ACC, personal injury cover and prevention 5. Records of accidents You must keep an accident register to record all accidents, near misses and 'serious

harm'. Read more about accident recording, including setting up systems to report and record incidents and injuries 6. Companies Office transactions Keep all copies of transactions with the New Zealand Companies Office, such as the annual return filed with the Companies Office (if your business is a company). Keep articles of incorporation (if your business is a company) plus the company Seal. Keep a copy of updated company details (such as lists of directors or shareholding changes), records of annual general meetings or other meetings. 7. Fixed asset register Keep a register of your assets to comply with Inland Revenue regulations, and to keep control of your business. Read more about keeping records of your assets 8. Other records

Leases, hire purchase documents and loan agreements with the bank and

other lenders. Copies or originals of any personal guarantees you may have signed with

lenders, or that you may have required credit customers to sign. Emails, databases and accounting records Expired contracts (you may need to check quoted prices, or other aspects of

the contract) Advertisements (so you can compare layouts and results) Market research. Many of these records (such as accounting records, invoices, emails, minutes of meetings - for example, annual general meetings) are likely to be stored in digital form on computers. Find out more about keeping digital records safe

Maintenance of electronic storage

As electronic media deteriorate with time, you need to follow a regular maintenance programme. You must make sure that the relevant electronic data is retrievable and readable at all times and follow appropriate back-up procedures. It may be appropriate to keep back-up records at a different location to safeguard against theft of your personal computer.

Further information
Smart business (IR320) This Inland Revenue publication is an introductory guide for businesses and nonprofit organisations to tax obligations, record keeping, and income and expenses. Page published: 23 June 2006