Good records save small businesses
The ATO suggests that consistent and coherent book-keeping is key to not only staying on top of finances but for the survival of businesses.
Record-keeping for small business owners is a time-consuming job and is typically the first task to be neglected during busy times. This often leads to complications catching up on bookwork.
The ATO constantly monitors small businesses to make sure the correct amount of tax is deducted from wages, specifically those industries that are required to report to the ATO all payments made to contractors.
Keeping on top of tax, wages and contractor payments is almost impossible if your company records are in chaos. The ATO presents penalties as high as 75% of the unpaid tax, even for innocent mistakes. However, if you can show that your tax records are well kept, greater leniency is given.
Good book-keeping goes beyond accumulating receipts for tax deductions. Businesses that pay their income tax quarterly can reduce their instalment amounts if their records indicate that profits are down from the previous year.
There are several benefits for having your records and books in place;
- managing cash flow;
- stock purchasing;
- showing your financial position to lenders or prospective buyers;
- calculating and lodging superannuation contributions on time; and
- completing and lodging activity statements on time.
Having a professional tax accountant manage your EOY finances is only an asset if your invoices and receipts are in order. This will you save your business both time and money.
Finally, it is a legal requirement to have good business records in place. Your business account books, income and sales receipts, expense and purchase records and any other documents needed to prepare your tax return must be kept for a minimum of five years.
If you have any questions about record-keeping or need advice on how to set up a system for managing your records, speak with your accountant at Enrizen.