Financial record keeping
Keeping accurate and up-to-date records is vital to the success of your business. Good records help you to minimise losses, manage cash, meet any legal, regulatory and taxation authority requirements and improve financial analytics. Your accountant can help you set up a record-keeping system.
Understanding financial record keeping
Record keeping is how you log, store and dispose of important financial information for your business.
- source documents, both physical and electronic, that show transaction dates and amounts
- contracts and other legal documents
- private customer and business details.
You may need to access your records at different times of the year (e.g. for end of financial year) or on request (e.g. by the Australian Taxation Office).
Seek professional information
Talk to your accountant, bookkeeper or tax agent for tailored advice on:
- what records you need to keep
- what system or software is best for your business
- how long to keep your records.
Benefits of good financial record keeping
Good financial record keeping can help you:
- protect your business
- measure your performance
- maximise profits
- plan and work more efficiently
- generate meaningful reports
- meet legal and tax requirements
- protect your rights
- manage potential risks.
Good record-keeping practices video
In this video you can learn about creating and maintaining good record-keeping practices in your business.
This video covers:
- what records you need to keep
- the best practices for record keeping
- how to keep your business's records secure.
How to keep financial records
There are certain record-keeping requirements for businesses in Queensland, and there may be specific laws and requirements related to your industry sector.
You can keep records using either an electronic or manual system. You also need to make sure your records are secure, private, backed up and can be easily reported on if needed.
The Australian Taxation Office (ATO) recommends that businesses use an electronic record-keeping system. The same record-keeping principles apply to both electronic and manual records.
Learn more about digital record keeping for businesses.
Seek professional advice
Talk to your accountant, bookkeeper or tax agent for advice on which method or system is best for your business, and your legal responsibilities for keeping records.
Assess your record-keeping skills
Use the ATO record-keeping evaluation tool to identify what records you need to keep and review how well your business is keeping records.
Electronic record keeping
An electronic record-keeping system, such as accounting software, makes it easier to capture information, generate reports, and meet tax and legal reporting requirements.
- Easily record business transactions, including income and expenses, payments to workers, and stock and asset details
- Efficiently keep financial records and requires less storage space
- Provides the option of recording a sale when you raise an invoice, not when you receive a cash payment from a client
- Easily generate orders, invoices, debtor reports, financial statements, employee pay records, inventory reports
- Automatically tallies amounts and provides reporting functions
- Keeps up with the latest tax rates, tax laws and rulings
- Emails invoices to clients, orders to suppliers, or business activity statement (BAS) returns to the Australian Taxation Office (ATO)
- Backs up records and keep them in a safe place in case of fire or theft
Having good accounting software or systems is important to keep your business running smoothly. The right system can help warn you if it looks like your business might run out of cash.
Make sure the software has standard business reporting (SBR) forms needed to report to the ATO (such as BAS statements) and meets Australian tax requirements.
Review what your business needs from accounting software before deciding which one to buy. Consider if you need software that can:
- calculate all payroll requirements (e.g. pay-as-you-go withholding, annual leave and long service leave)
- track stock, work in progress, orders, sales, and other task management requirements
- manage multiple bank accounts
- manage foreign currency transactions
- track separate financial records for each business or department within your business
- allow for interface with other IT systems including online payments, data spreadsheet packages and customer relationship management (CRM) systems
- keep detailed sales records on customers.
Free or paid software options
There are many software packages that allow you to successfully control records without needing accounting experience. There are free software packages available but make sure these meet your business's needs.
There are many commonly used purchased accounting systems used by small businesses that are billed monthly or purchased outright. Consult with your accountant, financial adviser or industry organisation to assist with identifying the most appropriate software package.
Software for Single Touch Payroll
All businesses must report tax and superannuation information directly to the ATO. This is known as Single Touch Payroll (STP). You should check that STP reporting is included in your accounting software.
The ATO provides a register of software products that support STP reporting, including low-cost options for micro employers.
You must use the ATO's SuperStream to pay employee superannuation guarantee contributions to super funds. This ensures money and data are sent electronically in a standard format across the superannuation system. Make sure your accounting software is compliant with SuperStream.
Understand your SuperStream requirements as an employer (including if you are self-employed).
Seek professional advice
Talk to your accountant or financial adviser before deciding on a software option.
Learn more about digital record keeping for businesses from the ATO.
Manual record keeping
You may prefer to use a simple, paper-based record-keeping system.
- Less expensive to set up
- May be easier to use for correcting errors, as opposed to computerised ones that can leave complicated audit trails.
- Lower risk of corrupted data
- Less of a risk of data loss, particularly if records are stored in a fire-proof environment
- Problems with duplicate copies of the same records are generally avoided
- Familiarity with how accounting software calculates and treats your information isn't needed
- Sort and store all paperwork, receipts and payments by financial year.
- Keep all original documents and date all correspondence.
- Record all transaction dates and payment amounts.
- Save all online financial transactions by month and financial year in your inbox and in a separate folder on your hard drive.
- Backup all electronic records on an external hard drive or storage device other than your computer's internal hard drive.
- Capture all your income and expenses in statements from both your bank and credit card accounts.
- Request that all statements and bills be sent monthly, allowing you to reconcile all financial records each month.
How long to keep records
You must keep your records for a certain period. The length of time will depend on the type of record and your business type or industry.
There are legal requirements for how long you keep some records. These include:
- income tax and other financial records—at least 5 years
- personnel records—at least 7 years
- formal company documents (e.g. resolutions)—indefinitely.
Keeping your records secure and private
If you collect and keep customer records, you'll need to protect and respect your customers' privacy. You may have to comply with the Privacy Act 1988.
Read the Office of the Australian Information Commissioner's guide to privacy for small business to help you apply the national privacy principles.
Learn more about protecting privacy and information.
Reporting on your records
If you use an electronic record-keeping system, you must be able to produce a hard copy of a record if the ATO or Australian Securities and Investments Commission (ASIC) request it.
Find financial reporting requirements broken down by business type from ASIC.
Backing up records
Set up a secure electronic backup system to ensure records are safely stored and regularly backed up. Daily backups are recommended, particularly for important records.
Online (or 'in the cloud') backup services allow you to access records from anywhere, at any time. They are generally inexpensive and offer benefits for flexible work and business continuity. Make sure any online system protects the privacy and security of your business and customers.
Learn more about cloud computing.
Cheap backup options include memory sticks and external hard drives.
Make sure any physical backup copies are stored in a separate location to your business in case of fire, theft or a natural disaster.
What records to keep
Keep these records to meet basic taxation legal requirements.
- Cash receipts and cash payments
- Bank account (e.g. cheque books, deposit books and bank statements).
- Software records
- Invoice books
- Receipt books
- Cash register tapes
- Credit card documentation
- Credit notes for goods returned
- Record of goods used by the business owner personally.
- Petty cash system (smaller cash purchases)
- Credit-card statements
- Cheque butts (larger purchases)
- Any other documents relating to purchases, including copies of agreements or leases
Keep these records to meet legal requirements and to accurately determine your tax position at the end of the financial year.
- Details of stock on hand at the beginning and end of the year, to work out whether the business has a taxable income for tax purposes
Debtors and creditors
- Details of all your debtors and creditors for the period—ask your accountant what you need to give them
Capital gains details
- Records of sale and asset purchase dates and agreements
- Disposal and proceeds received
- Details of commissions paid, legal expenses and improvements made to an asset
- Any other records relevant to how you calculate your capital gain or capital loss
- Original purchase agreements or tax invoices
- Depreciation schedule
- If applicable, the cost of transporting the items to your business and installation costs—to obtain tax deductions for depreciation (wear and tear) of assets
- Cheque butts, receipts, cash register tapes, copies of statements and invoices, credit card documentation, details of payments by cash and log books.
Staff and wages
- Full details of wages, employment contracts, tax deducted, fringe benefits, superannuation and related matters such as sick pay and holiday pay.
Basic accounting records
- Stock records, accounts receivable, accounts payable, and other basic accounting records.
- Sales and purchase contracts, and loan agreements
- Rental and lease agreements
- Franchise agreements and sale and lease back agreements
- trading agreements with suppliers
- Other legal documentation
Assets and liabilities
- List of assets and liabilities
- differentiate between current and long-term assets and liabilities.
- Evidence of deposits with utilities, contracts with phone companies and registration of your business name.
Keep your personal and business records separate to simplify business reporting and tax returns. For example, use a dedicated business credit and debit card for business expenses to make it easy to separate business and personal expenses.
Financial record-keeping checklist
- I have investigated and set up a record-keeping system that suits my business.
- I know what records I need to keep.
- I know how long to keep my records.
- My record keeping meets privacy requirements.
- I regularly back up my records to a secure, offsite location.
- Read about how to collect and store customer information.
- Find out about ATO recommendations for recording keeping for business.
- Learn about cyber security and protecting your online business activity.
- Find information, tips and resources on setting up and managing your business finances from our Mentoring for Growth mentors.
- Last reviewed: 20 Dec 2021
- Last updated: 11 May 2022