Good record keeping practices
Starting your business with a good record keeping system can help you track your business performance, meet reporting responsibilities and access financial history with ease. Since different rules apply to different types of documents, the length of time that a business needs to retain documents depends on what the documents are. Some businesses may need to keep documents indefinitely.
The seven year principle is recommended as a base due to the fact that seven years is sufficient time for defending tax audits, lawsuits and potential claims. Government departments and organisations, such as the Australian Securities and Investment Commission (ASIC) and The Fair Work Ombudsman (FWO), require company and employee records to be kept for seven years.
Owners should note that there are some circumstances where it may be required to keep documents for more than seven years. For example, documents relating to intellectual property rights, such as trademarks and copyright, can be needed indefinitely by a business. These documents should be retained for as long as the rights in the intellectual property exist.
Financial, legal, employee, policy and procedural records are the main categories of documents that a business will need to retain. Keeping good records can save you a lot of time and money when a situation arises as you may need to rely on these files if disputes or other issues appear in your business.
The general standards for record keeping in Australia are as follows, documents need to;
- Be in writing, either on paper or electronically.
- Be written in English.
- Explain all transactions.
There are benefits and risks to storing files both on paper and electronically. The most important thing to remember, regardless of storage method, is to back up your records. A combination of both methods can ensure you have documents available when needed.