How to Store Financial Records Easily and Effectively

An effective business is an organised business, starting with your record keeping. Many small businesses have a lot of questions when it comes to keeping and storing financial records. What you might not realise is just how easy it is to do when done correctly. When your record keeping is on track, your cash flow and budgeting will be accurate and error-free. Here are a few tips for managing your business’ financial records.

Apply the K.I.S.S principle

When it comes to storing financial records in your small business, remember to:

  • Keep it simple
  • Be consistent
  • Follow the same system every day

It’s no good keeping records if nobody can find them when required. Part of having stress-free finances is about being prepared.  Although filing is a boring part of the job, it’s essential when it comes to finding documents in a hurry.

Decide upon an appropriate methodology for keeping records. This helps keep you prepared and ensures everyone in the business is in the loop.  Complete a simple bullet point document of how and where your business stores it documents and share with key stakeholders who require access to your financial records.

Print or digital?

In order to be consistent, your business must choose to keep financial records on paper or in a digital format. If you don’t feel confident about jumping straight into digital, run both side by side for a financial year. Keep all the paperwork in a box until you are confident with the digital system and have transferred all records over.

If you’re still having trouble deciding between print and digital, here is a step-by-step process for setting up each.

A digital Accounts Payable system

  1. Receive invoice by post or email.
  2. Scan and save invoices received by post into an Accounts Payable Received folder. Rename them [Company Name-invoice date] on accruals or [Company Name-due date] if on cash.
  3. Enter tax invoices into your accounting system. Once entered, move the digital tax invoices into an accounts payable folder named after the financial year. For example, [15/16 Accounts Payable Paid].

A paper Accounts Payable system

  1. Receive invoices by post or email. If received via email, print out a copy.
  2. Enter tax invoices into your financial software. Stamp the date paid and which account it was paid from on each invoice.
  3. Once the tax invoice is entered into your financial software, file away under the relevant letter in oldest to most recent date paid. (You’ll want to set up lever arch files for each financial year, sorted by supplier name in alphabetical order.)
  4. When searching for a copy of your tax invoice, search your financial software package first to ascertain date and an appropriate order in the lever arch file.

Special documents

For important documents such as wills, it’s essential to keep copies in a safe-deposit at your bank. It’s also essential immediate family members, key stakeholders such as fellow directors of the business or executors of the will know where they’re kept.

For individual insurance policies such as life cover, income protection, trauma cover, and key man cover, set up a file per person with segments between each policy. For each file, create a summary spreadsheet detailing:

  • Insurance Company
  • Policy Name
  • Policy Number
  • Policy Benefactor
  • Value of Cover
  • Renewal Date
  • Value of Premium

Make a note in your diary to contact your insurance broker eight weeks prior to the policy due date each year to commence renegotiation. This allows plenty of time to discuss business, debt, lifestyle or health changes. It will also allow the broker plenty of time to create a package best suited to your needs.

How long do you keep your records?

According to the ATO Rulings, all financial records must be kept for a minimum of five years and can be stored in paper or digital format. The five years commences when:

  • A payment is received or made
  • A loan is paid out
  • A contract is fulfilled
  • A staff member leaves
  • The last cheque or deposit is written from a book
  • BAS, PAYG, Payroll Tax and Super returns are paid and includes the data used to collate the returns/payments
  • A bank statement is generated

Regular payments based on a contract term should also be put into the diary at least two months before their renewal date. This should be put in the cash flow forecast for the following year and is an important reason why businesses should maintain at least a two year rolling cash flow forecast.

Do you still need help organising your financial records? For more assistance, why not try out Reep today? Reep keeps you focused at a high level without being bogged down in the detail. Contact us to get started.