Take control of office records

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Keeping accurate and up-to-date records is a key component of running your own business and improving your cash flow.

We are all in business to make a living. Our customers pay us to provide a service or a product or both. This sounds straightforward enough, yet often it’s the ‘getting paid’ bit that causes stress. It can also cost us time, money and customer confidence.

There may be several reasons why a customer hasn’t paid their account on time. It may have arrived late and/or lacked detail. Perhaps there is disagreement over the work done and costs quoted.

To avoid such problems, it’s important that all invoicing is accurate, detailed and provided to customers on time. Job cards/worksheets signed by your customer can form the basis for a reliable invoice to be generated back in the office at the end of the day or week. These records can reduce the risk of disputes arising later.

Keep records up to date

New owner-operators or contractors quickly learn that they have become an accountant, a secretary, a salesperson and perhaps even their own office cleaner. Record-keeping often takes a back seat but keeping accurate and up-to-date records is a key component of running your own business. It makes life easier for filing GST returns and annual accounts and means that deductions are less likely to be overlooked.

Accurate records and your annual set of accounts are always required if you apply for a business loan or other funding. Plus, if you are audited by Inland Revenue, a detailed record-keeping system will look far more professional than a shoebox full of receipts.

So you need to track your income, your assets and every expense in your business, as well as personal expenses related to your business. Keeping your business and personal expenses separate is also crucial.

Small business expenses

Many of the expenses related to your business will be partially or fully deductible:

  • Office expenses – If you have a home office, you need to keep records of your deductible housing costs (either rent or, if you own your house, your mortgage interest and insurance) and utilities. You can deduct a certain percentage of these. If you rent an office separately from your house, your office rent and associated utility costs are fully deductible. Your accountant can advise you.
  • Training expenses – Record costs such as books, manuals, training seminars, classes and certifications.
  • Equipment expenses – Note all your equipment such as tools, laptop, printer and even cables and extension cords.
  • Vehicle expenses – All fuel and repairs carried out on your business vehicle should be recorded. You can also deduct insurance, parking fees and tolls.

Recording other business transactions

Recording monies coming into and leaving your business account is another way of keeping track of your finances. If you pay cash for a business item, ensure that you fill out a petty cash slip and attach it to the receipt for that item. Keep a separate petty cash log or record these cash payments along with your other expenses.

You need to keep detailed records on assets used for your business, such as computer equipment, office furniture and tools. Physically numbering each asset and recording it is another good habit.

Your asset records should include:

  • when you acquired it
  • how much you paid for it
  • how you used it.

If you sell the item, keep a note of when and how you sold it, any expense in selling it and the amount you received.

How long should you keep the records?

As a general rule, you need to keep all your records and documents for at least 7 years. The period of limitations that Inland Revenue sets can vary depending on the type of expense, for example, you must keep records relating to each business asset until the period of limitations expires for the year in which you dispose of the item. A schedule is available from Inland Revenue or your accountant.

Keep your supporting documents

Whether your business keeps paper hard copy or electronic records is up to you. Generally, a mixture of both is the norm. A computer system will allow you to generate appropriate reports to track collections, stock levels and seasonal trends. It is important to keep all paper records safely and to regularly back up your computer system. Keep a record of the electronic files in a different place in case the system crashes or is stolen.

By putting record-keeping at the top of your list instead of the bottom, you will be more likely to maintain a healthy cash flow.

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