Why Keeping Your Financial Records Important?
There are several reasons why any organisation needs to keep financial records. First and foremost, records and documents are necessary to make sound business decisions. They also provide a snapshot of an organisation’s past performance, which can be used to drive future growth. Additionally, good financial record management can help an organisation avoid or mitigate legal issues.
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Top Benefits of Financial Records Keeping
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Prepare Accurate Financial Statements and Reports
Financial Records play an important role in preparing accurate financial statements. Financial statements summarise a company’s financial position, performance, and cash flow. Managers of the company make decisions about where to allocate resources and how to improve performance inside and outside. Good financial records will also ensure the complete availability of diverse commercial documents when needed.
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Be Tax Ready
You are always updated with your monthly, quarterly, and annual tax papers by keeping financial records.
Your company must file timely monthly, quarterly, and annual tax returns, including federal, state, and city income tax returns and state & local sales tax returns (these may be monthly or quarterly).
Maintaining accurate financial records is essential for business owners to meet their tax obligations. The records should include gross earnings from your business, other money received, expenses you will claim as a deduction, and more.
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Keeping Records Allows You to Manage Your Business and Its Growth
Maintaining accurate financial records is critical for businesses of all sizes. By tracking your income and expenses, you can better understand how well your business is doing, identify areas that need improvement, and make more informed decisions about where to allocate your resources.
Financial records also offer a window into proper verification, allowing market-orientated business policies to be developed—ultimately benefitting your company’s growth.
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Keeping Business Records Helps Easy Access to Loans and Grants
Loans and grants can benefit businesses looking to expand, save money, or improve their financial situation. Companies that qualify for loans or grants must keep track of their economic growth and stability. This includes maintaining records of their forecast, strengths, and weaknesses.
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Know Your Financial Situation
You need to have an accurate understanding of your company’s financial situation regularly. This knowledge gives you control over your business.
You can make informed decisions about what needs to perform daily, weekly, monthly, quarterly, and annually to stay compliant with local and state regulations and maintain healthy cash flow.
Besides, if something unexpected happens (a natural disaster, for example), you’ll already have a plan because you’ve been closely tracking your finances.
Identify Top Income Sources
Maintaining accurate financial records is important for various reasons, the most important of which is proper identification of your income sources. This is necessary to properly separate business from non-business receipts and taxable from nontaxable income. An advanced document archiving system can help make this process easier and more efficient.
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FAQ
How long do businesses have to keep financial records in Australia?
Australian businesses are required by law to keep certain financial documents for at least five years. This includes income statements, payment summaries, and receipts.
These documents are important for the business to do their tax during the income year, and in case of an audit.
The length of time businesses must keep these documents varies depending on the type of document and the state or territory they are located in.
What Are the ATO Requirements?
The Australian Tax Office (ATO) requires businesses to submit monthly, quarterly, or annual business activity statements (BAS).
The BAS is used to report and pay GST, PAYG installments PAYG withholding tax, and other tax obligations. The BAS can be filed electronically using the ATO’s online system.
What Are the Key Requirements for Financial Record Keeping and Auditing?
There are key requirements for businesses to maintain financial records and be audited. Records must be kept for at least five years, in English or easily convertible to English, and maintained for at least five years after completing transactions or acts. This is important to ensure that businesses can provide accurate documentation if law enforcement or other legal entities require it.
Why do you need financial document management?
Accurate and well-organised financial documents are essential for any business. Financial document management helps businesses keep track of their expenses, income, and other important data. This information is used to create financial statements, which are used to make important business decisions. Financial documents also help businesses manage their relationships with creditors and other partners.
Conclusion
Business professionals understand the importance of record keeping. This blog post has demonstrated some benefits of keeping financial records.
Maintaining financial records is important to make sound business decisions based on an accurate historical record.
Good recording of financial transactions can prevent the financial missteps that lead to financial woes.
Demonstrating a firm’s financial history throughout business protects customers, investors, employees, and future investors.
Finally, good record-keeping helps you avoid or mitigate legal issues.
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