Knowing what business records to keep and for how long is essential to comply with tax laws. It also gives you insight into how your business is performing.
What is business record keeping?
Business record keeping is when you keep track of all business transactions. By law, you must keep all tax records and supporting documentation, like receipts, invoices, wage and salary records, bank statements and records related to business assets.
Why keeping business records is important
Keeping business records is important for a few reasons. It helps you keep on top of the financial health of your business and it’s also a legal requirement of the Inland Revenue (IR).
You need to be able to produce these if you’re ever asked for them or audited by the IR. If you can't, you might face fines or other penalties. You must keep all your business records for at least 7 years.
What types of business records should you keep?
The types of business records you need to keep are everything that relates to what you spend, owe and own in your business.
These include financial statements and tax returns, tax receipts and bank statements, employee wage and salary information, contracts with suppliers, your business assets register, depreciation schedules and any records of business loans and shares.
New Zealand requires you to keep personnel files for at least 6 years and pay records for 7 years.
Record keeping requirements for businesses in New Zealand
Record keeping requirements in New Zealand you legally have to follow are:
You must keep all records for at least 7 years
All records must be kept for at least 7 years as set by Inland Revenue. This period starts when you prepare them, get them from your accountant or complete the transactions — whatever comes later. So, if you use accrual accounting, the 7 years start when the money changes hands.
Records must not be changed and must be stored in a manner that restricts changes
Records must not be changed and must be stored in a manner that restricts changes. If you save an electronic version of a paper record, make sure all the information is clear and that it accurately reflects the original. When this is safely stored, you don’t need to keep a paper copy too.
Records must be in English or Te Reo Māori or an approved language
Records must be in English, Te Reo Māori or another language approved by IR.
Records must be easily retrievable and readable at all times
Records must be easily retrievable and readable at all times. Retrievable means accessible digitally with passwords handy or accessed easily. It's a good idea to back up your records, too. If manual, this should be an offsite area. If digital, choose a cloud-based system.
How do you store business records?
You can store business records electronically or manually, depending on your preference. However, the IR is moving towards electronic records as part of their 'making tax easy' approach.
Top tip: With MYOB's accounting software, you can bring all your business information together in one place. Plus, your data is stored safely in the cloud and retrievable at the click of a button.
What are the benefits of record keeping?
The benefits of good record keeping are that you:
Stay on top of your business cash flow
Staying on top of your business cash flow and tracking expenses is easier when you keep accurate records. You can use cash flow analysis to see where you’re spending and making money and where you might be able to make changes.
Meet tax obligations and stay compliant with IR
Meeting tax obligations and staying compliant with IR is central to your survival as a business. Keeping good records will help you file accurate returns each year.
Have records on hand when needed
You must have records on hand when needed, like if the IR amends your tax return or audits your business. It’s a requirement and will also make your life easier.
Business record keeping FAQs
Should I keep digital and paper copies of all business records?
You don't have to keep digital and paper copies of all business records. The IR is moving towards electronic records, so they prefer that you do, too. You can still choose to store manual records, though this practice is less efficient and harder to manage.
What penalties are imposed for inadequate record keeping?
The penalties imposed for inadequate record-keeping can include fines from the Inland Revenue and, in severe cases of evasion or deliberate record manipulation, also criminal prosecution.
How long should I keep client records for?
Generally, you should keep client records for at least seven years. If you’re unsure about your record keeping obligations, get advice from an accountant, bookkeeper or other qualified professional.
Stay compliant with business record-keeping
Understanding your obligations around record keeping is vital to staying compliant with tax laws. And it’s good for business, too. It lets you see how well your company is performing and any areas you can improve your cash flow.
It doesn’t need to be complicated. MYOB Business takes the stress out of record keeping, letting you get on with delivering for your customers and building your business. Get started today.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.