The Importance of Proper Record Keeping?
Financial record retention is an essential administrative responsibility of every individual, business, trust, and organization. Good record keeping helps you maintain your financial discipline while avoiding any legal liabilities in case of an audit or discrepancies. However, according to our experience and business statistics, more than 50% of Canadian businesses and tax payers either do not retain essential financial records for future reference or loose them within 12-24 months of filing their tax returns.
How to Keep Proper Records?
We cannot stress enough on this. It is very important to keep all financial records (receipts, invoices, cheques, pay stubs, etc) organized in a safe place where they can be accessed when required. Top four scenarios of why records are lost are:
- they were not kept at all
- they were kept but so disorganized that you cannot make sense of it
- they were kept very organized in a place where it got washed or destroyed; And,
- they were kept safely and organized in a place but you cannot find them anymore.
Creating a habit of spending a few minutes a day to organize your daily documents helps a lot in avoiding record retention problems.
The Repercussions If Not Done?
Financial records that are kept in an orderly and complete manner serves best when essential information is required at a very crucial time in future. Tax audits, financial audits, governmental requests, and credit applications are just a few examples. There are numerous cases when tax auditors have denied expenditure claims or credit applications have been rejected because proper supporting documents could not be produced in due time.
Cost Vs. Investment ?
Always try to spend your hard earned money on things which will reap long term benefits, i.e., invest rather than spend. Our guiding philosophy is to transform your expense dollar into an investment for your future success. Businesses that spend on expenses with long term investment nature reap its benefits much longer. The point to remember is to balance the cost versus the benefit. Most businesses see record keeping as an added cost. In reality, if done properly, this is a significant investment in the future of your business.
If you want your business to avoid legal liabilities arising from improper or lost records, you need to invest in the effort to implement a complete and a comprehensive record retention method. Such a system will keep your records organized and safe, and help you avoid legal liabilities arising from record discrepancies.
How Can We Help You?
We at Compendium Nancial have years of experience with proper record retention methods. Whether you are an individual, a business, a trust, or an organization, we can help you develop and implement an efficient and an effective record retaining method. All records are not the same, nor stacking up every piece of paper is ever an effective or an efficient method of record retention. We have learned from experience what constitutes proper financial records and how to store them in an effective and an efficient manner. You don’t have to invest thousands in a high tech and a complicated storage system. Depending on your needs and the volume of annual financial transactions, having a proper method and proper space for storing essential data, whether electronic or paper form, is sufficient to serve your recording needs.
Call us today for a free consultation session on how to maintain proper business records for your self, your business, or your organization.