If you’re of a certain age you’ll no doubt remember those bold newspaper headlines of years ago heralding the arrival of the paperless office. Personal computers had arrived and the modern office was going digital. Not a sheet of A4 would be seen, and all the company records would be kept on floppy discs.
Of course it didn’t happen. Although today’s office is full of word processors, and computers it still seems to generate reams of paperwork. From receipts and invoices, to cash and card transactions, to employee details and tax returns, the bulk of this paperwork needs to be filed and kept – often for a period of years. So what do you need to keep, and for how long?
Whether a sole-trader, or a small business with three or four employees, even before you open the doors to start trading you begin to accumulate paperwork. If you’ve taken on a lock-up, machine shop, or retail store you have lease or purchase and rental documents that need to be kept. Employee details, contracts and payment records have to be safely stored.
Depending on your type of business, health and safety inspections may need to be carried out, equipment and safety at work checks undertaken and recorded. All this paperwork needs careful filing and keeping in case of legal problems down the line.
Day to Day Trading:
Receipts and invoices of pre-trade expenditure such as building alterations, vehicle lease or purchase, and equipment and stock purchase all need to be filed. Much of this outlay you can claim back against your first year’s tax liabilities – provided you have proof of expenditure.
There are some excellent packages available for keeping your trading accounts and tax liabilities up to date, but the paperwork which comes with them, receipts and invoices, also need to be retained. Your accountant will need to cross reference your entered figures against these receipts before presenting your books to the tax authorities.
Operational expense records such as utility bills, insurance payments, rent or mortgage payments paid through the bank should show on your monthly bank statement. They need to be kept.
It can sound overwhelming, but it doesn’t need to be. If space is tight in your office a few wide shelves fitted to the walls are all you need to be able to keep your records itemised and neatly stacked using A4 box files which can be purchased very easily from many places online. Files can be stacked as you would books on a book-shelf. With each box labelled with its subject matter and date, it takes seconds to lift one down and record or update its contents.
All legal documents should be retained for as long as the business is trading. It is a good idea to scan the documents and file them on your computer to give yourself a back-up in case of a disaster such as fire. Companies such as box.com allow you to store and share information securely online which reduces the chance of it being lost if your machine breaks.
Once your annual tax returns have been agreed by the authorities and your accountant, payment made or rebate received, you should be able to shred all receipts and invoices for that year’s trading. However, all official paperwork, and any correspondence between yourself, accountant and tax office has by law to be retained. In the UK your returns have to be kept for at least five years. In other countries it may be six, seven or more.
Don’t despair, for a small business an hour a day can see all your day’s trading figures recorded, and paperwork filed in the relevant box file.