Have you ever wondered why your accountant gets so bent out of shape when you lose a slip or invoice? I mean, it’s just a piece of paper – right? You have the proof that the expense was paid, isn’t that enough? Unfortunately, the payment isn’t enough on its own.
If you go fishing and catch the biggest fish of your life, but you don’t take a photo, how many of your friends will believe you?
So, if you spend cold hard cash on office furniture but don’t keep the slip, why should the taxman believe you? How do they know you didn’t just put that cash in your pocket? Or spend it on something else entirely?
Documents are the paper trail for EVERYTHING your business does. If you don’t have an original document for a transaction, then you can’t prove that the record is accurate or that the event even happened.
Your documents are your proof that your business did some form of trade – whether that money brought money into the business or sent money out of it, you need to be able to prove what happened.
This means that your accountant HAS to have your documents in order to accurately and truly reflect what has happened in your business. Especially when there is a delay between you receiving an item and actually paying for it. But you also need documents in case the taxman, or an investor, or a creditor, come knocking on your door asking for proof that your financial statements are actually true and correct.
What does this practically mean for you and your business?
- You need to keep EVERY single one of the papers that arise due to your business doing business. (This is not just about bookkeeping papers. Your accountant may raise an eyebrow at you if a slip is missing, but as a business owner you are also required to keep every email, whatsapp, sms, contract and written memo that pertains to your business!) If a transaction occurs, make sure you have a document for it.
- You need to get these documents to your bookkeeper for capture and filing
- You then have to store these documents. Every country has a minimum legal requirement for storing documents, make sure you know what yours is.
- You need to make backups of the documents and the accounting work in case disaster strikes your office.
Documents may seem like irritating bits of paper, but they’re vitally important to the health of a business. The more you have and the easier it is to find them and the information they document, the better off you will be.
Look after your paperwork!