Business record keeping

Providing accurate source documents to your bookkeeper 

Did you know that the accuracy of your bookkeeping is only as good as the accuracy of the source documents you provide?

Source documents are records that provide evidence of a financial transaction. They help your bookkeeper understand what the transaction was, when it occurred, how much was paid or received and how it should be recorded.

Source documents could include:

• Invoices

• Receipts and tax invoices

• Bank statements

• Credit card statements

• Payroll records, timesheets and leave information

• Credit notes and refund records

• Loan and finance documents

• Records relating to the purchase or sale of business assets

Providing accurate and complete source documents means your financial records are more likely to be accurate, current and compliant.

It is also important to remember that a transaction appearing in your bank feed does not necessarily provide all the information your bookkeeper needs. It may show the supplier and amount paid, although it may not explain what was purchased, why it was a business expense or whether GST was included.

The receipt, invoice or other supporting document provides this information and helps your bookkeeper categorise the transaction correctly.

The ATO identifies receipts, tax invoices, wage and salary records, GST documents and records relating to business assets among the records businesses may need to keep.

Benefits of having accurate source documents

There are several benefits to making sure you provide accurate and complete source documents to your bookkeeper.

These documents support reliable bookkeeping and help your bookkeeper prepare financial records that reflect what is happening in your business. They can also reduce the time spent following up transactions, correcting entries and searching for missing information.

Accuracy

Making sure you provide the correct source documents means that your financial records are more accurate.

This is important for several reasons, including:

• Making sure transactions are recorded with the correct GST treatment

• Supporting the amounts reported in your activity statements and tax returns

• Reducing the risk of errors, adjustments and financial penalties

• Receiving more accurate financial reports

• Making informed business decisions

Your profit and loss report, balance sheet, accounts payable records and cash flow reports all depend on the information entered into your accounting system.

When receipts, invoices or other supporting records are missing, transactions may be placed in the wrong category or left unresolved until more information is available. This can affect how useful your reports are when you are reviewing expenses, planning supplier payments, monitoring cash flow or deciding whether the business can afford a new commitment.

Providing documents regularly also gives your bookkeeper an opportunity to identify unusual transactions or missing information sooner, rather than trying to resolve several months of questions at BAS or financial year end.

Compliance

Accurate source documents help your business meet its tax, superannuation and employer record keeping obligations.

Your records need to explain the transactions reported through your accounting system, activity statements and tax returns. They should contain enough information to show what occurred and support the amounts reported or claimed.

Most business records generally need to be kept for five years. Some records may need to be retained for longer, depending on the transaction and the type of record involved.

Payroll and employment records have separate requirements. Employers generally need to retain employee time and wage records for seven years. These records need to be accurate, legible and accessible if requested by an employee or Fair Work Inspector.

Missing or incomplete documents can make it difficult to support an expense, GST credit, payroll payment or other amount recorded in your accounts. Keeping the correct records from the beginning is easier than trying to recreate them months or years later.

Time and financial savings

When you provide accurate source documents to your bookkeeper, they can save time by not having to track down missing or incomplete information. This can also reduce the time spent correcting entries or processing the same transaction more than once.

A regular document process helps keep your bookkeeping current throughout the month. It can make monthly reconciliations, BAS preparation, payroll processing and financial reporting easier to manage because the required information is already available.

Current records also give you a more useful view of what the business owes, what customers owe you and how much cash may be available for wages, supplier payments, tax obligations and other commitments.

A regular process is usually more manageable than collecting several months of paperwork at once. It also reduces the chance of receipts fading, documents being lost or important details being forgotten.

Managing your source documents

There are a number of platforms that can help you manage your source documents and make it easier to provide them to your bookkeeper.

Platforms that we recommend include Dext, Xero, Hubdoc, and Lightyear. The right option will depend on your accounting software, the number of transactions you process, who needs to approve purchases and how your team currently handles financial documents.

Dext is a cloud based document capture and bookkeeping platform that allows you to photograph, upload, email, store and organise invoices, receipts and other source documents. It can extract information from the document and send the information to accounting platforms such as Xero, ready for review and processing.

Xero is an online accounting software platform that allows you to manage invoicing, bills, bank transactions, reporting and other bookkeeping functions. Its document capture features allow you to photograph, email or upload invoices and receipts. Xero can extract information from the documents and store the original file with the relevant financial record.

Hubdoc can also be used to collect and store paper and digital documents. Documents can be uploaded from a computer, emailed to a dedicated address or photographed through the mobile app. Hubdoc extracts details such as the supplier, date, invoice number and total amount before the transaction is reviewed and published to Xero.

Lightyear serves a slightly different purpose. It is designed for businesses that need more control over purchasing, supplier invoices, accounts payable, expense management and approvals. It can extract invoice details, apply coding rules, route invoices through approval processes and then send the information to Xero.

Using a digital platform to manage your source documents can improve the accuracy and efficiency of your bookkeeping. It can also help keep your financial records organised, accessible and current.

The platform still needs to be set up correctly and used consistently. Automatic data extraction can reduce manual entry, although documents and transaction details should still be checked before they are approved or published.

First Class Accounts Ovens & Murray can review how you currently collect and process documents, recommend suitable business apps and help set up a system that works for your business and your team.

Tips for providing accurate source documents to your bookkeeper

Here are some additional tips for providing accurate source documents to your bookkeeper:

• Scan or photograph paper source documents and upload them to Dext, Xero, Hubdoc or your agreed platform as soon as possible after the transaction occurs. This helps prevent them from being lost, damaged or forgotten.

• If you are taking a photograph, photograph the original source document. Avoid taking a photograph of another photograph or submitting a screenshot when the original invoice or receipt is available.

• When an invoice or receipt has been emailed to you, upload or forward the original PDF rather than taking a screenshot of it.

• Make sure scans and photographs are clear and legible. Check that the supplier name, date, description, total amount and GST details can be read and that no part of the document has been cropped.

• Include all pages of an invoice, statement or agreement when the information is spread across more than one page.

• Add a short description of the transaction when its business purpose is not obvious. This can be helpful for meals, travel, mixed purchases, reimbursements and expenses that include both business and private use.

• Keep credit notes, corrected invoices and refund records with the original transaction. These documents may change the amount or GST treatment recorded in your accounts.

• Do not rely solely on the description shown in your bank feed. A bank transaction may confirm that a payment occurred, although it may not provide enough information to explain what was purchased or support the GST treatment.

• Keep your source documents in a safe and organised place. Using a digital platform such as Dext, Xero, Hubdoc or Lightyear can make documents easier to find and connect with the relevant transaction.

• Provide your bookkeeper with the appropriate access to your document management and accounting systems.

• Agree on one main process for submitting records. Sending documents through several email addresses, text messages and folders can make it difficult to confirm that everything has been received.

• Provide payroll changes, approved timesheets, leave information, reimbursements and other payroll records before the agreed processing cut off.

The ATO recommends using digital record keeping where practical. The same record keeping requirements apply whether records are kept manually or digitally, and digital records need to remain accessible and protected.

By following these tips, you can help ensure that, as your bookkeeper, we have the information needed to keep your financial records accurate, current and compliant.

If your existing document process is taking too much time or information is regularly being missed, talk to First Class Accounts Ovens & Murray. We can help you improve the process, choose suitable apps and provide reliable bookkeeping and payroll support.

Frequently asked question about business record keeping

What source documents should I give my bookkeeper?

Your bookkeeper may need customer invoices, supplier bills, receipts, tax invoices, bank and credit card statements, payroll records, credit notes, loan documents and records relating to business assets.

The documents required will depend on the transaction and the way your business operates. Your bookkeeper may also ask for an explanation when the business purpose of a transaction is not obvious from the document.

Is a bank statement enough evidence for a business expense?

A bank statement shows that money entered or left your account, although it does not always explain what was purchased, whether the expense was business related or how much GST was included.

Your bookkeeper may also need the receipt, tax invoice or other source document to categorise the transaction correctly and support the amount recorded or claimed.

How long should I keep business source documents?

Most business records generally need to be kept for five years. Some records may need to be retained for longer, particularly when they relate to assets or transactions that continue to affect later reporting periods.

Employers generally need to retain employee time and wage records for seven years. Records should remain accurate, legible and accessible throughout the required retention period.