Your financial records

Every business owner needs to be able to understand and interpret financial records, regardless of whether you employ an accountant or book keeper to handle your financial reporting for you.

Knowledge of the roles of different types of financial records gives you a more accurate picture of your business’s health and allows you to respond more effectively to changes in your business’s performance.

Here are some summaries of the core financial records you should be keeping not only to meet your tax obligations but also to help safeguard the health of your business.

On this page:

• Cashbooks
• Profit and loss statements
• Balance sheets
• Transaction records
• Other types of records

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Cashbooks

Cashbooks are a cash flow record for your business. They record all the transactions of money that have gone into and out of your business for a given period (normally a month), plus how much cash is left at the end of that period.

‘Cash in’ can include things like:

• sales
• interest on savings
• asset sales.

‘Cash out’ can include:

• buying stock
• advertising costs
• tax paid
• equipment purchases.

A cashbook is a useful record of performance that can help you highlight cash surpluses and deficits quickly. If you’re GST- registered, your cashbook should also record the amounts of GST you collect and pay on your goods and services transactions.

Employers should record their staff’s pay in a separate wage book.

Monitoring cashflow is critical for businesses. Many businesses that fail, do so because they run out of cash, even though they may be trading profitably. This is because they may have too much cash tied up in areas like stock and debtors, or they struggle to manage unexpected expenses that come along.

Find out about GST with An introduction to GST and GST obligations.

Find out more about cashbooks with  Inland Revenue.

Find out more about wage books with Inland Revenue.

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Profit and loss statements

Profit and loss statements and balance sheets traditionally form what is known as the final accounts.

Profit and loss statements record a business’s net profit – that is, its profit after all expenses – but they can also be accompanied by a trading account (showing gross profit) and an appropriation account showing a record of how net profit has been split between partners or company shareholders.

Find out about Improving your business health.

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Balance sheets

Balance sheets record a business’s net worth, which is the value of its assets minus its liabilities. This is why they’re sometimes simply referred to as a list of assets and liabilities.

Balance sheets should also show how assets have been paid for and whether any of them have been used as security with a creditor to gain finance.

Final accounts should be delivered at the end of the financial year, which is set by your balance date. Most businesses use March 31 as their balance date. Find out more with Inland Revenue.

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Transaction records

In addition to providing statements recording and summarising your business’s performance, it’s also wise to keep direct evidence of individual transactions. This is why you should also keep a record of the following for your financial records.

• Invoices
• Receipts
• Cheque stubs
• Deposit slips
• Bank statements
• Till tapes and day books
• Stocktake figures

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Other types of records

In addition to standard financial records, you may have to keep the following.

• A wage book, if you’re an employer.
• Details of business entertainment expenses and fringe benefits (which may be applicable to Fringe benefit tax).
• A list of debtors and creditors.
• Interest and dividend statements.
• Depreciation schedules.
• Worksheets.

Always consult an accountant or book keeper if you’re unsure of which records you must keep for financial reporting.

Read more about Business taxes and levies and Employer deductions.