Omar Bennett
Business records are documents that record acts, conditions, or events related to a business. They can be hard copies or digital records and include meeting minutes, memoranda, employment contracts, and accounting source documents. The type of records a business keeps depends on the industry and federal tax purposes. For example, records of purchases, sales, payroll, and other transactions are necessary for tax returns. These records can be kept through single-entry or double-entry bookkeeping. Additionally, certain records, such as employment tax records, must be maintained for a minimum period, as specified by legal requirements or internal company policies.
| Characteristics | Values |
|---|---|
| Format | Hard copy or digital |
| Content | Acts, conditions, or events related to business |
| Examples | Meeting minutes, memoranda, employment contracts, sales reports, purchase orders, inventory logs, production records, payroll details, attendance registers, gross receipts, purchases, sales slips, paid bills, invoices, receipts, deposit slips, canceled checks, licenses, permits, patents, legal agreements, etc. |
| Retention period | Based on legal requirements and/or internal company policies |
| Purpose | Compliance with legal requirements, tax purposes, financial planning and budgeting, audits, resolving disputes, etc. |
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What You'll Learn
Financial records
Types of Financial Records
- Profit and Loss Statement (P&L): This statement summarises a company's revenues and expenses over a specific period. It provides a clear picture of whether the business is profitable, breaking even, or losing money. The P&L statement is a dynamic tool to evaluate the company's financial trajectory and make strategic decisions.
- Balance Sheet: A balance sheet offers a snapshot of a company's assets, liabilities, and shareholder equity at a particular point in time, typically the last day of the reporting period. It follows the standard equation: Assets = Liabilities + Equity. Balance sheets are essential for stakeholders to understand the company's financial position and potential risks or opportunities.
- Cash Flow Statement: The cash flow statement is a critical document that tracks the movement of cash into and out of the business. It is divided into three categories: operating activities, investing activities, and financing activities. This statement helps stakeholders understand the sources of cash and how management spends it. It is also crucial for planning day-to-day and long-term investments and assessing the company's ability to cover debts.
- Income Statement: Income statements reflect a company's profitability over time. They provide insights into the revenues generated and expenses incurred, helping evaluate the company's financial condition and growth prospects.
- Statement of Shareholder Equity: This statement reveals what profits or losses shareholders would receive if the company were to liquidate. It provides insights into the distribution of profits and the value generated for shareholders.
- Tax Returns: Maintaining accurate tax records is essential for compliance with government regulations. These records include information on gross receipts, deductions, and credits, and employment-related taxes.
- Aging Reports: These reports provide insights into the consistency of business revenue flows and help identify cyclical patterns in sales and services.
- Asset Records: Businesses must maintain records of their assets, such as machinery and furniture, to compute annual depreciation and gains or losses when selling these assets.
- Supporting Documents: This includes sales slips, paid bills, invoices, receipts, deposit slips, and cancelled checks. These documents support the entries in the company's books and tax returns.
Recordkeeping and Accessibility
Businesses must implement a robust record management system to ensure their financial records are organised, accessible, and secure. Records can be maintained in physical form, such as in file cabinets, or digitally through electronic accounting software. Active records refer to those that need to be accessed regularly, such as current policies and procedures. Inactive records are not required frequently but may be needed for legal, financial, or historical purposes, such as meeting minutes or historical financial statements.
Additionally, businesses should categorise their records to facilitate easy access and retrieval. Common categories include enterprise records (related to everyday business activities), industry records (specific to a particular industry), and legal hold records (maintained for legal purposes, audits, or government requests).
In summary, financial records are a critical component of any business, offering a comprehensive view of its financial health and enabling data-driven decision-making. Effective recordkeeping and management ensure that businesses can leverage their financial records to make strategic choices and maintain transparency with stakeholders and regulatory bodies.
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Operational records
Business records are documents (hard copy or digital) that record an "act, condition, or event" related to business. They include meeting minutes, memoranda, employment contracts, and accounting source documents. These records must be accurately and easily retrievable for review and must be stored in a way that ensures accessibility and safeguards against environmental damage.
Additionally, operational records can refer to records about products and practices, which can be beneficial to firms. These records are typically maintained or made available for audit in the base jurisdiction.
The retention and management of operational records are crucial. They may be stored on-site or off-site in records centres, and proper capabilities for retrieval must be established. The tracking of records during circulation is often handled through computerized systems, such as bar code scanners or radio-frequency identification technology.
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Legal records
One of the key aspects of legal records is their ability to stand as evidence in legal proceedings. Business records are often exempt from hearsay rules, which typically prohibit out-of-court statements from being introduced as evidence. To be admissible in court, business records must meet certain criteria: they should be made in the routine of business operations, based on information provided by individuals with direct knowledge of the matter, and created contemporaneously with the event or act being recorded.
The specific legal records maintained by a business will vary depending on factors such as industry, jurisdiction, and operational specifics. However, some common examples of legal records include meeting minutes, memoranda, employment contracts, and accounting source documents. Meeting minutes, for instance, are detailed records of discussions and decisions made during formal meetings. These minutes are often kept for historical value and can provide a valuable record of the company's decision-making process.
Employment contracts are another critical type of legal record. These documents outline the terms and conditions of employment for individual employees, and they are legally binding agreements between the business and its workforce. Similarly, memoranda, or memos, are formal documents used for communication and record-keeping within an organization. Memos can serve as evidence of internal policies, procedures, or instructions that have been communicated to employees.
Additionally, legal hold records are a distinct category of legal records that businesses are required to maintain for legal purposes. These records may be requested during audits, litigation processes, or by government agencies. An example of a legal hold record is receipts for travel reimbursement. These receipts serve as proof that any reimbursement for travel expenses was directly related to business activities. They are particularly important in the context of financial audits, where accurate record-keeping is essential.
In conclusion, legal records are an indispensable aspect of a business's operations, ensuring compliance with legal requirements and providing valuable historical context. By maintaining comprehensive and well-organized legal records, businesses can protect themselves from legal repercussions, make more informed decisions, and foster trust with their customers and partners.
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Employee records
Firstly, personnel records are fundamental employee records that cover a range of information about individual employees. This includes personal details such as names, contact information, dates of birth, and employment history within the organisation. Additionally, personnel records may include documentation related to employee performance evaluations, disciplinary actions, promotions, and training undertaken. Maintaining accurate and up-to-date personnel records is essential for effective human resource management and ensuring compliance with employment regulations.
Secondly, payroll records are a critical component of employee records. These records involve documentation related to employee compensation, including wage rates, salaries, bonuses, and deductions. Payroll records also encompass information about payroll taxes, such as income tax withholdings, social security contributions, and any other mandatory or voluntary deductions. Employers are typically required to maintain payroll records for a specified period, often several years, to comply with tax regulations and labour laws.
Moreover, employee records encompass various employment-related transactions. These include documents such as employment contracts, offer letters, non-disclosure agreements, and termination paperwork. Additionally, employee records should include timesheets, attendance records, and leave requests, as these documents are essential for tracking worked hours, calculating paid time off, and ensuring compliance with labour regulations. In certain jurisdictions, employee benefit plans, such as pension and insurance plans, must also be maintained as part of employee records for the duration of their validity and beyond.
Furthermore, it is important to note that employee records may be subject to specific retention requirements. For example, in some countries, payroll records must be retained for a minimum of three years, while personnel records may need to be kept for at least one year. Additionally, certain types of employee records, such as those related to employment taxes, may have longer retention periods, often extending to four years or more. Therefore, it is crucial for businesses to familiarise themselves with the applicable laws and regulations to ensure compliance with retention requirements.
Lastly, with the increasing use of digital systems, it is worth mentioning that employee records can be maintained in either physical or electronic formats. Electronic record-keeping systems, such as accounting software or specialised human resource management platforms, offer efficient ways to organise and retrieve employee data. However, regardless of the chosen format, the security and integrity of employee records must always be a priority to protect employee privacy and ensure compliance with data protection regulations.
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Marketing and customer relations records
Market plans are essential for outlining a company's marketing strategy, including the target audience, messaging, and channels to be used. Customer databases, on the other hand, contain valuable information such as contact details, purchase history, and feedback. This data helps businesses understand their customers' needs and preferences, enabling them to tailor their products or services accordingly. It also assists in building customer loyalty and improving customer satisfaction.
Additionally, advertising campaign histories are important to track the success of past marketing initiatives. This includes details such as the duration of the campaign, the channels used, the target audience, and the results achieved. By analyzing these records, businesses can identify successful strategies and avoid past mistakes, thereby improving the effectiveness of their future marketing efforts.
Sales records are another crucial aspect of marketing and customer relations records. They provide valuable marketing information, including customer purchases, amounts, dates, products, payment methods, and returns. This data can be analyzed to identify the best customers, understand their preferences, and develop targeted marketing approaches. Sales records are unique to each business, providing a competitive advantage and valuable insights for decision-making.
Furthermore, customer relationship management (CRM) is vital for businesses. Building strong customer relationships can have numerous benefits, including increased loyalty, positive word-of-mouth marketing, and repeat purchases. Understanding the different types of customer relationships, such as transactional, emotional, or community-based, helps businesses tailor their engagement strategies. By focusing on value, personalization, and customer experience, businesses can foster trust and long-term relationships with their clients.
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Frequently asked questions
A business record is any document (hard copy or digital) that records an "act, condition, or event" related to business.
Examples of business records include meeting minutes, memoranda, employment contracts, and accounting source documents.
Accounting source documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks.
Yes, it is important to keep records of employment for at least four years.
It is important to keep business records in an orderly and safe place. One way to do this is to organize records by year and type of income or expense. Additionally, it is a good practice to date the records for added accuracy.
