Whenever we meet someone about to go into business for themselves, eventually the conversation gets down to practical matters: things like business bank accounts, choice of book-keeping system, EFT terminals, etc. A few even ask how long they’ll have to keep their ’records’... ]

Unfortunately even in these cases we tend to find that their question is really about the ’accounting’ output, rather than the paperwork from which that is compiled. Yes, there is a difference, and it’s an important one.

Whichever book-keeping system you use for your business, it is essentially just a way of organising data in this case financial data so that, at some point, you or your accountant can extract information from it and, eventually, accounts.

Absolutely essential for any business and a legal requirement for most, the data contained within your accounting system represents a financial history of that business. As such that data has to be kept safe and accessible for as long as the business exists and for some time after it ceases. Today there’s quite a choice of book-keeping/accounting systems particularly the cloud-based ones which meet both those objectives without requiring much in the way of effort by the user. No need for dedicated hardware fixed in the office, or having to make daily data back-ups onto a disc, which then had to be taken off-site for security.

However, there are circumstances under which the accounting records, however neat and detailed, are not enough. It may be a routine VAT compliance visit or, if you’re unlucky, a tax investigation of some sort. Or you may be a dealer looking to sell your business, in which case any prospective buyer is likely to undertake due diligence in other words an audit of your accounts. In each case the information within the accounting system is merely part of the ’audit trail’, an information chain which eventually leads back to transactional records of sales, purchases and cash/bank movements. You are expected to have kept those transactional documents long after the details extracted from them have been entered into your book-keeping system. Even in 2016 those are most likely to be paper documents. And unfortunately many owners/operators of small businesses seem to have forgotten that they are still responsible for keeping a lot of paper stored safely for at least six years, sometimes longer.

Lucky retailers

In many ways petrol retailers are quite lucky when it comes to the audit aspect of their business as almost every site has technology that links the tanks, pumps and POS. It’s mostly a single fuel supplier delivering product in precise quantities; recorded by linked tank gauges. The main product is sold through metered dispensers linked electronically to the POS terminal, itself linked to the EFT payment systems.

This is certainly a much tighter audit trail than you’d find in most pubs, for example where you have individual barrels of product, no stock gauges, rarely any metering on dispensers, and those aren’t usually linked to the POS any way. However, even on the forecourt there can be a major break in the audit trail. Although the sales automatically go through a POS, producing detailed sales transactional records, there’s often no direct link between that POS and the accounting system itself.

Someone has to transcribe the figures from the POS into a separate software application. It’s actually one area where technology could be said to have regressed since the 1990s. In those days, the main IT effort was to fully integrate on-site systems. The POS would dump its data seamlessly into a book-keeping and/or accounting system sitting in the back office, without any human intervention, in the belief that it was a step towards the paperless office.

Back to our fuel retailer what paperwork do you need to keep to support the accounting information if you’re inspected or audited? On the sales side the most crucial documents are POS reports; not necessarily daily, but preferably weekly, and certainly monthly ie in line with the accounting periods. Remember that POS equipment can crash and lose data, so you really need to print off the same reports that you enter into your book-keeping system. Keep these safe for a minimum of six years.

On the purchase and expense side, the obvious documents are supplier invoices: even if you receive these electronically and don’t want to print dozens of pages, it’s good practice to save these onto separate recording media and keep the copies somewhere safe again for at least six years. Any sort of audit will eventually involve comparing your sales and purchase records with your bank statements so whether electronic or paper, these should be kept safe indefinitely. We’d also recommend keeping physical copies of weekly or monthly EFT transmission reports and card payment acquirer reports, again for at least six years.

Important to print

At this point we’re often asked why we still recommend printing-off electronic documents, when it’s so much easier to store these as they come. But storage media can become obsolete very quickly, even if the software to read the data is still available. Notice that many new laptops today don’t have CD-Rom drives. And will that flash drive on which you’re storing suppliers’ electronic invoices still be readable in 2022? Even cloud storage isn’t necessarily an alternative to hard copies: you’re expected to be able to provide these documents at reasonable notice if required. Putting aside any potential security/privacy issues, what if you can’t access your cloud account for any reason? Again, while six years isn’t so long, who knows which technology companies will be around to host your legacy data in 2022? The paperless office isn’t much nearer reality today than it was 20 years ago; not necessarily a bad thing, but just find some space and keep your paperwork safe for half-a-dozen years.