What Financial Records Should Businesses Keep, and For How Long?

Maintaining accurate financial records is essential for all businesses in Canada. Not only does it ensure compliance with the Canada Revenue Agency (CRA), but it also provides clarity and insight into your business's financial health. So, what records should you keep, and for how long?

What Records Should You Keep?

The CRA requires businesses to maintain detailed records that support all income, expenses, and deductions. Key documents include:

• Income Records: Sales invoices, receipts for all sales transactions, deposit slips.

• Expense Records: Supplier invoices, receipts for business-related purchases, credit card statements.

• Payroll Records: Employee timesheets, pay stubs, Records of Employment (ROEs).

• Tax Documents: GST/HST filings, corporate tax returns (T2), T4 and T5 slips for employees and shareholders.

• Other Financial Documents: Bank and credit card statements, loan agreements, contracts and leases.

Digital records are acceptable, provided they are clear, easily accessible, and securely backed up. Utilizing cloud-based bookkeeping software can streamline this process, offering real-time access to your financial information.

How Long Should You Keep Records?

In general, the CRA mandates that businesses retain records for six years from the end of the last tax year they relate to. However, certain situations require longer retention:

• Permanent Records:
  Documents such as articles of incorporation, shareholder agreements, and records of major asset purchases should be kept indefinitely.

• Asset Disposal:
  Keep records related to the sale of assets for six years after the year of disposal.

• CRA Audits:
  If under audit, retain all pertinent records until the process concludes, even if it extends beyond the standard six-year period.

Why Proper Recordkeeping Matters

Maintaining organized and accurate records is vital for several reasons:

• Compliance:
  Adhering to CRA requirements helps avoid penalties and ensures your business remains in good standing.

• Financial Clarity:
  Well-kept records provide a clear picture of your business's financial health, aiding in informed decision-making.

• Tax Preparation:
  Accurate records simplify tax season, reducing stress and the likelihood of errors.

Simplify Recordkeeping with Expert Support

At Transfigures Bookkeeping, we understand that managing financial records can be overwhelming, especially when you're focused on growing your business. Our bookkeeping services are designed to keep your records organized, accurate, and compliant with CRA standards. With real-time access to your financial data, you can make informed decisions quickly and confidently.

Let us handle the numbers while you concentrate on what you do best—running your business. Contact us today to discuss how we can assist you in maintaining impeccable financial records.