How long to keep accounting records? A question we often hear. When you’re running a business, you are legally obliged to establish and regularly maintain a proper administration and keep it well as an entrepreneur. Many business owners often dread this task, but having a well-organized administration can be crucial for accurate tax returns. Clients frequently ask us, “how long should you keep accounting records” and why is it necessary. We’ll explain everything in this blog post about the importance of maintaining accounting records.
The Importance of Preserving Business Records
Why is preserving business records so important? If your records are not complete or if they lack supporting information, it can have unpleasant consequences. For example, the tax authorities may determine your revenue and profit themselves and calculate the applicable taxes accordingly. If, as an entrepreneur, you disagree with their assessment and want to appeal, you’ll need to prove that their calculation is incorrect. This is referred to as the ‘burden of proof reversal.’
Therefore, having a clear (real-time) overview of your administration is crucial. For all our clients, we maintain records on a daily basis. We have structured all our processes in such a way that we immediately request missing information from the entrepreneur, enabling us to provide quick answers to the tax authorities’ questions.
Without clear records of your purchases and sales, you won’t be able to complete your value-added tax (VAT) returns or your income tax returns. Moreover, without a proper business administration, you won’t be eligible for advantageous schemes such as the VAT small entrepreneurs’ scheme (KOR) or the investment allowance for income tax purposes. This underscores the importance of preserving your business records.
Which Records Should You Retain?
But which records should you keep? The government has established a statutory retention period for your financial records. All (digital) data related to your business are part of your administration. The following records must be retained:
- Digital bookkeeping from a software package
- Bank statements (whether or not digitally imported into your software environment)
- Contracts, agreements, and other arrangements
- Calendars and appointments that have been made
- Cashbook and cash receipts
- Invoices received and copies of invoices sent
- Data on the number of kilometers driven with a company vehicle, for example, through a mileage log.
- Computer programs and files
The retention requirement also applies to computer programs, software, and files. You must ensure that these programs and files can be used during an audit. Simply retaining a file in printed form does not fulfill your retention obligation. Clients in our office have access to their digital records at any time. If necessary, we can generate exports that can be easily imported by the tax authorities, and with the client’s approval, we can provide an inspector with access to expedite the audit process.
Zeker Online Bookkeeping Certification
Good accounting software helps you keep your records in order and ensures that your data remains available for 7 years. Reliable bookkeeping is the foundation of good business management and tax reporting.
In collaboration with the government, the Zeker-Online certification for bookkeeping software has been developed. As an office, we exclusively use software that has obtained this certification. This way, our clients know that the software is secure and reliable and suitable for storing the data that the Tax Authorities require.
Statutory Retention Period for Financial Records
The statutory retention period for financial records depends on the type of data:
- Basic data (general ledger, accounts receivable and accounts payable ledger, inventory records, purchase and sales records, payroll records, data relevant for the tax assessment of third parties): 7 years
- Real estate data: 10 years
- Data on electronic services, radio and television broadcasting services, and telecommunications services: 10 years
- Other data: 7 years
Practical: Your Full-Service Accounting Firm
Practical is a full-service accounting firm. We are more than willing to take care of your accounting needs. We ensure that the administration is always processed, checked, and adjusted on time, allowing you to dedicate your valuable time to entrepreneurship. Additionally, we provide proactive advice to help your business grow.
Curious about how entrepreneurs can maximize the discussed topics? Read more in our blogs and discover the keys to up-to-date insights and solid financial management, where our office does more than just accounting. Whether it’s tax benefits, payroll administration, or optimizing your accounting, we have the insights you need. Contact our specialists today for a personal advisory session. Discover how we can help you optimize your financial strategies and achieve relationship insight so you can steer based on facts rather than assumptions.
