If you have a company or a small business, you must manage personal financial records. Those of us who issue invoices and keep records are often seduced by the temptation to clean the office. Sometimes we want to throw away all the documents that seem unnecessary, like personal financial records.
However, there is something that stops us: uncertainty. Common sense tells us that it is not a good idea to get rid of some documents, for example, financial records. But understanding why and for how long we should do it can save us trouble in the future.
We are fully in the digital age, but papers continue to cannibalize space and time in companies … you know what I’m talking about, right? Many of these files are expendable, but others are what we might call: “legally executable”.
Although this expression can generate some discomfort, it will not be necessary to keep these documents forever, there is a legal limit of conservation.
Let’s go over a little bit about the reasonable time to keep a financial record and what to keep.
Your financial records
Your financial records include everything you do related to money. It is very important to keep track of your financial records. Your bank statements, receipts, money transfers, investments, withdrawals, paychecks, mortgages, loans, stocks, mutual funds, and insurance policies are considered part of your financial records.
You should keep track of all your financial records. Keeping your records update allows you not to be late in paying your bills and to reach your financial goals.
And the invoices… Why should we keep them?
Invoices are a legal document that guarantees three things:
- That we have done a job
- That we have charged for him and
- That the tax that was derived from our income
The most obvious reason to keep them is to prove that we have done our part. If this were the only purpose, it would be reasonable to keep the invoices long enough so that no claims could exist. However, we could rely on our negotiating skills and remove the document.
What invoices should you keep?
You must keep all the invoices that you have issued to third parties, as well as those that you have received. Invoices are part of those types of legally enforceable documents that you need to have. Billing and accounting programs certainly make our lives easier.
A software allows us to manage in a simple and effective way the task of conservation and organization of invoices.
How to organize your personal financial records
Not sure what to do with your financial records? You don’t have all the required documents and tax season stresses you out? Don’t have a system to manage all this mess?
Well, you are not alone. Like many, you could use a complete financial cleanse. You also need a little regular maintenance to keep your financial records in good shape. Some keys that can help you organize are:
- Group all your financial documents: documentation, invoices and unopened emails.
- Establish a filing system.
- Classify your personal files.
- Keep documents separated by categories.
- Be careful with the dates! Organize them in ascending or descending order.
- Keep the documents at your fingertips.
- Whenever you add new content, archive it immediately to avoid backlogging.
- Use software to manage the information.
But, how long do you need personal financial records?
In the UK there are suggested times for you to keep your personal financial records. The time depends if you submit tax return, before or after the deadline. But, generally speaking, keep your records for at least 22 months after the end of the tax year for which the tax return applies.
Similarly, as we have already seen, your financial records are not just invoices. You also need to have bank contracts, titles, policy receipts, employment documents, etc. Depending on the type of document you have, the periods vary.
- Receipts for household supplies: Consumer associations advise keeping them for a year in case a claim is necessary.
- Labor documents: Always save all contracts. However, payroll receipts can be kept for a maximum of 12 months.
- Bank contracts: It depends on the validity of the bank account, the time you need to keep it.
- Income declarations: You can discard it once the term of presentation of the income declaration has expired.
- Receipts for different policies: Until their validity ends.
- Guarantee of a product: Keep it together with the invoice for the duration of the guarantee.
- Property deeds: Keep it with you for as long as you maintain possession.
As you can see, the time varies depending on the nature of the document you need. Ideally, you should classify and organize them properly so you know when to do without them. This way you won’t accumulate stationery unnecessarily.
Knowing how long to keep invoices and other documents, you can have them whenever necessary. Thus, if you need to make a claim or be part of a litigation, you have the evidence in your documents. It is always advisable to use software to digitize the information.
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