As a liquidator, I’ve seen countless businesses unravel for the same simple reason: poor financial records. It’s not exciting, it shouldn’t be complicated, but it is absolutely essential.
Section 286 of the Corporations Act 2001 requires every company to keep proper books and records that:
- Adequately explain the company’s transactions.
- Enable financial statements to be prepared and audited.
- Be retained for at least seven years.
That’s the law. But beyond compliance, good records are your safety net.
Why does it matter?
- Day-to-day operations: If you don’t know where your business is making or losing money, you can’t make good decisions. Many directors work hard but don’t realise their business is unprofitable until it’s too late.
- Seeking finance: Banks, lenders, and even the ATO expect timely, accurate data before they’ll consider finance or payment arrangements. No up-to-date accounts? No access to funds when you need them.
- Defending yourself: If you receive an ATO Director Penalty Notice, you have just 21 days to act. Without current financial records, you may be forced into liquidation simply because you can’t respond in time.
- Liquidation risk: When records are incomplete, liquidators (like me) assume the worst. That can expose directors to personal liability and even insolvent trading claims.
Real-world impact
I’ve seen directors who couldn’t defend legitimate positions because it took weeks to pull together accounts. By then, the opportunity was gone, and creditors, in particular the ATO, pursued them personally.
What can you do?
- Review your accounting systems. Cloud solutions like Xero or MYOB can keep you real-time.
- Bring in a bookkeeper weekly or monthly, it is a modest investment that pays off and should be seen as a natural part of running a business.
- Reconcile regularly. Don’t leave it all until year-end.
- Ask your accountant to stress-test your records. If you can’t produce up-to-date accounts within 24 – 48 hours, your business and you personally, are exposed.
The bottom line
“Proper accounts are your insurance policy. They protect you in good times, and they save you in bad times.”
Liam Bailey, Managing Partner, O’Brien Palmer
Don’t wait until it’s too late. If you’re unsure whether your accounts would withstand scrutiny, now is the time to act. Contact our team today for a confidential discussion on how we can help.
Liam Bailey, Managing Partner
O’Brien Palmer
📞 Need advice? Call us at (61) 2 9232 3322 for a confidential chat.
📩 Email us at: obp1@obp.com.au
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