Are you running a small business? Between juggling payroll, invoices, and everything else, it is easy to look at that pile of old files and wonder, ‘Do I need to keep all this?’ Short answer: yes. Long answer: yes, and here’s why. Before you send anything through the shredder or delete that digital folder, let us walk through why your business records deserve a second look.

What Counts as Business Records?

Let us clear this up first. Business records aren’t just tax returns or bank statements. They are everything that supports your income and expense claims, including:

• Sales invoices and income records (cash register tapes for cash transactions)
• Receipts for business expenses
• Contracts and agreements
• Payroll information
• CRA assessments and correspondence
• Bank and credit card statements

It doesn’t matter if it is on paper or saved digitally. The business record should be complete and valid. It should back up a claim on your taxes and help tell the story of your business finances. It means insisting on a GST invoice where applicable, and all receipts should have the complete address, date, bill number, and contact details of the other party. The CRA should be able to contact the party by phone, email, or in person to verify the authenticity of the document.

How Long Do You Have to Keep Business Records?

The Canada Revenue Agency (CRA) wants you to hang onto your records for six years after the end of the tax year they relate to. If your fiscal year ends on December 31, 2024, keep those records until at least December 31, 2030. It is not a suggestion. It is the law. And there are some little twists:

• If you file late (beyond the filing deadline of June 30), the six-year period starts from your actual filing date. Suppose you filed corporate tax on July 20, 2024; the six-year period ends on July 20, 2030.
• If you are involved in an audit or have appealed against the CRA’s decision, you must keep records until everything is resolved. Everything is considered resolved when the objection or appeal is settled or the time for submitting additional appeals has expired. 
• Even if you have dissolved your business, keep the business records for at least two years after the dissolution date.
• If it concerns property or capital assets, you should consult with an accountant to determine when the six-year period begins. For instance, you purchased a house for $400,000 in 2019, spent $40,000 on renovation in 2021, and sold it for $700,000 in 2025. You will claim the renovation cost in 2025 by calculating a capital gain of $260,000 ($700,000 – ($ 400,000 + $40,000)). In this case, the documentation for renovation expenses must be stored for six years, beginning in 2025, when you claim the expense.

Be very careful when calculating the six-year timeline, as the start date of the timeline is not the date on the document.

What Happens If You Toss Things Early?

The pace is tight, paper piles up, and storage systems can feel more trouble than they’re worth. But if you get rid of your records before the deadline, you’re leaving yourself open to:

• CRA Penalties – You can be fined for not maintaining proper books and records.
• Lost Deductions – No proof, no write-off. That is the CRA’s approach.
• Stressful Audits – Audits are hard enough without having to say, “I don’t have that anymore.”
• Cash Flow Trouble – You may need records for financing or insurance purposes, even outside of tax time.

What If You Need to Destroy Records?

Is your basement flooding or your file cabinets bursting? There might be a way to get permission from the CRA to destroy your business records related to taxes early, but it is not automatic. You will need to fill out a T137 form and explain why you want to destroy the documents. The CRA will decide if it is acceptable. Until you get their written OK, you are legally required to keep everything intact. Destroying tax-related records without this step can lead to legal problems, especially if you are selected for a review or audit in the future.

Tip: Although six years is CRA’s recommended timeline, it is advisable to retain certain records indefinitely, as they may be helpful in the event of any litigation.

Going Digital? Great! But Be Smart About It

Switching to digital record-keeping is a game-changer for most businesses. Just make sure you do it properly:

• Files need to be readable, clear, and complete.
• Store backups in secure, reliable locations. Cloud storage with encryption is your best bet.
• Don’t just snap a photo of a receipt and call it a day. Ensure you can access it easily in the years to come.
• If you scan paper documents, keep the originals until you confirm the CRA accepts your digital versions.

A messy digital system is just as risky as a drawer full of random papers.

Tips to Make Recordkeeping Less Painful

Recordkeeping doesn’t have to be a headache. Good bookkeeping practices work for most of the small businesses:

• Set a monthly routine: Don’t wait until tax time. Set aside 15 minutes each month to stay organized.
• Label everything: Year, type of expense, and vendor. Simple but powerful.
• Keep business and personal finances separate: It will save you hours during tax season.

Even if your operation is small or solo, being organized now saves stress (and money) later. Having a basic understanding of your responsibilities goes a long way. It protects your business, gives you peace of mind, and makes sure you are not scrambling if the CRA ever comes knocking.

Before you discard those business records, ask yourself: Have I kept them long enough? Have I double-checked the rules? If not, it might be worth a little extra storage space (or a bit more space in your cloud folder).

Contact Edelkoort Smethurst CPAs LLP in Burlington Help You Take Control of Your Business Records

Talk to a bookkeeper to help you manage your business documents the right way to be prepared for the CRA if they ever come knocking. At Edelkoort Smethurst CPAs LLP, our team of bookkeepers can help you stay audit-ready with organized and compliant record-keeping solutions. To learn more about how Edelkoort Smethurst CPAs LLP can provide expert bookkeeping support, contact us online or by telephone at 905-517-2297.