Everyone who owns a business is obliged to keep records. If you have a sole proprietorship, are a partner in a general partnership, or director of a private limited company or an association, you are obliged to keep records.
In practice, this means that you must keep all contracts, invoices and receipts and give them a place in your administration. You can choose how to do this: keep everything on paper in folders or digitize everything and store it electronically. You can even choose to save part on paper and part digitally. For example, it can be useful to keep all signed contracts that have already been made on paper in a file, but more and more organizations are choosing to also scan signed documents and store them digitally. There are good tools for this available on the internet.
Your administration must clearly show how much VAT you have paid per period and how much VAT you have received from your customers. You do this by saving all your sales invoices and all your purchase invoices. Sales invoices are the invoices that you send to your customers for payment and purchase invoices are the invoices and receipts that you have received from suppliers and that you have paid.
A second requirement for the administration obligation is that you must have a balance sheet with which you can demonstrate the state of all income and expenditure at certain times. Of course, it is also wise and useful to maintain a report of your results that lists all your income and expenses; that is called a profit and loss statement. Accountants in the Netherlands often talk about a P&L.
You must keep the documents in your administration and the balance sheets for at least seven years, but if you have a matter that lasts longer, for example correspondence about a dismissal, then the entire correspondence about this issue must be kept, even if the dismissal was more than seven years ago . Only when an issue has been fully completed does the counter start to run for seven years. Or if you conclude a lease contract for a period of, for example, five years; you must then keep that contract for seven years after the contract has expired. A retention obligation of ten years applies to immovable property. The retention obligation also applies if you terminate your company.
If you do not comply with the administrative obligation and destroy your documents and figures before the period of seven years has expired, this can have consequences in the event of a book audit or bankruptcy. If the Tax Authorities comes to check your administration and finds that not everything has been saved, you can receive a hefty fine. And if a trustee finds this in case of a bankruptcy, you can be sued for improper management and you can be held liable for the bankruptcy.
By the way
It is always useful to make overviews of your administration. This can be done in Excel, but preferably in good administration software. The more complex your company, the better it is to use a good system for this.