Good accounting practices are critical to running a successful small business. Unfortunately, many small business owners overlook this step, assuming it’s nothing more than a waste of time. But when tax time rolls around the following April, they are left scrambling to find their financial records and other related documents. This is why it’s a good idea to start keeping good records from the moment you launch your business. So, what records exactly should you keep?
Arguably, one of the most important records to maintain is your business-related expenses. In other words, you’ll need records of each and every expense that’s directly associated with running your business. When it comes time to do your taxes, you can write these expenses off, allowing you to keep more of your business’s revenue. Without proper records, the Internal Revenue Service (IRS) may deny your expenses.
Of course, it’s a good idea to keep copies of any contracts you have with clients, customers or other businesses. Even if you never need them, having them on hand will provide a source of reference. If you tend to lose paper documents — like many small business owners do — consider scanning your paper contracts and storing the digital copies on your computer or an external storage device.
Assuming you have one or more employees on your business’s payroll, you’ll need to records of how much you pay them and when. While payroll records isn’t a requirement when running a sole proprietorship, it is a requirement when running a Corporation. Talk with a professional accountant for more information about payroll bookkeeping.
Try to get into the habit of storing records of all business bank accounts, including monthly statements. The good news is that even if you lose any of your bank statements, you can typically purchase copies from the banks. Banks are required by federal law to maintain records of customers’ bank accounts for a minimum of seven years. Assuming you are within this limit, you can request a copy from your bank.
These are just a few of the many records that you’ll want to keep when running a small business. Other records to keep include credit card statements, loan documents, petty cash, travel receipts, quarterly tax payments (estimated), inventory, check stubs and income.
Did we leave anything out? Let us know in the comments section below!