Record Keeping for a Small Business

by admin on 09/20/2013

An essential part of every small business is being able to get your hands on information to help you make business decisions. This is why record keeping for a small business is so important. What owner doesn’t want to be able to make fast decisions that can quickly improve their earnings.

Record keeping is for every business

Every business needs to file a tax return at the end of each year. Having a good system to keep all your information in is very powerful. This will eliminate hours of gathering information at the end of the year. Having your information in one place will save money on the long run.

How long should a small business keep its records

Most businesses should keep their records for at least seven years. The Internal Revenue Service can challenge your return six years from the date you filed it. This can happen if they suspect your revenue reported was underestimated by at least 25%. This information you need to save is not only your financial records but also your supporting documents. These include customer receipts, vendor invoices, bank statements, check stubs, and payroll records. Save any document that is important to support your return in case of any audit.

How should I protect my records

Protecting your records these days is not so complicated. You should always have at least three copies of your data and each stored in a different place. If something happens in your place of business you still have your data in two more places. The place to put them could be your home, office, a bank safe deposit box, and on the cloud. This certainly will guarantee you will always have a copy of your data.

How should I save my records

There are so many ways to save you records. Most businesses create daily backups of their bookkeeping software data. Customer receipts, vendor invoices, bank statements, check stubs, payroll records can all be saved in a pdf file. Some of these are already in pdf files, so it is only a matter of saving them.

When will I need my records

If you are audited by the Internet Revenue Service you will need to have backup for any transaction the IRS chooses to look at. Also, backup to support receipts, checks paid, and any purchase taken as a deducted in your business. When applying for a loan a bank may also want to see your financial information for several years.

What if I lose my records

With three copies of your records there is very little chance your records will be lost. If one copy is destroyed immediately create another copy to replace it. Doing this will limit your chances of having no records if there is ever an audit or any circumstance where you need to show prove of anything in question for your business.

Previous post: