Small business owners already have a lot on their plates, and they don't need to be rushing around their offices looking for a critical invoice or a tax document. But someone needs to make the commitment to good accounting in order to get an accurate financial picture. You will need to make the commitment to keeping impeccable records, and these business record keeping tips can help make the process easier:
Hire a pro. Someone has to keep the books for you because you will be so busy running your business. The pro should be able to advise you on your bookkeeping system and method of accounting (single-entry versus double-entry). Even with a pro, you must keep your information organized so it is easy for your accountant to evaluate.
Keep a spending diary for yourself. When buying for business, write down what you bought and how much you paid for it. When you are figuring out deductions, you may be surprised by how many you can take.
Hang on to the little things. Even if you keep a spending diary, hang on to the supporting documents. With receipts in particular, the paperwork will seem maddening, but you will think an extra business records storage is worth it when it is time to take itemized deductions.
Use a folder system. Those small little receipts have a tendency to disappear, so set up a folder system for each month or each week, depending on how much business spending you do. Also ask your accountant or bookkeeper about their preferred means of business records management.
Separate income and expenses. Have income (invoices, bank deposits) in one place and expenses (canceled checks, account statements) in another so you can think of what is going in and what is coming out.
Don't forget your employees. Keep files on each of them, including freelancers. According to the IRS, you need to keep employee records for at least four years, so don't toss a file on an employee who has left just yet.
Keep an inbox. Set aside a filing zone where employees should place any paperwork that needs to be filed.
Keep all past tax returns and supporting documents. You are probably keeping most of your documentation in case Uncle Sam's auditors come calling, so save space for anything tax-related.
 | The success of your business depends on making sound decisions. Following good record keeping supports that goal, by providing you with an easily accessible reference tool for almost every aspect of your business. |
A sound financial life depends on good records. Therefore you must have a system in place for monitoring and managing your finances that is both comprehensive and easy to understand. What you use and how you use it is up to you. |
Financial record-keeping is a personal thing. Use whatever organizational tools work best for you. Use what you are most comfortable working with. As with other areas of personal finance, the simplest approach is often the best. |
Starting your home business does not have to be complicated. |
There is more to starting a small business than "following your bliss." Start a new small business with your eyes wide open, and you will have more opportunity to succeed. |
