How to Keep Accurate Records for a Small Business
Keeping accurate records for a small business constitutes a simple task if you purchase accounting software that allows you to maintain current records of all transactions. In this age of technology with numerous paperless methods of recording keeping, effective accounting software can make organization and administration an uncomplicated matter for small businesses. Of course, you should also keep all paper receipts showing purchases and expenses on file. A few basic record-keeping methods ensures that your financial and business transactions remain accurate.
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Instructions
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Keep records of all expenses. Use accounting software to record all expenses that you pay during a calendar year. Expenses include rent, utilities, phone, maintenance, travel, insurance costs and most other bills and expenses necessary to keep your business running. Keep and file all receipts that show the amount that you paid for a small business expense. Credit card receipts, bank statements and invoices should be kept and filed in a safe location to prove that you incurred the expenses on behalf of your business. Never mix personal expense receipts with those for your business.
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Maintain complete records detailing employment taxes that you paid on behalf of all employees. Use accounting software to record payroll taxes, unemployment tax and worker's compensation. Many payroll checks include a stub that can be perforated from the check and filed by an employer. Keep these stubs as a paper record of state and federal payroll taxes paid for employees.
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Keep all gross receipts that show income that you received on behalf of your small business. Make a copy of checks that you receive and file those as income receipts. Keep all bank statements and financial documents that show payments made to you through wire transfers and direct deposits. File these supporting documents by date. You can file an additional copy by the customer or client's last name for quick reference especially if the client is a repeat customer. According to irs.gov, documents for gross receipts include cash register tapes, receipt booklets, checking deposit slips and credit card receipts.
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Maintain records of all assets that you acquire on behalf of your business. These assets include purchased property that you own and use solely for your small business purposes. Equipment, machinery, computers and furniture all constitute assets that help you run your business. Keep receipts for all of these property purchases. File these receipts by date. According to irs.gov, these records help to calculate annual depreciation and the gain or loss if you ever sell those assets at a future date. Keep records as to when, how and how much each asset cost you.
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Tips & Warnings
Use manilla folders to file all receipts. These are easy to label and organize. Choose accounting software that offers a cash accounting method: the easiest accounting method to maintain.
Keep all personal receipts and documents separate from business transactions. If you are ever audited, it will make proof of your income and expenses a simple task.
References
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Comments
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why must we keep record.
