Keeping Your Business Financial History Intact
Why recordkeeping is crucial for your business success
One of the most important tasks for any business owner is to determine how business records will be kept. This organizational step can save hours of frustration, as it will keep all records in one safe, secure place.
According to the Internal Revenue Service (IRS), good records will help you monitor the progress of your business, prepare your financial statements, identify sources of income, keep track of deductible expenses, keep track of your basis in property, prepare your tax returns, and support items reported on your tax returns.
Business owners can choose any kind of record system suited to their businesses that shows income and expenses. A popular option is QuickBooks, but there are also specialized options available for specific industries. You can also opt to keep your records manually.
The IRS suggests that recorded transactions include purchases, sales, payroll, and other transactions you have in your business that generate supporting documents. The length of time you should keep a document depends on the action, expense, or event the document records. You must keep your records as long as needed to prove the income or deductions on a tax return as the burden of proof will fall on the business owner.
According to an article on Nolo.com, even if you’ve hired a bookkeeper to handle your business’s books on a day-to-day basis, it is still essential that you have a good grasp of general bookkeeping concepts and an awareness of what’s going on with your business’s record-keeping practices.
Most new businesses don’t have the money to hire bookkeeping help, which means it is important they choose a record-keeping system they are comfortable with. Even if they can afford to hire a bookkeeper, it is still important to learn about record keeping systems because tax law places the responsibility for bookkeeping and accounting errors on the business owner.
Well-organized records will help you avoid a headache at tax time or beyond, especially if your business’s return is selected for an audit!
For more information on recordkeeping for your business, including which records to keep and how to record them, check out this helpful publication from the IRS, “Starting a Business and Keeping Records.”
Remember, as you work to get your small business records in order, The
University of Scranton Small Business Development Center can help! Visit
www.scrantonsbdc.com today to set up a meeting with a member of the team.