For many small business owners, creating and maintaining an accurate recordkeeping system is one of their least favorite parts of the job. However, they also know that it’s crucial to their ongoing success. Whether you’re a one-person operation working from home or you have already hired a handful of employees, we urge you not to put off getting your business records in order. While it might seem overwhelming now, it will be even more so the longer you wait. This is especially true if you wait until just before tax time to pull everything together.
Benefits of Creating an Efficient Recordkeeping System
You need to access financial information about your business more often than once a year when it comes time to file your tax return. The benefit of having an organized system is that it enables you to pull out financial data about the company whether you need it for a specific purpose or you just want to compare notes. While it requires an investment of time now, the benefits of an efficient recordkeeping system will last as long as you operate your business. Other reasons to tackle this task as soon as possible include:
- You will be in compliance with certain federal and state recordkeeping and financial requirements.
- You have documented proof if the Internal Revenue Service (IRS) or your state revenue office requests additional records.
- It gives you a better idea of your overall financial picture to allow you to see its opportunities, strengths, and weaknesses more clearly.
- You will have an easier time preparing financial documents such as a profit and loss statement.
- It provides greater insight into your business performance.
Before selecting a specific system to organize your business records, be certain that it makes sense for the nature of your business and the size of your company.
Business Records All Companies Should Keep
You might wonder where to store all the paperwork that comes from keeping these recommended business records. While it’s an understandable concern, the good news is that many scanning tools exist today that allow you to store an electronic version of your records. If you choose not to keep the originals, we recommend creating a backup of your electronic files. Here are just some of the important business records to keep:
- Gross receipts, including credit card and cash register receipts
- Check register from your business checking account
- Bank statements
- Insurance records
- Receipts of all gross income
- Legal documents
- Mortgage or rent documents
- Financial statements
- Summary of business expenses to include analysis and distribution schedules
- List of asset purchases
- Record of bill disbursements
- Employee data such as compensation and benefits
- Customer and vendor invoices
- Leases and contracts
- Trademark registrations
- General ledgers
The benefit of electronic storage of your business records is that you don’t need to decide how long to keep each type of record. You can simply keep them indefinitely, making sure to update as needed. If you do decide to keep physical copies, the timeframe to hold onto them can be as long as seven years.
Need Help Getting Started or Looking to Outsource?
At Palmetto Payroll, we understand this is a challenging and uncertain time for business owners. We are here to help you retain normalcy as much as possible. Please contact us if you’re feeling overwhelmed at the thought of organizing your business records or just want to outsource the project altogether. We can also assist with several other small business functions such as payroll, tax deposits, human resources, and more.
