Many small businesses are started with a unique idea. It takes hard work to make that idea into a reality, and even more effort to keep the business going. One of the great things about starting a small business is that the right idea can almost sell itself, despite the owner not having a business background. Almost.
One of the biggest issues small business owners face is staying on top of their record keeping. Small businesses have a plethora of options available to them for solving record keeping problems, but choosing what works for you can appear to be a daunting task.
Why is it important to keep records?
Record keeping can often be ignored until it is time to prepare a tax return, pay additional taxes beyond what the business was expecting or even worse, face an audit, leaving the owner with no idea where to begin. Nobody wants to find themselves in an accountant’s office the day before their tax return is due, with the proverbial box of receipts in their lap, and perspiration at their brow.
In addition to these IRS-related reasons, small businesses that do not diligently track their income, expenses, and other related transactions, will find it much harder, if not impossible, to secure financing. This is because banks and other lenders will not be able to accurately view the financial performance, and accurately determine their risk.
How long should I should keep my records?
You should keep copies of your tax returns indefinitely. Most other items should be kept for, at least, three to seven years.
How do I choose a record keeping system?
As a business owner, you need to assess what kind of needs your business may have. You should consider the size of the business, the nature of the business, the number of employees, etc. At the end of the day, you need something that can record all of your business transactions in an organized and thorough system.
Should I keep hard copies or use a software program to keep my records?
You need to decide if you want to keep hard copies or use a computerized system. There are many software packages to choose from, each offering different functions for the user. Most users will find a computerized system to be a necessity; however there may be times when additional documentation is needed.
Please email me or call me at (401) 383-9694 for more information. We can work together to see what kind of record keeping system will work best for you and your business.