One of the most important and daunting tasks facing small business owners is record keeping.
Accurate record keeping is critical to the success of a business — from assessing your operations and profit margins to ensuring that you're in compliance with IRS tax rules. For that reason, it's important to decide how you will keep your records.
Increasingly, record keeping is done electronically. There are a number of good software tools such as Quicken or QuickBooks as well as others that small business owners can use for record keeping. Regardless of how you maintain records, you still need to hold onto what accountants call source documents.
Source documents are records that relate to and support all business transactions. These include receipts, bank statements, purchase invoices and other records that serve to back up the numbers that are entered into your record-keeping system.
A few examples of records to keep include:
n Gross receipts — the amounts and sources of income your business receives.
n Business expenses — costs of goods or services necessary for your business.
n Employment records — salaries and deductions for employees, payments to independent contractors, etc.
n Business assets — information on equipment, furniture and property used in your business
Physical documents can be scanned and saved electronically or you may choose to keep hard copies. In either event, it's important to maintain a backup of your records, which can be done on a separate hard drive, flash drive, with a computer back-up service or an off-site safe document storage provider.
How long should you keep records? You can confirm by visiting the irs.gov website or consulting your tax advisor. However, most records should be kept for at least seven years.
Should you hire a bookkeeper? Many new businesses can't afford to hire bookkeeping assistance, at least not right away. That's why it's especially important for business owners to choose a record-keeping system that they're comfortable working with themselves. Even if you hire a bookkeeper to handle your business books on a day-to-day basis, it is still important that you have a good grasp of bookkeeping basics and remain informed about what's going on with your record keeping.
For more information or assistance with starting and growing your small business, contact Traverse City SCORE at 947-5075 or toll-free at 888-796-4913. Visit www.UpNorthScore.com to schedule a free and confidential appointment with a SCORE mentor.
Julie Courville is a volunteer SCORE mentor, an accredited business accountant and the owner of Courville Financial Services.