Running a successful small business requires more than just delivering great products or services; it involves meticulous recordkeeping. Regardless of the size or nature of your business, maintaining accurate records is crucial. Here's why:

Why Keep Good Records?

Good records help you:

• Monitor business progress

• Prepare accurate financial statements

• Identify income sources

• Track expenses

• Prepare tax returns and support tax items

What Records Should You Keep?

Choose a system that suits your business and clearly shows income and expenses. This could be accounting journals and ledgers or electronic accounting software. Your records should include summaries of transactions, showing gross income, deductions, and credits.

Supporting Documents Maintain documents like sales slips, invoices, receipts, deposit slips, and canceled checks. Organize them by year and type for easy access.

Gross Receipts Keep documents such as:

• Cash register tapes

• Deposit information

• Receipt books

• Invoices

• Forms 1099-MISC

Purchases Document all purchases with:

• Canceled checks

• Cash register receipts

• Credit card statements

• Invoices

Expenses Keep records of expenses, including:

• Canceled checks

• Account statements

• Credit card receipts

• Petty cash slips

Assets Track assets with documents showing:

• Acquisition details

• Purchase price

• Cost of improvements

• Depreciation deductions

• Casualty losses

• Disposition details

Travel, Entertainment, and Gift Expenses Substantiate these expenses with proper documentation.

Employment Taxes Retain employment tax records for at least four years.

How Long to Keep Records? The period depends on the document's purpose. Generally, keep records supporting tax return items until the period of limitations expires, typically 3-7 years.

Recording Transactions Maintain a summary of business transactions in journals and ledgers, whether paper or electronic.

Burden of Proof Prove entries, deductions, and statements on tax returns with adequate records and receipts.

Employment Tax Records Keep these for at least four years, including details of wages, tips, employee information, and tax deposits.

Good recordkeeping is a cornerstone of a successful business. Stay organized, stay compliant, and ensure the longevity of your enterprise.