How Do Subprime Auto Loans Work: Risks, Determinants and Alternatives - Record Keeping for Small Business 101: Benefits and How to Do It Right

Record keeping for small business is something you can’t skip if you’re serious about running a company.

As stated by the IRS, keeping records for your business is something all business owners must do.

Benefits of Keeping Records for Your Business

With good records, you’ll be able to monitor your progress. You will easily prepare your financial statements and small business tax returns. The sources of income would be easily identified and analyzed.

Last but not least, you will keep an eye on property and deductible expenses.

Not to forget the fact that it’s key to separate business and personal expenses, and detailed records help you do that. Then it’s a no-brainer when visiting banks or dealing with creditors.

Record keeping, if executed well and frequently, can guarantee the growth of your business.

That’s because you’ll always know what’s coming in, where you can optimize things, which items sell and what new marketing strategies and sales techniques to implement.

If you need more reasons on why record keeping for small business matters, here are some other cases:

  • When you’re audited;
  • In case of a lawsuit (with thorough records you can protect yourself from these, and also win them);
  • To stay financially stable and be prepared for unexpected expenses;
  • Have positive relationships with clients.

How Long to Keep Records?

Now that’s a question many business owners still don’t know an answer to.

While it all depends on the importance of the document, the type of business you’re doing, and the country where you’re running the business, the safest tip is to keep records for 7 years.

That’s what accounts, lawyers and bookkeepers suggest too.

However, the IRS shares more specific information on this issue.

What Business Records to Keep Exactly?

Here are the most important elements for record keeping for small business:

Basic Records

There are legal requirements to be met. So here’s the minimum of documents you should always have at hand:

  • All business transactions;
  • Cash receipts and cash payments;
  • Contracts;
  • Loans;
  • Licenses and permits;
  • Proof of purchases;
  • Invoices;
  • Employee records;
  • Payroll;
  • Bank accounts;
  • Business assets;
  • Quarterly tax filling;
  • Annual tax returns;
  • Company health and safety documents;
  • Travel log.

Other Records to Keep

The more things you keep a record of in your business, the better.

  • Business communication.

All emails and any other form of communication concerning the business.

Here’s how to manage email records.

  • Client files.

These include all the work you’ve done together, payments made and due, the type of agreement you have.

Have such files, organize them well, keep a copy of them, and update them frequently.

By doing this, whenever a client has questions, has forgotten something or wants to make changes to your relationship, you’ll simply use the records to remind them of what you’ve agreed upon.

  • Employee resumes and job applications.
  • Purchase orders.
  • Record of meetings and decisions taken.

How to Do Record Keeping for Small Business Right

Now, here are some tips on how to store the types of records we talked about.

1. Use a record keeping system.

A record keeping system captures and manages records. You have access to it over the years and the documents in it are organized well.

That’s also a way to keep your business records protected.

Your record keeping system must be easy to use, customizable and efficient. With the right one, you can improve business performance and even use it as the main source of information for all that’s going on in your business.

Check out the ISO 9001 Forms Collection.

2. Electronic and manual record keeping.

With an accounting software program, you’re storing your data electronically, and that’s safe enough these days.

But if you want to do record keeping for small business much more reliable and never worry whether you’ll experience technical issues, then use paper-based tools too.

That’s quite simple. And while a bit old-fashioned, for some business owners it’s still the preferred method when they are just starting a business.

We’re talking about having folders and storing them in cabinets. Here’s how to classify and name them.

While all transactions are tracked virtually today, a computer-based system is usually mandatory for your business.

To take even more precautions though, make use of a cloud-based system that’s separate from where your accounting software program is storing all your files.

Alternatively, you can backup your files on an external or portable hard drive. Or even put it on a USB flash drive.

3. Turn record keeping into a habit.

If you want to do business right and safely, you need to track everything, check it often, and update it daily or weekly.

So this behavior must become a habit. Even if that’s something you delegate, or are convinced your software does the job well, you still need to keep an eye on how your records are stored.

Now that you know why record keeping for small business is crucial and how it can boost your performance, what changes can you make to the way you’re currently keeping records?

Here's why record keeping for small business is crucial, how it can boost your performance, and what changes to make when keeping records: