What Business Records Should You Keep?
Knowing what business records to keep is critically important to a small business entrepreneur. These records serve many functions. They help you quantify and monitor the progress of your business, and make decisions accordingly. They give you the information you need to prepare a financial statement. They allow you to identify your various receipts and classify them as taxable and non-taxable. They track your deductible expenses. They generate the data you’ll need to put into your tax return. And they can be used to support the items you report on your tax return if you’re ever audited. But how do you know which records you need to keep?
Follow this general guide to make sure you have all the business records you’ll need for your business.
At the very least, you’ll be required to keep several summary records. You’ll need to keep your business checkbook and both daily and monthly summaries of cash receipts. Keep a journal of your check disbursements and a depreciation worksheet. You will also need to keep a record of all employee compensation.
There are other summary records that we strongly recommend you keep, going beyond the bare minimum. You should keep a general ledger of some type. It might be done by hand, in a computer spreadsheet, or through formal bookkeeping software. You should also keep several additional journals: one for cash receipts and another for cash disbursements/payables. Also consider keeping journals for payroll and billing. Finally, a “general” journal can be used for other information you want to keep track of that is relevant to your business.
Other records you’ll need to keep are more detailed. They fall into many different categories:
- Gross Receipts: Keep cash register tapes, bank deposit slips, and receipt books. Along with those, keep track of invoices and credit card charge slips. If necessary, keep copies of Form 1099-MISC.
- Purchases: For purchases, keep any canceled checks and credit card sales slips. Also hold onto cash register tax receipts and invoices.
- Expenses: There are many records you need to keep for your business’s expenses. Start with canceled checks and cash register tapes. Keep any account statements and credit card sales slips, along with invoices. If you make any small cash payments, file away petty cash slips. Finally, maintain a log with all automobile mileage you accumulate for the business.
- Travel and Entertainment: Record any travel, with the places you travel, the travel dates, and the specific business reason for the traveling. Maintain trip logs of automobile usage, and keep receipts for any lodging expenses, as well as any expenditures of more than $75. For entertainment costs, record the time, place, and nature of your expenses. Include an explanation of the purpose of the entertainment, as well as the business relationship with the people you were entertaining.
- Employment: Keep detailed employee files, with copies of all salary documentation as well as withholding forms. Keep the time records you use to calculate your payroll, and the payroll registers you use to list the details of each individual paycheck. Maintain payroll summaries, which are used to prepare payroll tax documents, as well as the payroll tax returns.
How do you store records for your business?