Your Record Keeping Systems May Need Attention
The record keeping system:
Give priority to establishing good record keeping practices
for your business. Record keeping goes much farther that
actual check writing, depositing income, keeping receipts,
etc. Also involved are the choices you must make about
accounting methods, dealing with inventory (if any) and
other assets, complying with regulatory and tax requirements,
and computerization. You will probably find taking care
of all these details time-consuming and frustrating to
say the least; many of the choices you have to make may
require help from a financial or accounting professional.
When keeping your business records, though, try to follow
a few basic "rules":
DON'T CO-MINGLE BUSINESS
AND PERSONAL BANK TRANSACTIONS!
From the very outset hove o separate bank account for
your business in which you deposit only business gross
receipts and from which you write checks for business expenses.
KEEP BACKUP FOR YOUR DANK DEPOSITS
AND EXPENSES
Keep bank statements and supporting documents so you can
trace your bank deposits, including those that aren't income
(e.g., loan documents for loan proceeds deposited, insurance
reimbursement, etc.)
If possible, pay all expenses by check. They should be
supported with sales slips, invoices and any other available
documents of explanation. The income and expenses should
be recorded in on orderly manner (either by hand or on
computer) so that the backup con be readily available if
and when needed.
Sometimes you con log your expenses in a timely manner
so you don't hove to keep receipts. Before you adopt o
logging system, though, it's best to check with your tax
advisor because the rules for logs are quite strict.
BE SURE TO KEEP ALL REPORTS
FILED WITH GOVERNMENT
AGENCIES
This includes personal income tax returns, soles fox returns,
payroll returns, W-2s and 1099s filed for employees and
other hired labor, etc.
Length of time to keep records:
From a tax standpoint, you should retain books and records
of your business for three years after the due date of
your income tax return. There are some sections of the
tax law where the statute of limitations is longer than
three years, however. Because of these, it's wise to keep
records at least six years. When it comes to the records
that support cost basis of property, equipment or any item
that you are depreciating, keep records for at least three
years beyond the life shown on the depreciation schedule
in your tax return.
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to Tips for Small Business
Small
Business - Expenses
Small
Business - Other Issues
