Recordkeeping is one of your most important responsibilities as a business owner, and success depends on creating and maintaining an effective system. Recordkeeping systems range from simple folder filing to complex online electronic software. Whether simple or complex, a recordkeeping system must be easy to use and suited to your particular business needs. The type, size, and complexity of your business, as well as available resources, will help to determine the recordkeeping system best suited to your business.
HERE ARE FOUR SUGGESTIONS TO HELP YOU DOCUMENT AND ORGANIZE YOUR BUSINESS RECORDS.
1. RECORD INFORMATION & PROCEDURES
Get in the habit of capturing everything. Document procedures, keep track of every amount you spend on your business, and the location of all paper and electronic files.
2. CREATE A SYSTEM
Your recordkeeping system should give you accurate and helpful information to see how the business is doing and when to act. Input the data into a spreadsheet or accounting software. We recommend recording everything at least once a month so it can be reviewed. Read our blog post to learn the 5 Best Expense Tracking Tools for Businesses.
Note: Accounting software keeps track of business financial records such as expenses, sales, assets, and inventory. An accounting software, such as QuickBooks, can help you execute, manage, and track your critical financial transactions and reduces the chance of human error. Also, financial numbers are generally more accurate because calculations are done automatically.
3. ORGANIZE DAILY DOCUMENTS
Organize your desk by shredding documents with sensitive information and scanning older papers into computer files. The most efficient method is to scan, file, and shred as soon as you are finished with a document. If you do not have time, consider assigning document organization to specific employees and making it a task to be completed daily.
Note: Always shred business financial documents thoroughly before throwing them. Also, use proper disposal protocol for any computers and other electronic equipment containing financial data. Simply deleting files is not enough. Unless you use proper disposal protocol, tech-savvy hackers may be able to recreate sensitive data from the device’s hard drive when thrown out, donated to a charity, or returned to the lessor after the lease term expired.
4. DOCUMENT FOR TAX PURPOSES
Another critical reason to keep accurate business records is for tax purposes. Track incentives discussed in your tax planning strategy meeting, such as a credit for accelerated depreciation available for buying business assets. For example, for asset purchases, retain receipts and record the purchase details. These details include the type of equipment, purchase date, total amount, and related set-up costs.
Like most business-related activities, recordkeeping requires establishing good habits. We know you are busy and may feel that organizing your business records will take more time than you have available, but consider how using these tips may save you time and money in the long-run.