Keeping records of your business is an essential part of running a healthy business. It not only helps you make smart business decisions but can help you in your eligibility for tax credits and loans. As many small businesses are preparing for loan applications or PPP loan forgiveness applications, they can significantly benefit from organized business records. If you want to know how to start keeping your business records organized, read the five tips below.
Know the Records to Keep and How Long to Keep Them
The first step in keeping business records organized is knowing which records you should keep. If you are in doubt about keeping records, you should err on the side of caution and hold onto them. You should keep the following:
- Business tax returns
- Financial statements
- General ledger
- Bank statements
- Credit card statements
- Check registers
- Business agreements
- Permits and licenses
- Insurance documentation
- Payroll records
- New hire forms
How long you should keep these records varies. In general, these time periods hold for the following documents:
- Records on which wage calculations are based: 2 years
- Income tax return records: 3 years
- Payroll records: 3 years
- Sales and purchase records: 3 years
- Collective bargaining agreements: 3 years
- Employment tax records: 4 years
- Bad debt reduction claim: 7 years
- Income tax return records if you do not file a return: Indefinitely
If in doubt, hold onto the files but make sure that your documents are well organized and that their date is marked.
Separate Your Funds
You can help to keep your business records organized by separating your personal and professional bank accounts. By separating these funds, you can better track which expenses are yours and which belong to the business. If your company is structured as an LLC or a corporation, you must create a separate bank account, but sole proprietorships and partnerships without a DBA are not required to.
Understand the Basics of Journal Entries
Keeping business records organized can be done by maintaining journal entries that log transactions. These journals are the foundation of your business’ accounting books. The first thing to understand about journals is debits and credits. When one account increases, the other decreases. Make sure you know how debits and credits work before beginning journaling on your own.
Take Things Digital
To avoid damaging or accidentally disposing of documents, you can consider making digital copies of your business records. You can keep the paper copies as well, but with digital copies, you have two copies, one of which will remain pristine.
Use Reliable Accounting Software
Keeping business records organized can be an intimidating task, which you can easily put off until you are overwhelmed by documents. You can simplify things by streamlining your recordkeeping process with reliable accounting software. Using accounting software can help you organize your documents, store important information, and keep digital copies of your books.
With a few small adjustments to your recordkeeping habits, you can make sure you never have to rifle through paperwork again.
trust the professionals at the harding group
Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for emails or phone calls and will strive for open communication with our clients. Whether you are interested in business advising, tax preparation, bookkeeping and accounting, payroll services, Training + support for QuickBooks, or retirement planning, we have the expertise and years of experience to help. We serve clients in Annapolis, Anne Arundel County, Baltimore, Severna Park, and Columbia. If you are ready to take the stress out of taxes, contact us online or give us a call at (410) 573-9991 for a free consultation. For more tax tips, follow us on Facebook, Twitter, YouTube, and LinkedIn.