Tips to Keep Your Financial Records Well-Organized
March 2020
[Back to newsletter]

Home Page
Business Checking
Business Savings
Business Loans
Contact Us
Privacy Policy


Subscribe to our Newsletter
Tips to Keep Your Financial Records Well-Organized
Strong financial recordkeeping is at the heart of every successful business

Good financial recordkeeping practice can be one of the most consequential things you do as a small business owner, especially when it comes to tax records. Unorganized tax records can cost you money and cause other major problems if you are audited by the IRS, which requires that you keep certain tax records for certain periods. Organizing your records will reduce stress, simplify finances and better prepare you for unexpected events. The following tips can help you get and stay on track.

Use good accounting software

The quality of your tax records will depend on the quality of the accounting software you use to generate them. Business consultant Rosemary Peavler says that if your final tax return is a product of your recordkeeping, it’s therefore important to choose software that can deliver the best results, though she adds that “you may want to outsource the preparation of your final tax return to a tax professional, such as an accountant.”

Create categories

Over the course of a year, you will amass such a sheer volume of documents as to make organization difficult. It’s important to intelligently categorize your documents to make them easier to find when needed. Typically, you’ll need categories for each financial account you have, each utility, vehicle records, tax return copies, insurance statements, individual employee records and accounting ledgers that include source documents. The more relevant categories you have, the better. It takes some time to set up, but the process of record keeping becomes a lot easier and streamlined once your organizational structure is in place.

How long to keep records

According to the IRS, “you must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return expires.”

If you owe taxes, you should keep your records for at least three years. If you have reportable income but do not report it, and it’s more than 25 percent of the gross income on the tax return, you should keep your records for at least six years. If you have employees, you should keep their records for no less than four years — but at least seven years is the usual recommendation.

Sort and copy source documents

You should strive to keep and sort all of your source documents. These include sales slips, paid bills, receipts, deposit slips, canceled checks and invoices. These not only contain the information you need to record in your books, they are also the documents you need to support your tax deduction claims. As a result, you should keep all of these documents in an orderly fashion and in a safe place, organizing them by year and type of income or by expense. Peavler also recommends that, “In case of a fire or other disaster, each source document should be scanned into a computer file and stored on a flash drive.” If possible, you should store your digital copies in a different place than your paperwork, to ensure one form survives in a disaster.

Hire a bookkeeper

Entrepreneurs thrive on the do-it-yourself mentality, but hiring professional help has its benefits. Bookkeepers ensure new employees file all the right paperwork for your company’s payroll, submit invoices, track company expenses and ensure that all costs have been correctly entered and recorded. For startups especially, organizing financial records may have too large a time cost when there are so many other pressing business issues to handle. And if time is money, relegating the work of bookkeeping to a professional may ultimately be worth the price.

No matter how you go about organizing your financial records, the most important thing is that you do it. And whether you’re just getting into the entrepreneurship business or have been a small business owner for decades, you can always benefit from professional accounting and bookkeeping.


[PRINTER FRIENDLY VERSION]
Published by Heritage Bank of Nevada
Copyright © 2020 Heritage Bank of Nevada All rights reserved.
Includes copyrighted material of IMakeNews, Inc. and its suppliers.
Disclaimer - All content contained in this newsletter is for informational purposes only and should not be relied upon to make any financial, accounting, tax, legal or other related decisions. Each person must consider his or her objectives, risk tolerances and level of comfort when making financial decisions and should consult a competent professional advisor prior to making any such decisions. Any opinions expressed through the content in this newsletter are the opinions of the particular author only.
ARCHIVE
August 2020
February 2020
January 2020

[MORE]


Powered by IMN