Maintaining an accurate and thorough financial record for any small business can be a tedious and overwhelming task. Many business owners face the same questions regarding their financial documents. What should I keep and for how long? Is it alright to manage my documentation electronically? And how on earth do I organize everything?
Behm Bookkeeping has put together a list of tips to help organize the financial receipts of your business. The information here is quite general, so be sure to consult your personal accountant with any specific questions. Also, the tips here are in accordance with the rules set forth by the IRS. You can find a very useful article on the IRS website detailing the types of records that should be kept by small businesses.
Electronic is OK!
No need to stress! Electronic records are absolutely OK with the IRS as long as the documents can be easily read and retrieved. In fact, maintaining electronic records is preferable to paper with regards to safety. Natural disasters like floods or fires are no longer threatening, plus you can save a lot of space. Just be sure to back up all of your records at an offsite location to avoid losing your files because of some sort of computer or server crash.
Make a Copy for Yourself
Many of your financial records may be spread out between you accountant, your bookkeeper, your bank, etc. It is important to always store copies with you in case you need to present them and you are no longer using the same provider.
Though the IRS states that it is unnecessary to keep receipts under $75, they also state that you must be able to validate absolutely any expense incurred. The easiest way to do this is a receipt! You should also get in the habit of writing down the purpose of business on each receipt. You won’t remember why you took that lunch a year from now! If you scan receipts and store them electronically, then you can shred the paper and save some space.
Simple is Best
Creating a complex filing system for financial receipts can sometimes prove to be more trouble than it’s worth. Instead of keeping a separate folder for each vendor, consider putting all of your receipts for an entire month in one folder. QuickBooks can tell you when a transaction took place and then you can access the receipt by date. Remember, the more complex your filing system, the less likely you’ll be successful maintaining it.
QuickBooks, QuickBooks, QuickBooks
The accounting software on your computer will likely be the first resource consulted by an IRS inspector in the case of an audit. The IRS representative will seek out supporting documents based on the information in QuickBooks. This means that we must be diligent and committed to maintaining a clean and detailed transaction record in QuickBooks! Properly maintaining your accounting software will be a lifesaver if you happen to be chosen for an audit.
Though it can be a bit of a hassle, it is important to document your odometer readings for tax purposes. You may not be aware that the IRS actually wants you to document your mileage at the beginning AND the end of your trip! An example entry may look like: 09.15.2011 15,000 – 15,029 Sales lunch with Jim Austin at Campell’s Restaurant in Tempe. You can convert this information into an electronic document once a month and toss the paper log. Remember that details can’t hurt!
The professionals of Behm Bookkeeping offer expert financial advice for your small business. Our consultants will assist in properly maintaining your QuickBooks software and keeping documentation in order. Could your business benefit from the assistance of a professional bookkeeper? Call today!