What Financial Records Need to Be Kept

What Financial Records Need to be Kept for Your Small Business

Do you feel like you are drowning in paperwork? It can be hard to keep up with the requirements of running a small business, especially when you feel like you need a secretary dedicated to bookkeeping and filing. Even though these financial records can feel like a burden, it is essential that you have a good system in place so that you can locate the paperwork if it is needed in the future.

Why Record Keeping is So Important

Why does it matter if you keep the paperwork with details about your business finances? No matter your industry, bookkeeping and accounting need to be a priority for your company. Not only do you need the paperwork for your own records, but there are requirements from federal and state taxing authorities to maintain documentation of your income and expenses.

Here are a few reasons why you need to keep financial records:

  • What is Your Financial Situation? If you don’t have a good financial system, then you are running your business in the dark. The best way to make good decisions for your company is to know where the business stands every day, week, month, quarter, and year. Is your business profitable? Or are you losing money? Will there be enough cash in the bank to cover the overhead costs this month? These details give you more control over your business practices, helping to set your company up for success in the future. As a result, you can improve your efficiency and productivity, which helps to maximize the possibilities that can be achieved.
  • Documentation for Tax Obligations: Taxes are a necessary part of business ownership, and many people agree that their stress goes up when it is time to talk about taxes. You need to keep documentation of your business records to ensure that you have the right numbers for your tax filings and payments. These records need to show the money that is coming in from your clients and customers, as well as the expenses that you are using as deductions. If money changed hands and the transaction was related to your business activities, then you need to have documentation of that transaction.
  • Potential Business Investors: When your company is expanding, there are times when it makes sense to bring in investors. But, it is hard to convince people to invest in your company if you can’t show the history. You need reports and paperwork that outline the history of the business, as well as anticipated sales reports for the future. Additionally, investors often want to view details regarding assets and bank accounts.

Keeping good financial records is one of the best things that you can do to maintain order in your company. If you know the numbers, then there won’t be big surprises in the future about the costs that are due for taxes or inventory expenses.

Even though it can be a lot of work to keep up with these financial records, it is one of the most important things that you can do to set your company up for success. Don’t assume that you need to manage the business records by yourself. Instead, find a trusted company that offers bookkeeping and accounting services so that you can outsource the busy work.

What Documents Need to Be Kept?

The legal requirements vary depending on your business and industry. So, the best thing that you can do is get personalized recommendations from an accounting team. Your accountant can provide a list of the paperwork that needs to be kept, ensuring that you are maintaining everything that might be needed in the future.

If there is a question about whether a financial document needs to be kept, then it is best to err on the side of filing the document for a while. Keep in mind that you don’t have to keep all of the paperwork indefinitely. Instead, you can hold onto some documents for a few years before shredding the paperwork.

Follow this overview of paperwork that you need to hang on to:

  1. Business Documents: If you have paperwork that shows the legality of your company, that it needs to be filed in a safe place. Hold onto records that show your right to be in business, such as a business license, certifications, and more. Also, keep copies of the by-laws for your company, articles of incorporation, and other applicable paperwork.
  2. Business Contracts: Do you have signed agreements with clients or subcontractors? Signed copies of these files need to be kept on record. If a dispute or question comes up in the future, then you can always pull up the contract to ensure that all parties share the same understanding. These business agreements might also include documentation for employees, suppliers, vendors, and more.
  3. Financial Records: Anything that shows money changing hands needs to be documented and filed. This category includes accounts receivable, which is the money that you receive from your clients or customers. Additionally, you need to keep records of any business expenses that are being used as deductions. Other applicable paperwork includes tax filings, payroll details, and more.
  4. Executive Meetings: If you have a board of directors or an investors meeting, then it is a good idea to keep records of the minutes of the meeting. These details might include major business decisions that could impact the future of the company.
  5. Business Assets: Whether you have company-owned computer equipment or you bought the building where the business is located, you need to hang on to the paperwork that details the assets for your company. Your accountant can help with the purchase, sale, and depreciation details. You need to hold onto the paperwork that shows any transactions related to these assets. Keep in mind that financial gains or losses in assets can have an impact on your tax filings, so you might need to keep the details for potential audits in the future.
  6. Employment Taxes: In addition to income taxes and other business taxes, you are also responsible for the records and filings of employment taxes. These records need to show the details of every employee, including their legal status for working in the United States. You also need to track paychecks, dates of employment, tax withholdings, tax payments, and more. The IRS has requested that businesses hold these records for a minimum of four years.

Do You Need Hard Copies or Electronic Files?

We live in a digital world, and there are many times when you can keep digital files to avoid the mess of a full filing cabinet. If you want to simplify your business records, then it is best to keep a digital file where all of the documents are kept in their corresponding folders.

For example, you might have a folder for all of the invoices that are sent to clients, another folder for tax filings, and another folder where business receipts are kept. Minimizing the paperwork eliminates the need to print every page. Plus, a cloud-based storage system gives you full access to the information from anywhere in the world.

Another benefit of a digital filing system is that your accounting and bookkeeping team can access your financial records. If you want to free up your time, then you need to use an outsourced accounting service so that you don’t have to sort through the busy work of your business records. You can upload the files and let the pros handle the document filing, data tracking, reporting, taxes, and more.

If you choose an electronic filing system, then it is essential that you have a good backup service in place. Your business could be devastated if you lost all of the documents due to a computer failure. Many cloud-based storage solutions offer automated backups. You can also set up a private service that syncs your files to another cloud-based location.

Finding an Accounting Team to Help with Your Financial Records

Do you have a good accountant to help with your business files and records? There is no reason why you should be handling these details without the support of a financial professional. Outsourcing the bookkeeping and accounting for your company is one of the best things that you can do to ensure that you aren’t overloaded with busy work.

Our team can handle the financial details, freeing up your time to focus on activities that will boost the success of your company. We are experienced with small business accounting and know the best methods to help you take control of your financial records.

Are you ready to learn more about the benefits of outsourced accounting? Then you need to talk to our team at Easier Accounting. We are happy to cater your accounting services to match the needs of your company. We provide a range of services, ensuring that you get the best results to match your needs. If you have questions or you would like more information, then we invite you to call our team right away: (888) 620-0770

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