As a business owner, you know that it’s essential to keep organized and up-to-date records of your company’s financial transactions, day-to-day operations, and other important information.
That’s why today we’re exploring why record keeping is so important, and what kinds of records you need to retain. Plus, we’ll give our tips on effective record management.
Why is it important to retain business records?
Keeping effective records ensures legal compliance and helps you to make informed decisions, improve efficiency, and protect your business from potential risks.
Maintaining financial records ensures accurate reporting for tax purposes, audits, financial management, and tracking financial health.
Legal and corporate documents must also be retained to comply with regulatory requirements, protect your legal rights, resolve disputes, and ensure smooth business operations. Maintaining operational records allows you to analyze business trends, improve efficiency, and address any potential issues promptly. Maintaining employee records is important to achieve legal compliance.
Keeping organized tax records is necessary to comply with tax laws and simplify the tax filing process. Tax records play a significant role in meeting your legal obligations and preparing accurate tax returns. The IRS generally recommends retaining tax-related records for at least three years.
What financial records do you need to keep?
- Banks and institutions
- Credit card statements
- Retirement account statements
- Bank statements and copies of canceled checks.
- Invoices and bills
- Accounts payable (bills you pay)
- Sales invoices for customers or income
- Emails and text messages
- All receipts for business purchases
- Debit/ credit card statements are not evidence enough
- Cash receipts
- A receipt for a cash purchase is your only proof
- A contemporaneous record: a note at the time an event happens is better than nothing at all.
- Tax records
- Income tax returns
- W-2 and 1099 forms
- Receipts and documentation for deductions and credits
- Correspondence with tax authorities
3 Tips for effective record retention
To stay on top of your business record keeping you’ll need to:
- Organize and categorize your records
Create a logical filing system (this can be both physical and digital) to easily locate and retrieve documents when needed.
- Decide on record retention and disposal
Your business needs to outline how long each type of record should be retained based on legal requirements and business needs. Then when a record reaches the end of the retention period, dispose of it securely to protect against a breach of confidentiality.
- Backup and secure your business records
Remember to regularly back up your digital records to prevent data loss and protect sensitive information with appropriate security measures.
Setting the record for business advisory
When it comes to running a business, there’s a lot to know. It’s wise to seek professional advice to ensure compliance with regulations and best practices.
Efficient record retention is vital for the success of your business and is an investment that pays off in the long run. At Business Advisory and Accountancy Partners, we understand what it takes to make a business run smoothly and efficiently. So, if you’ve got questions, we’ve got answers.
As your business advisors, we can guide you toward a successful future. Let’s talk about business strategy, tax management, accountancy, and financial advice. We specialize in everything from basic compliance to business advisory services and advanced tax planning to business exit planning.
If you’re thinking about how your business can thrive in the future a good start is to have an expert ready to advise you. Our goal is to establish a partnership with companies and cultivate long-term rewarding business relationships. Let’s discuss the needs of your business and schedule a free strategy session.