Many business owners don’t understand how to keep their books. It doesn’t usually go with the idea of running a business. But small business owners can get a lot out of keeping books and records, no matter how complicated they are. Here is some information regarding bookkeeping and recordkeeping that may convince you to include them into your small business.
What Is Bookkeeping?
Bookkeeping is a way to keep track of how money comes into and leaves your small business. There are two kinds of bookkeeping: single-entry bookkeeping (only for transactions) and double-entry bookkeeping (for transaction entries and company cash flow). As you keep track of your money, you’ll put it into different categories, such as expenses, payroll, income, and taxes.
How do I keep a small business’s books?
You can keep the books for your small business pretty easily with just two binders. One will have things like licences and permits that are needed in your state. The official binder is the best place to keep the following:
- Certificates of Articles of Incorporation or Certificates of Articles of Organisation
- Seal of the company Minutes of the meeting Resolutions
The second binder will have records for each day. Keep the following in the binder with your daily records:
- Books of accounts
- Forms and permissions
- Contracts that the company signed
- The company has insurance policies.
- Certificates of membership
- addresses and names of all shareholders or members
- An operating agreement or set of rules, as well as any changes,
- Buy and sell shares
- Shareholder interests
- State documents (such as annual reports)
As your business makes decisions about what it will do over time, try to write everything down. To stay organised, divide the above sections into different sections in your binders. It’s important to keep track of everything, whether it’s official (like meetings and minutes) or not (daily activities). For even more accuracy, you should also date the records.
What Forms of Records Must a Small Business Maintain?
It’s important to know what kind of records you should keep, whether you’re using software or something else. Keep track of your small business’s debits and credits, as well as its income, by keeping receipts for purchases, expenses, and gross receipts.
You should keep records of your gross sales, such as:
- Tapes for a cash register
- Put down information (cash and credit sales)
- Forms 1099-MISC Receipt books and bills
You should keep records of purchases like:
- Checks that have been returned or other proof of payment or electronic funds transfer
- Tape receipts from the cash register
- Receipts and bills for credit cards
- Invoices
Lastly, you should keep records of your costs like:
- Statements of account
- Checks that have been returned or other proof of payment or electronic funds transfer
- Tape receipts from the cash register
- Receipts and bills for credit cards
- Invoices
Do I need to keep business receipts?
Even though you don’t have to keep receipts to file taxes or prove business expenses, small business owners can still benefit from doing so. This will make it easier for you to lower your tax liability, or the amount of taxes you’ll have to pay. Some receipts can help you get a tax break, which will save you money when it’s time to file your taxes.
You will need receipts from:
- Bills for a service or good
- Travel and food
- Other things like stocks, bonds, depreciated equipment, and real estate.
- Except for lodging, the IRS doesn’t need receipts for business costs that cost less than $75. A receipt is not required if you utilise a Schedule C Form for your firm to deduct health insurance premiums. If you keep the receipts and don’t lose them, you’ll have a better chance of getting business expenses deducted from your taxes or even reimbursed.
- How long should business records be kept?
You should keep business paperwork and receipts for at least three years.
This time period includes the possibility of an IRS audit, which is why you should keep all of the necessary documents and receipts. Also, if the IRS thinks you didn’t report all of your income, that time frame goes up to six years.
Use the Help of a Pro
Bookkeeping can help your business keep track of different kinds of income and expenses. If you need help keeping track of your books, you might want to talk to an accountant. Don’t be afraid to ask the experts for help if you want your small business to make it through this global crisis.
