Small Business Record Keeping

Everyone in business must keep records.  Good business record keeping is very important to your business - it will help you monitor progress, prepare your financial statements, keep track of deductible expenses, prepare your tax returns, and support items reported on tax returns.  Business records can be divided into three categories: income, expenses, and capital expenditures.

• Income Records-Whatever the source of your income, it needs to be recorded. Business records should indicate the type of payment received, the date it was received, and the source of the payment. Keep all of your income records in a central location.
• Expense Records-Keep proof bills were paid, by holding on to copies of receipts, invoices, credit card slips, canceled checks, or rent receipts.
• Asset Records-Whenever a business purchase gives you a long-term benefit, like a fax machine, a building, a car, or office furniture, these assets must be tracked separately from assets that will be used immediately, such as office supplies.

The IRS normally has three years to audit you and your business.  Some state agencies have longer statute of limitations than the IRS, so to be safe, it's best to keep all tax-related documents for longer than three years.

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