How to do Bookkeeping for Your Small Business
When you’re starting a business it’s important to keep track of all of your revenue and expenses. You do this not only to file your taxes correctly but to also make sound business decisions using the data. Now it’s always good to defer to an expert when handing your finances but this guide will help you keep track of things until bookkeeping is something that you can out source.
Bookkeeping For Small Businesses
These are the best practices when keeping your finances organized as a small business owner.
Device a Document Management Procedure
Every business transaction will be connected to what’s called a source document. This is the document that can be trusted as to what occurred during a transaction. These documents are very important when reconciling your finances and making sure all of your transaction are completed accurately. Be sure to develop a system which helps you gather, record, and retain these documents. Some examples these documents are receipts, packing slips, bank statements, checks, deposit slips, invoices, and others.
Understand IRS Record Retention Expectations
The IRS mandates a record retention policy between 2 and 6 years depending on the document. You never want to get into a situation where the IRS or a state deportment asks for records that you don’t have. It will most likely result in a tax penalty. Some common records that need to be kept are:
Employee information
Employee time sheets & Pay stubs
Tax forms submitted to the IRS
Bank statements
Purchase receipts
Customer invoices
Tax returns
Financial statements
Depreciation schedules
Business registration documents
Match all records to your bank statement
The key to bookkeeping is to make sure that every transaction is accounted for and recorded in the correct time period so that it shows an accurate picture of that specified time period’s performance. You make sure everything is accounted for by matching the source documents to your bank statement. Make sure that all sales invoices are accounted for in your credits and expense receipts are on the bank statements as debits.
