Keeping good records is paramount to the success of your business. Proper business record keeping can help you examine the progress of your business and learn areas of growth as well as areas you need to improve. Good record keeping goes hand in hand with accurate financial statements about your business. Records can reveal profit and loss statements and balance sheets that can be shown to banks, investors, and others who have an interest in your business.
Your profit and loss statements will demonstrate the income and expenses of the company for a particular time frame. Your balance sheet will reveal the assets, liabilities and the equity in the business on a specific date. Your business law attorney can help you select the proper items to be kept in your business records.
Records can help your business in the following ways:
- Help you keep track of sources of income. Proper business record keeping will be helpful in distinguishing business receipts from non-business transactions, as well as taxable income from nontaxable income.
- Help you better identify your basis in property, which is the portion of your investment in property for tax purposes. Businesses use the basis to determine their gain or loss on the sale or exchange of property. Also, your basis can determine deductions for amortization, depletion, depreciation, and casualty losses.
- Help you examine and identify deductible expenses for your tax return. Records will assist your business attorney or accountant in preparing your tax returns each year. Your business records should support the income, expenses or credits you report to the IRS. You can utilize the same records used to monitor the company, and create your financial statements for the year. All of these business records should be kept for any inspection by the IRS. If the IRS audits your business, you will have records to explain and support the information you have presented on your tax returns.
Record keeping is not just for large firms and corporations with large profits and expenses. Smaller companies and startups should learn to start keeping accurate records, too. They can keep records that may include:
- Income and Expense Records
- Petty Cash Records
- Inventory Records
- Fixed Asset Logs
- Accounts Payables
- Accounts Receivables
- Payroll Records
Business records can be maintained manually, computerized on a spreadsheet, or created online. Make sure the system you use is easy to operate and compliments your business. Hang on to your receipts, bank statements, and invoices, Keeping business records can be a difficult task, but you should allow your business attorney to help your organize your files and records with a manageable and maintained system that works well for your business. You should keep records as long as required by law.
Accurate business record keeping can benefit your company in many other ways and can be used as resources for the following:
- Exploring solutions for new business problems
- Implementing marketing and sales strategies
- Helping manage business accounts
- Identifying how your business compares to its competitors in the market
- Revealing hidden and unexpected business expenses
- Foretelling when the business is in a financial crisis
- Exposing how much petty cash is on hand in the office
Record keeping and data management solutions have made record keeping less complex and more efficient for businesses of all sizes. Implementing an effective and reliable record keeping system is vital to your business success. Allow your business law attorney to help you formulate a record keeping strategy that fits your business goals. Plus, your attorney can make sure you maintain the proper items in your records.