In recent articles, we’ve highlighted some important factors to consider when starting your new business. In this article, we will discuss why it is important to keep good records and some options for keeping your files in order.
First, what’s the big deal about record keeping? Good records are the best way to monitor the health of your business. Accurate financial statements will help you spot trends and identify problem areas that may need attention. Your records should allow you to easily generate specific reports to make the changes needed to ensure success. At the end of the day, success is ultimately the goal of every business.
Keeping good records also helps in the following ways:
- Identifying sources of revenue — Loans may show up as deposits in the bank statements, but they are not ordinary business revenue and may be taxed differently or not at all. Keep records of non-revenue cash infusions to the business accounts to avoid paying taxes on loans or capital investments.
- Tracking deductible business expenses — Group deductible expenses by category to simplify tax return preparation and provide support for items on tax returns.
- Identifying and tracking business assets — Keep up with your title work and insurance documents, along with depreciation worksheets for your business assets.
Small business owners can be quickly bogged down in the avalanche of paper unless they establish and maintain a good system of managing paper. Some business owners go paperless and invest in scanning and indexing equipment. Others use the tried and true paper files and a filing cabinet. Whichever method you choose, it is generally best to group payables receipts and other financial documents by category, rather than by vendor. For example, all receipts for office supplies and business meals should be filed in one folder for each category, rather than using countless separate folders for various office supplies stores or restaurants.
For more information about starting a business, or for help with other matters related to managing your business, the attorneys at the Scolieri Law Group, P.C. can help. Located in western Pennsylvania, our attorneys are experienced in Pennsylvania business law and can take care of the details for you every step of the way. Contact us today at (412) 765-0546 or via email at email@example.com.