Recordkeeping? Why is recordkeeping so important to your business?
It’s almost the close of another year and tax time is right around the corner.
Are you ready for tax season?
Do you have all the deductions that you expect?
How health is your business?
Is your company expecting a profit or a loss at the end of the year?
Did you know that all these questions can be answered, sometimes, within
a moment’s notice, by keeping good records.
What are good records to keep in the process of operating your business?(Here is a basic list to get you started.)
For your revenue (income):
Bank deposit slips.
Receipt books.
Invoices.
Credit card charge slips.
For expenses:
Canceled checks.
Bank and Credit Card statements.
Credit card sales slips.
Invoices.
Petty cash slips for small cash payments.
If you have Inventory:
Canceled checks.
Credit card sales slips.
Invoices.
For Fixed Asset Used in the Business:
When and how you acquired the asset.
Purchase price.
Section 179 deduction taken.
Deductions taken for depreciation.
Deductions taken for casualty losses, such as losses resulting from fires or storms.
How you used the asset.
When and how you disposed of the asset.
Selling price.
Expenses of sale.
All information above should be found on:
Purchase or sales receipt
Canceled Check
You Are Gathering This Information Through Out the Year, What Do You Do with It Now?
Instead of looking for receipts at the end of the year, why not go that extra step to summarize your information though out year. There are many ways to conveniently organize and categorize your information so that there is no hurry, hurry or rush, rush at the end of the year.
A great way to summarize your information is by either
Manually using Journals and Ledgers, which are available in any office supply store
Or
Electronically, there are various software options on the market that can fulfil this purpose
Ultimately, you should have a system in place that will keep track of your day to day or month to month transactions such as,
Business checkbook
Daily summary of cash receipts
Monthly summary of cash receipts
Check disbursements journal
Depreciation worksheet
How Does Good Recordkeeping and Recording Really Help Many Business Owners?
Monitor the progress of your business
How health is your business
What product or service is being purchased
What are your major costs
Is your company growing
Ability to Prepare your (3) major financial statements
Balance Sheet
Shows the Assets, Liabilities, and Equity
What the business owns, owe, and what is left over
Having a snapshot of the business
2. Income Statement
Shows your revenue (income) vs your expenses
Does the business have a Profit or Loss?
3. Cashflow Statement
Shows the cash activity for operations, investments, financing
Identify sources of your income
The ability to identify sources of income (if multiple income streams)
Keep track of your deductible expenses
Identifying more tax deduction which equal more tax savings
Keep track of your basis in property
Ability to deduct the use life of business property and equipment
Prepare your tax returns
Having all the necessary documentation which can equal to more time
Support items reported on your tax returns
With supporting documents, no worries, or cares if you are contacted by the IRS
So, in answer to the question, is recordkeeping important. It is very important to be prepared for tax season, include all income and deductions when filing your taxes, staying compliant with the IRS, to knowing the health and prosperity (or not) of your business.
For more information, helpful tips, and tools please continue to visit our website at: www.eappremierbookkeeping.com
If you have any further questions regarding recordkeeping or other bookkeeping and/or tax questions, please feel free to email EAP Premier Bookkeeping at jsmith1@eappremierbookkeeping.com our give us a call at 248-592-7230.
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