An obvious goal of owning a business is to be successful. A key way to achieve this is through good recordkeeping. A small business should employ recordkeeping to being able to prepare accurate financial statements by keeping track of all income and expenses throughout the year.
Now you may be asking what kinds of records should I have? The answer is simple, as the business owner you can choose any system that fits the company. However, you want to ensure the system can clearly show income and expenses.
How long should you hold on to records? Well that depends on the type of expense, income or transaction that occurred.
This applies to taxes through the burden of proof, meaning the responsibility of being able to validate information stated on a tax return. The owner of the business must show proof of all expenses recorded during the year to deduct them on their business tax return.
Whether your business is large or small, make sure all your records are updated and you can provide proof of all transactions through recordkeeping.
For more on recordkeeping, check out this article that explains its requirements for personal taxes.
Meghan Metzger, MSA