Good Business Performance Starts with Good Record Keeping

Good financial record keeping is vital to the success of any business. Good records help plan for the future, prepare accurate financial statements and tax returns, and enable business owners to create sensible budgets and cash flow projections.Taxes_iStock_000001334173_Medium

Small-business owners have a multitude of issues to contend with, whether they are in startup mode or more seasoned. One area that often requires a bit more of their attention is keeping good financial and other records for their company.

How keeping good records makes for good business

Your bookkeeping records help you make smarter and well-informed business decisions, for one thing. You don’t know where you’re going if you don’t know where you’ve been. Solid financial record keeping for your business helps you plan for the future based on real data. Your company’s financial records:

  • Provide the basis and support for your tax return preparation (track income, expenses, deductions, etc.).
  • Help you prepare financial statements (income statement, balance sheets, cash flow) and other financial reports that help you monitor your company’s progress. Are you doing better or worse than anticipated or compared to prior years or budgets?
  • Track inventory and maintain better inventory controls and spending.
  • Identify income sources and pricing levels.
  • Collect revenues and know which customers owe you money.
  • Track your basis in property – needed to figure gain or loss on the sale, exchange or other disposition of property; depreciation, amortization, depletion, and casualty losses.
  • Are the foundation for formulating accurate, sensible budgets and cash flow projections.

So beyond the “why keep financial records?” are several other questions we often hear from our clients who are business owners.

Which records should I keep?

Although there is no law stipulating what you must keep, for a small business we recommend your bookkeeping records include reconciled bank statements, cash receipts by customer, payroll reports, vendor invoices, accounts payable and accounts receivable aging, and anything specifically related to your field or industry that you’ll need for your tax returns. We recommend tracking all your business-related income and expenses in an accounting software program.

Depending on your occupation, you might have expenses related to: travel, meals, entertainment, wholesale goods or supplies, and equipment purchases or leases. In addition to your financial data, The Association of Records Managers and Administrators (ARMA International) offers these basic guidelines:

  1. Business documents – Establish your right to conduct business, such as articles of incorporation, by-laws, and business and tax-collection permits.
  2. Business agreements – Demonstrate your company’s obligations to your customers/clients, suppliers, vendors (such as contracts), and your staff (such as employee benefit packages and individual selections).
  3. Executive decisions – Show how business decisions were made and commitments honored, including annual reports, dividend records, board of directors meeting minutes and actions, and company health and safety documents.
  4. Regulatory compliance – Proof you have met legal and regulatory requirements of your industry.

How long do I keep financial records?

There is no set answer but general guidelines that relate to income tax returns are outlined by the IRS. Time frames range from three to seven years, depending on certain criteria (the IRS recommends “indefinitely” for certain other scenarios). Hold on to all filed tax returns and basis records because they will help with preparation of future returns and provide excellent financial history. Employment tax records should be retained for at least four years.

A good rule of thumb is to keep documents as long as you need to prove the income or expense/deduction on a tax return. Your accountant should be able to recommend the best course of action for you.

What is the burden of proof?

Burden of proof refers to your responsibility to substantiate entries, deductions, and statements made on your tax returns. If you plan to deduct certain expenses, you must be able to prove certain elements of them.

The IRS offers more in-depth information and guidance about the how, what, and when of maintaining financial records at

Can’t keep it all straight? No worries.

Maintaining your company’s books and other records may feel daunting to owners of small businesses without a controller, staff accountants or a good bookkeeper. Our Business Office Group’s EZ-Bookkeeper Solutions fill that void and relieve that pressure by handling all your full-charge bookkeeping and back-office administrative needs. This staff has been trained by our own CPAs and ensure your financial records will be well organized and in order, and that statements and reports will be properly prepared and filed on time.

Give us a call to find out more at (201) 655-7411 or go to for details.