Every business owner knows running a business is a full time job. You do not want to waste your valuable time to dig into some old document or catch up the substantiation in case of IRS audit. Run your business in a smart way will save you tons of time and let you focus on your venture!
Today I am going to share some easy tips you can adopt them immediately.
TIP #1: Keep all business receipts / contracts / invoices in 6 boxes
My clients told me record keeping are the most challenging part to them. I understand not every small business can afford hiring an administrative staff to handle it. That leaves this burden to the owner.
To make it less stressful, you should know the minimum requirement to keep the records if you do not have time to archive them in a perfect way.
Keep 6 boxes at least, name them as “Permanent”, “2016”, “2015”, “2014”, “2013”, and “2012”.
All the current year receipts, dump them to the box of “2016”. I also recommend you take picture of every receipt as certain receipts’ ink might fade away in the near future. Accordingly, the receipts from 2012 to 2015, keep them to the other boxes. For those document, contracts or receipts related to capital investment or improvement, keep them in “Permanent” as you may still need them 5 years later.
After the tax filing season in 2017, you simply throw away the box of “2012”. In other words, you only keep 6 to 7 boxes at a time.
TIP #2: Open a business account and business credit card
Never commingle your personal expenses to the business cards, and vice versa. Some IRS auditors may extend their scope of audits to your personal level when they see a lot of transactions commingled between business and personal expenses.
Also, it is impossible for you to delegate the bookkeeping if you are the only one to know which transactions are related to business.
TIP #3: Use Accounting Software Instead of Spreadsheet
While spreadsheet is user friendly, it may not be able to provide you all the accounting reports you need. Some business owners just keep the statement of profit and loss in spreadsheet. However, IRS requires businesses to keep balance sheet, general ledger, bank reconciliation reports and income statement in their records. Choosing a proper accounting software can help you prepare these records easily. We recommend Quickbooks Pro or Online Quickbooks.
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