Recordkeeping for the Restless
Contents
Why keep business records?
When you’re passionate about your company, keeping accurate business records can seem like a boring chore. It’s not the most glamorous or engaging task, and it requires patience and good organizational skills. But while dealing with paperwork can seem burdensome, a thorough and up-to-date record system can save you headaches and work down the road – and best of all, save you money at tax time.
It can also help you improve your client relationships and accurately assess your company’s performance. In fact, maintaining immaculate business records is critical if you want to:
- Prepare financial statements and tax returns
- Track and substantiate deductible expenses
- Monitor your business profitability and plot growth strategies
- Maintain attentive relationships with vendors and customers
- Protect yourself in the event of lawsuits
While specific industries sometimes have specific recordkeeping regulations, the practices described below are fundamental to all businesses.
What business records should you keep?
- Legal Records: Make sure you keep the following documentation organized and accessible: articles of incorporation, permits, by-laws, state filings, trademark registrations, patents, licenses, insurance policies, and employee records. And, of course, you’ll keep all of your own client contracts on file, along with the contracts you’ve signed from your suppliers and distributors.
- Accounting and Tax Records: Your financial records will usually represent the bulk of your records and involve the most complexity, so spend some time developing a comprehensive system. Many small businesses are launched with just a spreadsheet for their books, but most eventually move onto accounting software such as QuickBooks to help organize records and prepare financial statements. Do be aware that you will need a rudimentary knowledge of accounting basics like debits, credits, and journal entries. In addition, you should understand your profit-and-loss statement, balance sheet, and cash flow statement. Beyond recording your income and expenses, you will need to maintain these types of financial records: bank and credit card statements, annual tax returns and quarterly filings, inventory, sales records, invoices, purchase orders, and payroll.
- Client Files: Here’s where some legwork really pays off in client relationships. Not only should you maintain accurate records of work performed, contracts signed, and bills paid, but you should maintain a file of the client’s preferences, culture, dislikes, and goals. Recording this in a customer relationship management (CRM) system will help you accurately tailor your work to their needs and avoid strategy misfires.
- Strategy and Business Planning Records: While these won’t be as formal as your other records, it’s helpful to document your business decisions, initiatives, and goals. Date these records, just as you would with any invoice or transaction, and document the results. You will be able to quickly chart your company’s evolution, determinate the most effective strategies, and create a more profitable roadmap for the future.
What’s the best system for maintaining business records?
The recordkeeping system you choose should be tailored to the size and purpose of your company. Generally, it is best to separate your official records – those required by the Secretary of State’s office in order to maintain your business’ legal status – and your financial documents. Your day-to-day documents, such as payroll and purchases, should be yet a third and highly accessible category. File hard copies in three-ring binders with index tabs for quick access – but whenever possible, preserve your records digitally as well.
Finally, make sure you schedule record maintenance on a recurring basis. Receipts pile up, contracts get lost, and client files get neglected. It’s easy to let paperwork devolve into chaos while you’re chasing “real” business. So stay organized, stay current, and perhaps most importantly – keep your digital records backed up.
Good business records are much more than a filing system. They’re the foundation of your company’s success. Devote some time to creating a comprehensive system now and you will thank yourself in the future.