How to Keep Better Business Records
Keeping proper business records is necessary, but it can be a frustrating prospect for the unpracticed and novice recordkeeper. Fear not! These types of records can easily be kept by implementing a few strategies to streamline the process and simplify a potentially confusing situation.
The first step to keeping better business records is to separate all personal accounts from business ones. This means having a dedicated checking account and credit card for the business that are used only for purchases made by the business. The credit card should only be paid down with funds from the business checking account, and money should only be added to the business checking account that was earned by the business. In this way one can easily reconcile costs and income when it comes time to do taxes. Nothing is worse than wading through pages of bank statements and trying to remember which purchases were made for personal items and services, and which purchases were for business expenses. This strategy will help keep the IRS from knocking on the door with a surprise audit that costs both the government and the audited business time and money.
Another way to keep better business records is by limiting account access to privileged individuals and informing everyone within the business who has the authority to make purchases about the company’s purchasing policy. For instance, if a policy that all employees who make purchases on the business account must get a receipt is implemented, then this information should be disseminated to everyone with such power.
A quick tip for a policy like this would be to have the purchasing employee take a picture of their receipt to digitize it. They can then save the digital file under a certain designation that could include the date of purchase, the amount, and an abbreviated code that corresponds with the type of purchase. In this way, the reconciliation of documented purchases can be easily handled in the event of an audit or a discrepancy in funds by accessing a single folder on a hard drive.
By implementing strong organizational policies surrounding business records, a bookkeeper can streamline and simplify the process of accounting and recordkeeping. There is no need for this task to be an arduous one. Propper allocation of funds for small businesses can help during tax time when separating personal transactions from business ones, as they each need to be treated differently and reported differently to the IRS. Make recordkeeping fun again with organization and simplification.