Records management for your small business
Every business faces the challenge of records management. If you are a small business owner you may find that keeping the records you need, at hand, and under control is an ongoing battle. While it may not be the most glamorous job you take on, it is a necessity. The good news is that there are certain steps that can make the entire process much easier. Best of all when these steps are implemented they can make the process of records management much easier. The bottom line is that efficient records management can make your working life much easier to deal with and has the added benefit of reducing stress, when tax time rolls around. Here is what you need to know about record management, for your small business-
- Don't ever mix personal and business expenses-If you fail to follow this guideline, then what you have is a tax time nightmare, just waiting to happen. This is the most common mistake when it comes to records management. You must clearly determine what is a personal and a business expense then make sure they are recorded, under the appropriate categories. It is crucial to make sure that you understand what can qualify as a legitimate business expense. Then you will you need to make sure that your business records, will reflect this in an accurate manner.
- Keep your business receipts-Many small business owners make the mistake of thinking that a list of business expenses or a credit card statement is good enough. However, you may be surprised to learn that is not always correct. There is always a two-step process that you should follow. Always get a receipt and then label. You want to make sure that you are asking for a receipt, each time you make a purchase. This is regardless of how small or large the purchase is. Remember that even small purchases can add up quickly, and if you want to take the deduction, you need the documentation. In addition, if you receive a receipt that does not clearly indicate what was purchased; you should take a moment and do that yourself. You should write directly onto the receipt what it is for, and what expense category, you will be putting it under.
- Always have a separate business bank account-No matter what it costs you, you need to have a separate business bank account. This is essential for good records management. You need to train yourself to only use this account, for anything that is business-related. If you are unsure of what kind of account to start with, most banks now have a business specialist who can guide you through the process of opening a business bank account. In addition, this has the added benefit of helping you to establish a relationship with your bank that can be beneficial to your small business, in the months and years ahead.
- Always use a separate business credit card, for anything related to the business-Just like you have a separate business banking account, you should have a business credit card. If you give into the temptation of using your personal credit card, for your business, you will soon have a business records nightmare on your hands. Having a business credit card goes a long way toward simplifying the records management process. In addition, it also helps to make your business look more professional, and prevents questions at tax time about the legitimacy of your business.
- Keep all your business records organized and in once central place-There is nothing worse at tax time, then having to dig through multiple files and boxes, to find what you need. Taking the time to set up a filing system and then using it, is the best way to stay on top of your records management. You will then not have to waste time trying to find that needed piece of paper.