Running a small business is a big task. Between the everyday tasks at the core of your company and keeping your staff and customers happy, you may be compelled to expunge files to make space. Before you opt to get rid of your small business accounting records, take note of these reasons for keeping your files in shape and on hand.
- Audits. The Internal Revenue Service is a powerful entity with the ability to request years of records if an audit is initiated. Payroll records should be kept for at least four years, and a tax audit can go back as far as six years. In general, it is helpful to keep records for at least seven years before expunging them to ensure that you cover any potentially needs, should an audit be scheduled.
- Monitoring Progress. You can’t know where you’re going until you know where you’ve been. Keeping track of your small business accounting records will afford you the ability to paint an accurate picture of your company’s progress. By documenting your income statements, balance sheets, and sales records, you’ll be able to better understand which items are selling, how much inventory you’re storing unnecessarily, and how you can improve your overall business functions.
- Preparing for Credit Needs. As your company grows, you may find yourself in need of additional funds to help with the expansion of your business. Well-kept small business accounting records can mean the difference between wanting a loan and obtaining one. Properly kept small business accounting records, including balance sheets, income statements, and payroll documents can provide you with the leeway you need to grow your business for the long term. On the other hand, poorly kept or inadequate documentation could potentially lose a loan that could have meant big things for your business.
- Employee Inquiries. Whether you’re talking about present or past employees, anyone who has worked for you in most forms or fashions can generally request information at any time. It’s important to remember that your small business accounting records don’t solely include financial statements that could be audited by outside inquirers. You may be required to present information relative to employee benefits, including details about benefit plans, contributions, payments, and other imperative details. It’s vital that your small business accounting records are healthy enough to withstand any inquiry so your staff can answer any necessary questions at a moment’s notice.
Small business accounting records needs to be kept tidy to ensure the health of the companies they encompass. Between local, state, and federal regulations, the housekeeping of these records is not only ideal, but it’s essential. It can also be tough to do if you’re operating a company that’s stretched in resources as it is.
If you need help keeping your small business accounting records in order, contact our team at Ernst Wintter & Associates, and let’s talk about how we can help.