Keeping Good Records
Peter VanderWoude, CPA, CGMA
September 1, 2017
Have you ever made a resolution on April 15th to do a better job of maintaining business and tax records? If you haven’t made progress in that regard, you can be forgiven for being distracted by our wonderful summers in upstate New York. Now it is September, so let’s use the fall season to start anew!
If you have been using handwritten records or a spreadsheet, there is a better way to keep track of your business income and expenses. Most accounting firms advocate using a collaborate technology like QuickBooks Online. It can pull in your bank statements, credit cards and scanned receipts to help make the process of maintaining your business’s financial records an easier one. Both your accountant and you canaccess the “books” at the same time from each of your own offices. Many small businesses find it a great convenience that their accounting firm can reconcile their books while the small business is still currently using the QuickBooks Online program. No longer does a business have to stay out of their accounting program while an accountant cleans up the accounting records by working with a backup file.
Each expense posted in QuickBooks Online has a copy of its scanned receipt or invoice backing up that expense accessible within the program. Wouldn’t it be a relief that there is no need to maintain paper copies of receipts? Last month we covered a paperless tax preparation process. Many of those same steps involving secure sharing of documents can also be done with the bookkeeping and payroll process. Tax audit? No problem.
What about performing a financial analysis of your business operations? Without proper accounting records within a program like QuickBooks, a business owner is not sure of the level of profitability of each aspect of their business. They are left to manage by feel and by the level of cash in the business’s bank account. Large businesses know this information and invest great sums of money to determine it. All it takes for the small business owner is a monthly subscription to software like QuickBooks Online (you can get it wholesale) and connecting with an accounting firm that uses a current technology platform.
Good recordkeeping or bad, how long do taxpayers need to keep tax records? Keep supporting documentation for at least three years from date of filing the tax return. The IRS cannot audit after that time period, unless fraud is suspected. That’s why seven years is usually recommended, however, with personal assets like your home or investments you should keep records of those assets until sold.
September brings a new school year and the feeling of a new beginning. Use it to get on track with your business records. Call your accountant to get started and look out for stopped school buses!