As a business owner, you need to keep complete and accurate records, not only because the IRS requires it, but because it can help you save money by reducing your taxes.
Try to make it a habit to request receipts for everything you purchase and keep them all in one envelope. Once a week sit down with your receipts and your checkbook.
Some people find it helpful to create a simple filing system using manilla folders and loose leaf paper. Under this system, folders would be labeled by month. Transactions are recorded on 8 ½" by 11" sheets of paper placed in the front of each folder and all supporting documentation gets filed inside of it. You should include one sheet of paper for income, one for direct expenses, and one for indirect expenses. Be sure to staple them all together and prepare this package for the front of every folder.
For every expense, list the date, who was paid, the item purchased, the amount and the method of payment. Separate your receipts into each category, record them, and file in the appropriate folder.
For income, list the date it was received, the source, the amount received, the method of payment, and reference number (check number or credit card used).
At the end of the month, add up the amounts listed on your sheets of paper. At the end of the year, simply compile the totals from each month to arrive at your final numbers.
Once you have completed the year, file everything away in large 10" by 13" clasp envelopes marked with the tax year and keep in a safe place. You may reuse your emptied folders or start over again with new ones.
Recording everything on a weekly basis will allow you to create an organized recordkeeping system for your business and will support your claims in the event of an audit.
Brigitte A. Thompson is an accountant, former daycare provider and work at home mom of three. She is the President of DATAMASTER, LLC, an accounting firm based in Vermont. Her book, The Home Daycare Complete Recordkeeping System, is used throughout the United States as a reference guide and training manual. She has been producing it since 1995 and updates it annually.For more information, please visit her web site at DaycareRecordkeeping.com.
All information is based on the current federal tax laws of the United States. Since these laws are subject to change, neither the author (Brigitte A. Thompson) nor this web site (www.MomsBudget.com) assume liability for modifications to the law which occur after the creation of this work. Every effort has been made to ensure this information is as accurate and complete as possible. These articles contain general information for businesses and are offered as an overview of the law.
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