Owning a small business comes with a lot of paperwork. Sometimes, it’s hard to decide which documents to keep, especially when they pile up in your office. You need to keep several kinds of records to stay compliant with laws and measure your progress. Accounting software can help, but do you know what types of business records are essential for staying on track?
Types of business records
Make sure you keep track of these five types of records for your business.
1. Accounting records
Accounting records document your business’s transactions. These records include information about your income, expenses, and equity. You can compile the figures from your accounting records into financial statements and small business ratios.
You must track accounting records for several purposes. Accounting records help you see your business’s financial health. You can measure your company’s profitability over time, look at patterns in your records to help make decisions, and see if you have enough capital to cover your expenses.
The government requires you to keep financial documents that show income and expenses. You use accounting records to file your income tax return.
Once you file your tax return, be sure to keep tax records. The IRS can penalize you for up to six years after you don’t report income. For this reason, you should keep tax records of your small business finances for seven years.
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2. Bank statements
Bank statements are records of all your accounts with the bank. These accounts might include records of your checking, savings, investments, and credit cards.
You can reconcile bank statements with your accounting records. Comparing bank records to your financial records helps you see mistakes in your books. If your bank statements do not match your accounting records, there might be an error.
Like accounting records, bank statements help you track your business’s progress. You will also use this information to file taxes.
3. Legal documents
Depending on your type of business structure, you have different legal documents. For example, if you own an incorporated company, you should keep track of your articles of incorporation.
You have legal documentation if you operate under different business structures. Usually, a partnership has a partnership agreement. Sole proprietors and LLCs also have legal documents. Keep legal documents in your business records as proof that you own your company.
4. Permits and Licenses
Your location and industry may require you to have a permit or license. For example, you may need a permit from your city to assure that your parking area meets specific codes. Or, if your city restricts the size of your business sign, you may need a sign permit.
Keep up-to-date records of all your permits and licenses. You need documentation of permits and licenses to show you follow regulations.
5. Insurance documents
As a small business owner, you may need insurance for different aspects of your company. General business liability insurance protects your business from losses. You may also need other policies, like auto or renters insurance.
To use your insurance, you need proof that you are covered. For example, you may need to prove your coverage if your business is damaged by fire. Or, insurance can protect you during legal disputes. Your insurance documents include information needed to report incidents, such as your policy number.
Do you need a simple way to cut through the noise from all of the different types of business records? Our online accounting software is made for small business owners like you. To get you started, we offer free setup and support. Try it for free today.