Home Business Record Keeping – Know What’s Important

Reasons Why To Keep Good Records

Good record keeping provides a documented transaction history of your business. It offers you the following valuable information and benefits:

1. SALES DATA… Good sales monitoring is critical to your business. It provides historical data, for the week, month, quarter and the year. It will show you whats selling and what’s not. Proper record keeping gives you the information on areas of growth, decline or stagnation. You can spot trends and trouble spots in advance, which allow you to make the needed changes, keeping things under control.

2. EXPENSES… Depending on how you track your expenses, its history allows for you to decide if they are justifiable, normal or excessive. You can pin point patterns and questionable items. Catching them before they get out of hand.

3. CHECK BOOK… Keeping an up to date check book register, provides back up support documentation in the event you missed something in your regular postings When writing a check, don’t forget to post the type of transaction. Such as equipment purchase, travel, or Inventory. This historical information saves you future headaches. If you use a debit card, record the transaction as you would a check.

Your home business record Keeping is a valuable asset for monitoring the activity and trends of your business. It provides you with historical information needed to manage your business.

OTHER BENEFITS

Good record keeping practices will help you with the following:

a. Knowing the current Health of your business

b. Having at your fingertips, information for preparing Financial Statements required by banks and creditors.

c. It allows you to keep track of deductible expenses.

d. It provides needed information for preparing your Federal and State taxes. It provides you with supporting documents on items reported to the Internal Revenue Service.

Just think of your Home record Keeping system and activities, as having at your disposal a good compass and map. First of all, you need to now where you’re at now and in what direction your headed. These tools allow for you to track your business path, being on the lookout for obstacles and making the adjustments to keep you in headed in the direction for success.

WHAT RECORDS TO KEEP

Sales… Keep all documents, related to the money coming in to your business. Such as, Sales slips, Invoices, Charge card transactions, cash register receipts.

Expenses… All items related to cost of doing business. excluding items purchased for Inventory. Credit card transactions, Invoices, Account Statements, cancelled checks, cash register receipts etc.

Inventory Purchases… Merchandise purchased for stock and resale. All material used to manufacture a finished product for sale. Keep copies of Purchase Orders, cancelled checks, Invoices, charge card slips and cash sales receipts.

Business Assets… These are purchases such as office equipment, tools and machinery, store furnishings, displays, and real estate required for the running of your business. Much like the other categories, keep copies of purchase orders, Invoices, canceled checks and real estate closing statements.

Tax Returns… Keep copies of your State Local and Federal income tax returns along with State and Regional Sales tax returns and all returns for Employment tax.

You should keep these documents for five (5) years, longer preferably.

OTHER DOCUMENTS

a. Business Permits and Licenses

b. Contracts involving Sales, Rentals, Maintenance etc.

c. Estimates and Bid proposals

d. Insurance policies, such as Health, life, Workman Compensation

WHAT HOME BUSINESS RECORD KEEPING SYSTEM TO USE

How you keep your records depends on the type of business you have. There are many ways, from simple journals, to computer software like Quicken, Peach Tree and Quick Books. It depends on your what feels best for you.

My suggestion would be to visit a book Keeping service and tax preparer. Sit down with them and pick their brains with all your questions. You may learn that it would be of value to hire a service. Saving your valuable time for running your business.

If you’re one to attempt it yourself. Visit an office supply store, check out the manual systems available, or you can adapt one to fit your needs but observing the for sale products. Research the differences of software programs. Determine what meets your needs and budget.

Remember you don’t need a fancy system… just a system that provides good documentation of your business transactions.