Getting Organized

What kind of records do you need to keep? Although the answer depends on what kind of business you run, there are some hard and fast rules you should keep. IRS Publication 583 is a great resource for small businesses about what records need to be kept. Here are some of my own thoughts on the issue.

Accounts Payable:
Keep a copy of all your bills and records of how you paid them. If you paid with check, attach either the check stub or the carbon copy to the bill. If you paid online, print out the receipt. If you paid over the phone with a credit card, take notes on the bill itself of which payment method you used, the date, the exact amount, and the confirmation number they give you. This will help you make sure you never pay a bill twice and that if any issues come up, you have proof of payment. A chart of fixed monthly expenses can also help you make sure you never miss your due dates, either.

Accounts Receivable:
If you have customers on account, keep copies of all charges and payments on their account. Attach payment receipts to their invoices: credit card receipts, check stubs, or notes with check number (or last four digits of the credit card), date, and exact amount. If you run a store that also has customers on account, you need to decide whether to keep customer account records with your daily accounting or with their customer files. However, just make sure that you develop a system for keeping track.

Store Records:
If you run any kind of retail store, develop an end-of-day reporting system that requires your employees to reconcile their paperwork (receipts, credit card batch totals, cash register balances, etc) to the system records. Not only does this cut down on errors, it also creates a day-by-day summary of total sales, which can be very useful to to the business.

Payroll:
Make sure you keep check stubs for each payroll, as well as copies of all the time cards and records of any additions or deductions from employee pay. Anytime you make payroll tax payments, make sure you print the EFTPS or bank receipt and attach it to a payroll summary that shows the exact amounts you were paying.

Banking:
Keep all your deposit slips and match them to the receipts you bring back from the bank. If you are having a hard time reconciling your credit card payments, then reconcile them to the merchant processing statement FIRST, before you reconcile them to the bank statement. Also keep any letters that come from the bank. I also really recommend that when you reconcile your bank accounts, you print out at least the reconciliation detail report from Quickbooks. At one of my previous jobs, I noticed an old $1500 customer payment that had never been cleared in the system. I checked the paper records and found the check stub, almost a year old, and I found the deposit slip when it had been taken to the bank. However, the business owner never printed out the reconciliation reports, so I was never able to figure out where she made the mistake. When you reconcile your accounts, attach all the bank correspondence from that month to the bank statement, along with the reconciliation report, before you file it away.

Advantages of hard copy:
While electronic copies are nice to have, they don't beat physical copies. Even if you choose to switch to a data management program like Laserfiche, make sure you keep hard copies of everything at least back a couple months, and maybe a whole year. There's just no substitute for being able to spread things out on your desk, and in general, hard copies are "truer" than electronic copies. It's easy to falsify records in Quickbooks. (Which is why you should also periodically create a physical backup of your database on CD and file it, too.)

Sign everything:
If you have multiple people working in your office, and even as few as two, get everyone in the habit of initialing their work. Checks received, bills entered, payments sent, accounts reconciled, deposits taken to the bank, etc. This improves transparency and accountability, because it makes it easy to track who did what. I developed this practice as an employee, which saved me several times from being blamed for others' mistakes.