Small-Business Recordkeeping: Pick the Right System

If you own a small business, you know how important it is to be organized, especially with business records. The Internal Revenue Service (IRS) allows you to maintain records in the manner that works best for you.

You should, however, plan to record income and expenses in a format that makes it possible to quickly create financial reports.

Your recordkeeping system can vary based on the nature of your income and expenses. A retail business that makes many small sales every day can benefit from buying a cash register linked to a computer that automatically records sales. If you make only a few large sales a month with minimal expenses, you might manually enter income and expenses into a paper ledger.

Many business owners save time with computer software such as QuickBooks®. If you work with accountants or bookkeepers, they may recommend software that is compatible with their systems.

Your bookkeeping system should help you figure out how much will be required for taxes so you can save funds on an ongoing basis. Even if you are the sole employee, you will probably be required to make quarterly tax payments.

If you hire additional employees, you must set aside payroll taxes from their wages to cover income taxes, Social Security, and Medicare, plus another 8.5% of their wages as the employer’s share of these costs. The business also may need to pay state or local sales and use taxes.