What Are The 5 Kinds Of Records That Must Be Kept?
Managing your company requires a lot of attention as a business owner. Bookkeeping, payroll, hiring...we could go on and on. Keeping track of all your business records is on that list too.
Let's see, what are the most important records to keep?
Business records to keep track of
It is required in your country to maintain certain records for a specified period (e.g., tax records). Even if you don't have to keep records, what types of records should you pay attention to, anyway? 5 records to keep an eye on:
1. Accounting Records
Keeping accounting records allows you to keep track of all the transactions in your business. Accounting records are essential for running a business. They show income, equity, and expenses. You can compute small business ratios from your financial accounting records.
To keep track of your accounting records, you must:
- Take a look at the health of your business's finances
- Analyze your business's profitability
- Identify patterns to improve finances
- Get a sense of whether your current budget is working
- Assess your capital needs
- Keep track of your finances regularly (e.g., monthly or quarterly). Keep track of every expense and income source. It's impossible to provide accurate information without all the accounting data. Ensure that you maintain a copy of all receipts and invoices as a backup.
2. Bank Statements
Your bank statement shows the details of all your accounts. You may receive a statement that shows your checking, savings, investment, and credit card accounts. Your bank accounts can be reconciled with the accounting records you must maintain.
Review your bank statements to ensure there are no errors. A discrepancy between your bank statements and accounting records may indicate an error in your books. Bank statements let you know how your business is doing, too. Plus, you file your taxes using your bank statements.
3. Legal Documents
It depends on the structure of your business and what legal documents you have. C corporations, for instance, must maintain their articles of incorporation. Among other legal documents, a partnership agreement (aka partnership agreement) or a DBA (aka doing business as) are common. Ensure all legal documents proving ownership are kept up to date. You must keep these documents in a safe place in case you need to prove ownership in the future. Keeping track of legal documents isn't the same as keeping track of finances. Knowing where your documents are stored will make it easy for you to retrieve them when you need them.
4. Licenses and Permits
For your business to operate, it may be necessary to obtain a variety of permits and licenses from state and local governments. It is also possible that your business will need to obtain permits and licenses unique to its industry. In some cases, food or beverage businesses require health permits to sell their products. Similarly, you need a liquor license if you plan to serve alcohol at your business. Be on the lookout for permits and licenses that need renewal since you may need to bring them up to date periodically. Be sure to stay on top of any changes to the laws governing your permits and licenses. Whenever a law changes, comply promptly to avoid penalties or fines if you are required to post or renew a permit or license.
5. Insurance Documents
Having a business requires different types of insurance policies. Among the types of insurances, some of the most common are business liability insurance, renters insurance, business income insurance, professional liability insurance, and cyber insurance policies. For your insurance to be valid, you must provide proof of coverage. Don't lose track of your insurance policies. If you need to file a claim, you'll have your insurance number handy. Ensure that your insurance policies are stored in a safe, inaccessible (only accessible by you, of course!) place.
The Bottom Line
Getting your business off the ground takes much of your time, so it's easy to neglect your records. However, this can lead to trouble. Keeping track of all business activities will help you stay safe in the future. Focus on your business once you've organized your records!