Record Keeping - How You Should Do It and Why

We all know that keeping up with our receipts, mileage logs, and other business documentation (think business origination documents, loans, insurance agreements, etc.) can feel like such a chore. It's messy, we're too busy to deal with it, and it's cumbersome to think about the best way to manage it all.

So if you're like me? Well, then sometimes the documents pile up on the kitchen counter until you have no choice but TO do something with them.

Why It Matters

1. It's not a question of IF these documents will be needed, it's really a question of WHEN. As a bookkeeper, CPA, and former auditor, I know how important records are. If the IRS comes knocking on your door for an audit 2 years from now, do you have all of your receipts from last year organized and ready to go?
2. We want to maximize tax deductions. Unless you're in the game of wanting really high tax bills, it's in your best interest to document every penny spent on the business.
3. You can let your tax preparer and bookkeeper decide if certain questionable items meet deduction rules, but ALWAYS keep the receipts and tell your accountants about how you spent your business money. If your bookkeeper is good, they're doing bank reconciliations each month and will be able to see all the funds coming in and out of your business accounts, but they won't be able to see any business transactions you made that were made with personal funds.
4. It's vitally important to the success and financial management of your business to have accurate and timely records. You need to know how much revenue you're earning and how much money you have in expenses each month, maybe even each week!
5. Legal protection - in the event of a dispute or insurance claim, you need all the proper documentation stored (and readily available!) 
6. Peace of mind - doesn't it just feel better in your heart knowing everything is stored properly and in an accessible (but secure) location?

How to Keep Records Safe and Accessible

1. A physical safe/lock box - this is a great way to keep highly sensitive and rarely needed physical copies of your most important items
2. Online Storage - think of places like Google Drive, Microsoft OneDrive, DropBox, Amazon S3, and more. These places are secure (if you use proper security protocols like super lengthy and hard to guess passwords) and can be accessed at a moment's notice! Make a PDF scan quickly using your iPhone camera and upload to the cloud the moment you receive these documents!
3. Organization - the organizational structure of your files is a KEY factor in keeping things accessible and efficient (and usable to you on the daily!)
   1. Have as many "folders" as you need to keep items organized in a logical way
   2. Start from the top and work your way down. Maybe we start with a parent folder that is the year "2024," for example. And then it's folders inside of there for "Invoices," "Receipts," "Mileage logs", "Loan Documents," etc! 
   3. It might take some trial and error, but you can easily and quickly move documents around to their proper home.
4. You can also attach invoices or mileage logs directly onto the transaction inside of your accounting software (Quickbooks Online, Xero, etc.). This would make an easy audit trail for when questions are asked.
5. Naming Conventions - If you have a lot of items in a folder, it's probably a good idea to be as detailed as possible in the names of your documents. For example, if I have a folder for my business receipts for 2024, I might have my naming convention for each receipt look something like this: Date - Amount - Vendor - Description (12.13.24 - $65.78 - Walmart - Pens and notebooks). This will help keep your Drive searchable for when you need to find the receipt.

Any other thoughts you want to add or think I missed? Send me a message!