What’s the most important thing you can do for your company?

Make sure your financial records are correct. And for reasons beyond tax deductions, although that’s important and the first portion we’ll discuss. You also want to keep records to enable you to make informed business decisions, and to make sure that the necessary accounting and cash controls are in place.

The IRS requires that you keep certain tax records for a specified length of time, usually 5-7 years. If you are ever audited, you’ll need those records to defend the audit. The burden of proof for the validity of deductions is on you, business owner! And, if you don’t know what you spent money on, you can’t strategize your tax planning effectively. It is illegal to evade taxation, but you can – and should – avoid it as much as possible. So you want to make sure you have a record of each transaction you make, so you can take every allowable and effective deduction.

What if you make most transactions with debit or credit cards? Transactions are becoming more electronic every day. Your bank is required to keep electronic copies of your bank statements for at least seven years. I also suggest you download your statement and keep a copy of the PDF in cloud based storage.

What about petty cash or other cash disbursements? Keep a copy of your receipt. I would suggest that you scan or take a picture of it, and then send it to your accountant or bookkeeper – that gives you an electronic copy and gives you a backup with your accountant. Sometimes you can email a copy directly from the point of sale. Same thing with big box stores, actually. Because you can get almost anything with the huge retailers, it’s best to send the receipt to your accountant.

Interested in seeing how to improve accounting and cash controls? See if your business qualifies for a free strategy session. Call us today at 801-692-0032 to see if you qualify!