In the first part we went over what records are and who they’re really for (hint: it’s not the IRS). Now, we’ll talk about the ONE thing you must have to substantiate your business figures.
What’s The Bare Minimum?
These items are the absolute least you can do to keep your financial records: Check Register, Deposit Book, Bank Statements, List of Assets. Just these few things will help you keep track of some very basic information and make the end of year accounting a bit easier.
This is simply the list of checks, deposits and other transactions in the bank account. Most of us are familiar with the small ledger that comes inside our checkbook cover. A business checking account has a slightly different form, but is still the same listing. You may decide to keep this information in a computer spreadsheet, such as Excel, or write it all down in a binder.
No matter its form, this is the foundation for all your financial records and is ESSENTIAL. The list of all transactions in your checking account is the one record you must have. All the other items rely on it for proper completion. If you do nothing else, you must keep this register complete and up to date.
The deposit book is a separate small book that you receive with your business checking account. It holds deposit slips in duplicate so you can have a record of each deposit made.
It’s good practice to fill out the slip with the check numbers and customer name. Use as many slips as you need, don’t worry about running out. After all, if you are making deposits, that is good thing.
Most checking account holders receive statements monthly and copies of the cancelled checks may or may not be included. Start off with the very good habit of reconciling your bank account every month. Even if you decide not to pursue a more complicated system, reconciling your account every month will give you a great deal of information.
List of Assets
This is simply a list of the property used in and owned by the business and its value. At first, this may not seem like it is worth bothering with, especially if the business assets are a table and a chair. However, as your business grows, the list of property will too. By starting at the beginning, you can save a lot of work later and have a history of business growth. Be sure to note when assets are sold or disposed of as well.
Expanding file for receipts and invoices
Pick up a regular expanding file with 12 pockets at your nearest discount or office supply store. The easiest way to start is to file all receipts and invoices for the month you paid them.
When do I Start?
Now. Seriously, if you haven’t been doing anything, just start from where you’re at. Everything from the past can be sorted out and from today forward it will be easier. If you’re still in the idea stage, start recording any income and, more likely, expenses and other business activities. Just remember, “Well begun is half done.”
Now, start your records!
This two part post is available as a free PDF if you want to print it out for reference.