You need to keep accurate records of all transactions that take place in your business, including income and expenses. It is necessary for tax purposes for the U.S. government to track business income and expenses, so it’s important to keep documents that prove you’ve filed your tax returns. It’s also helpful to know how profitable your business has been over time, as this can help you decide whether you have sufficient capital to fund operations.
The records you keep should be easy to locate. Keep them organized by year, or scan them and shred them if you have to. You also need to keep records if the IRS or bank asks to see them. Keep records for seven years or longer if you’re required to do so. You may need to keep these records for even longer if you suspect fraud. But don’t worry, they’ll be worth it.
Your business records are the foundation of your success. Good records will show you where your business stands, what items are selling, and what changes need to be made. And, in the long run, they will help you prepare accurate financial statements, such as income and balance sheets. By keeping accurate records, you can ensure your business’s profitability and avoid any potential tax issues. You can also use these records to prepare tax returns, which are essential for tax purposes.