No matter how above-board you feel your organization is, there will come a time when some government agency will be interested in taking a cold, hard look at what you’ve been doing. That’s their job and they do it well. Your job is to support what you’ve summarised to those agencies with solid, organised documentation. Should you keep every, single receipt, then, for every lunch and box of pens?
How about that cash disbursement for your salesman’s fill-up? Remember that time when your shipping clerk nipped his finger with a box-cutter? That was, what, two years ago, right? Should you still have that accident report? The answers are as follows: yes, yes and yes.
No agency will simply take your word. Documentation is what they need to support your statement of whatever it is that you’re purporting. Did you have $5,000 worth of travel expenses for your business that you’re reporting? If so, you are expected to have $5,000 worth of legitimate receipts to support that contention. Do you really remember how minor your shipping clerk’s injury was? Having an accurate accident report, and know where it is, can help in reporting later and is probably required in your state and if it doesn’t, the OSHA does (a link to OSHA’s recordkeeping page may be found here.)
Keep Your Records, Keep Them In Order
For very small businesses, it’s very tempting to throw all those bits of paper into a cardboard box with the best intention of sorting it all out later. Don’t do it. Stay organised from the start. If your business functions at all out of the office, have each employee carry an old-fashioned accordion folder or closeable folder of some kind with him or her to collect receipts, sales quotes, invoices, trip records and anything else generated during the course of the working day. The employee can turn that folder in to whomever is responsible for bookkeeping at the end of the day or other appropriate interval so that records can be keep organised and current. If it’s a one-person show, get into the routine of spending a relatively small amount of time each day updating your records. An hour a day translates into two hundred or more hours a year, so discipline in this regard is its own reward.
How long should you keep all of those bits of paper? Advice varies, but the general consensus is not less than seven years. That’s a lot of paper, right? Despair not, since there are electronic solutions that are acceptable for storing almost all kinds of documents. The Neat Company has several very low-cost scanners with special database software that can extract information directly from scanned receipts and invoices and transfer that information into Quickbooks or similar bookkeeping software. The software included with the scanners can also create PDFs that are searchable for documents like that accident report we talked about earlier.
