Record Keeping Basics
Tools for record keeping
Audit proof your business - Internal records
Summary of required documents
Revenue and expense
Besides cash, it is important you keep good records of income and expenses. In the case of an audit your checkbook register will not be enough to proof income or expenses.
The IRS wants you to have a system of recording every revenue transaction. At a minimum, you should have a sales receipt book. Every customer who buys from you should get a sales receipt.
If you invoice customers, get an invoice book and a stamp that reads “PAID”. After a purchase, the customer gets a copy of the invoice and you also keep a copy. When the customer comes back to pay, be sure to mark the invoice paid.
This can also be tracked electronically.
It is important you have an original copy of your receipts. In the case of an audit, a bank statement or a cash register will not be enough. The IRS wants to see the purpose of the transaction which is found in the original receipt. It is okay to scan the receipts. This is recommended as it is easier to organize.
Due to the abuse associated with meal expenses, additional documentation is required with each receipt. On every receipt you are expected to write:
- Who the lunch was with and
- The purpose of the lunch