By ALEX JACKS
Starting a small business or maintaining an existing one can be a daunting task. The risks are high, but the success can be rewarding. One of the most difficult parts of running a small business revolves around keeping records.
Keeping accurate records proves to be an extremely important part of owning or running a small business though, said Sharon Payn, a CPA at Lowery, Payn and Leggett in Brookhaven.
“It’s important to keep accurate records for tax purposes,” Payn said. “If you own a business, you’re required to report all of your income and expenses on your income tax return. The easiest way to complete that task at the end of the year is to keep up with it throughout.”
The best way to keep accurate records for a small business is to keep a record of everything, Payn said.
“Keep all of your receipts for everything spent,” she said.
“Keep track of where your money went and which accounts it went in. We’ve had the experience of helping some of our clients while the IRS or state tax commission was auditing them. They want to see receipts for everything, so you must keep an accurate record and a filing system to produce that information.”
Records for a business should be kept for at least five to seven years, Payn said.
“The IRS usually will only go back five years to audit income taxes, which is why we say five years,” she said. “But for other taxes — like sales tax — they might want to go back further. That’s why we recommend keeping them another two years.”
In addition to keeping accurate records for tax purposes, Payn recommends it for long-term comparison use.
“Record keeping is good for small businesses so they can see where they’re spending their money,” she said. “It gives you an idea of where you’re spending your money and places you might want to examine to try to be more efficient with your money.”
Payn said there are several ways a small business can keep accurate records, including using a computer software program, tracking numbers in an Excel spreadsheet, writing everything down or hiring a CPA firm to do the work.
Susie Shore, the office manager and bookkeeper at Great Southern Events in Pearl, highly recommends using a computer software program.
“It’s the computer age, so I say find a good computer program,” Shore said.
“The computer is the way to keep your records now because it’s convenient to input the data and convenient to get the data back out of there when you need it.”
Shore uses Quickbooks to manage Great Southern Events’ records.
“I like the fact that it helps you follow a pattern,” she said. “It helps you keep up with taxes. It helps you keep up with vacation, sick pay, dates hired, dates let go — all the things you need for tax purposes.”
Payn agreed that Quickbooks can be user friendly for small-business owners with less accounting experience.
“The programs I have the most experience with are Quickbooks and Peachtree,” Payn said.
“There is a scaled down version of Quickbooks called Quicken that some people use. Quickbooks is very user friendly. In my opinion, Peachtree is designed more for people who have accounting knowledge. Everybody likes something different, so you just need to find out what works for you and your business.”
One downfall of some of the computer programs for certain small businesses could be the cost, Shore said.
“They are constantly updating the program about every two or three years and then they make you buy a whole new program,” Shore said. “It’s getting more and more expensive every year.”
An important aspect to be aware of when setting up a small business’s account with a computer software program is the initial set up, Payn said.
“The set up is very important to make sure that when you print out your reports, you’re getting accurate information,” she said.
“I also highly recommend having a good contact at the bank and with an accountant or tax advisor when managing the records of a business. They are a useful resource.”
Shore said that she keeps a working relationship with Great Southern Events’ hired accounting firm to prevent any mistakes from occurring in the records.
“We do have a CPA,” she said.
“I try to send him copies of the bookwork at least once a month so you can make sure there is nothing that needs to be corrected.”
The biggest piece of advice Payn said she could give to small business owners about record keeping deals with education.
“Educate yourself for your business,” she said. “Know when your taxes are due. Educate yourself about payroll tax and sales tax.
“By educating yourself, you will be able to keep better records for your business.”