What records should a small business keep?
Financial records form the foundation. Keep all bank statements, credit card statements, and canceled checks. These prove your income and expenses if you ever face an audit. Save receipts for business purchases, especially anything over $75 and all travel and entertainment expenses. Invoices you send to customers and invoices you receive from vendors should stay on file as well.
Tax records include your filed returns and everything that supports them. W-2s and 1099s you issue and receive, depreciation schedules, home office calculations, mileage logs, and documentation for any deductions you claim. The IRS can audit up to three years back in normal cases and six years if they suspect significantly underreported income. Most accountants recommend keeping tax records for seven years to be safe.
If you have employees, keep payroll records, I-9 forms, W-4s, time records, and any employment contracts. Retention requirements vary by form type and state, but four years after the tax is due or paid covers most federal requirements.
Business formation documents should be kept permanently. Your articles of incorporation or organization, operating agreements, partnership agreements, EIN assignment letter, and any amendments belong in this category. Small businesses that grow and eventually sell or bring on partners will need these documents to prove ownership and legal structure.
Contracts and agreements need to stay on file for the duration of the agreement plus several years after completion. This includes client contracts, vendor agreements, leases, and loan documents. If a dispute arises years later, the contract is your protection.
Insurance policies, both current and expired, should be retained. Claims can come up after a policy period ends, and you need documentation of what coverage was in place at the time.
For project-based businesses, job-level records matter too. Estimates, change orders, purchase orders, and cost tracking by project help you understand which work made money and improve future pricing.
Paper records deteriorate and take up space. Digital copies work for most purposes as long as they are legible and you can produce them when needed. Use consistent naming conventions, back up files regularly, and keep sensitive documents secure. Working with a construction bookkeeper in American Fork or similar professional can help you build a system that keeps everything organized without taking over your office.
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More Questions
Are there any bookkeepers in the Wasatch Front that specialize in construction?
Yes. The Wasatch Front has bookkeepers who focus specifically on construction companies and contractors. Construction accounting requires specialized knowledge of job costing, progress billing, and work-in-progress that general bookkeepers typically don't have.
Read answerWhat are cost codes and how do I use them?
Cost codes are a numbering system that assigns every job expense to a specific category like framing, electrical, or finishes. They let you track exactly where money goes on each project instead of lumping everything together.
Read answerWhy do I never know how much money I actually have?
Your bank balance doesn't show the full picture. Without tracking receivables, payables, and upcoming obligations, you're always guessing at your actual cash position.
Read answerWhat is job costing and why does it matter?
Job costing tracks expenses by individual project instead of lumping everything together. It matters because knowing your overall profit doesn't tell you which jobs made money and which ones lost it.
Read answerWhat is WIP reporting and do I need it?
WIP (Work in Progress) reporting compares what you've billed against what you've actually earned on each project. Contractors with jobs lasting more than a month or two need it to see their true financial position.
Read answerWhat should I track for accurate job costing?
Track labor hours and burden, materials coded to jobs, subcontractor invoices, equipment usage, and allocated overhead. The key is capturing costs at the job level when they happen, not guessing at month-end.
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