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
How do I handle contractor vs employee classification?
The IRS looks at behavioral control, financial control, and the type of relationship. If you control how and when someone works, provide their tools, and they work exclusively for you, they're likely an employee regardless of what you call them.
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Generic QuickBooks setup doesn't work for construction. You need a construction-specific chart of accounts, job costing enabled, items that match your bid structure, and retention tracking configured correctly.
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Managing a flooring business financially requires job costing to track profitability by project and flooring type. Material costs, labor productivity, and cash flow management around deposits are all essential to understand.
Read answerShould I do my own bookkeeping or hire someone?
It depends on your transaction volume, industry complexity, and what your time is worth. DIY works for simple businesses with minimal transactions. Hiring makes sense when bookkeeping eats into revenue-generating time or when mistakes start costing you money.
Read answerHow do I track service calls and parts for home services?
Treat every service call as a mini-job in your records. Use field service software to capture parts at the point of service, connect it to your accounting system, and reconcile weekly to see which calls actually make money.
Read answerWhy is tax time always so stressful?
Tax time stress usually stems from scrambling to organize a year's worth of financial records in a few weeks. The solution is consistent monthly bookkeeping that keeps records organized year-round, eliminating the last-minute scramble.
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