What records should I keep for my small business?
Keep every bank statement and credit card statement. These are the foundation of your financial records and prove money moved in and out of your business. Your bank keeps these digitally, but download copies monthly so you have your own archive. Same goes for statements from payment processors like Square or Stripe.
Save receipts for every business purchase. This means materials, supplies, equipment, meals with clients, mileage logs, and anything else you deduct. A photo on your phone uploaded to a folder works. Paper receipts fade and get lost. Digital copies organized by year and category survive longer and are searchable when you need them.
Invoices you send and bills you receive should be kept even after they’re paid. These document what you earned and what you spent. If a customer disputes a charge two years later or a vendor claims you never paid, you need that paper trail.
Tax returns and all supporting documents need to stay on file for at least seven years. The IRS can audit three years back in most cases, six years if they suspect underreported income, and indefinitely for fraud. Seven years covers you for almost any situation. This includes your filed returns, W-2s and 1099s you received, depreciation schedules, and records supporting every deduction.
Business formation documents are permanent. Your articles of incorporation or organization, operating agreement, EIN confirmation letter, and business licenses don’t expire for record-keeping purposes. Keep these somewhere secure and accessible because you’ll need them for loans, new bank accounts, and various registrations over the years.
Contracts and leases should be kept for the duration of the agreement plus at least four years afterward. Disputes sometimes arise after relationships end, and you’ll want the original signed document if questions come up about what was agreed.
If you have employees, keep payroll records, I-9 forms, W-4s, and timesheets for at least four years after termination. Workers’ compensation records and safety documentation have their own retention requirements that vary by state. California requires some employee records be kept for three years and others longer.
The easiest system is digital storage organized by year and category. Create folders for bank statements, receipts, invoices, tax documents, and contracts. Back them up to cloud storage so a computer crash doesn’t wipe out your records. Monthly bookkeeping services often include organized digital storage as part of keeping your books in order.
Most small business owners don’t realize how important good records are until they need them. An IRS notice, a vendor dispute, or a loan application all require documentation you may have thrown away or never saved. The time to organize your records is now, not when someone asks for proof.
Working with a San Diego bookkeeper makes record-keeping simpler because you have a system and someone to maintain it. But even if you handle your own books, building the habit of saving everything business-related will protect you when questions come up years later.
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More Questions
When should I hire a bookkeeper for my small business?
Hire a bookkeeper when you're spending several hours monthly on bookkeeping, when you can't answer basic questions about profitability, or when tax season becomes a scramble. Most business owners wait until their books are already messy. The better approach is getting help before problems compound.
Read answerHow do I know if my books are accurate?
Start with bank reconciliation. If your accounts match your statements to the penny, that's the foundation. Then check that balance sheet accounts reflect reality and your profit numbers match how the business actually performed.
Read answerHow long should I keep my business financial records?
Keep most business financial records for seven years. This covers IRS audit periods and California state requirements. Some documents like formation papers and major asset records should be kept permanently.
Read answerHow often should I update my books?
Monthly is the minimum for most small businesses. Weekly works better for high-volume operations or when you need current numbers for decisions. The key is establishing a consistent rhythm so your financial picture stays useful.
Read answerWhat financial reports should I review monthly?
Every business should review the profit and loss statement, balance sheet, and cash flow statement monthly. Adding accounts receivable and payable aging reports helps you spot collection issues and plan for upcoming bills.
Read answerWhat does a bookkeeper actually do?
A bookkeeper maintains the day-to-day financial records of your business. They categorize transactions, reconcile accounts, manage bills and invoices, and produce monthly financial statements that show how your business is performing.
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