Document Storage is Important!
Document Storage is Important!
Any business large or small must have a document storage system. During the course of any business day and certainly throughout each month, a business is likely to produce and receive a number of business documents. Receipts for expenses, such as meals or office supplies must be kept. If it is a meal – a note must be made to indicate the purpose of the meal and with whom it was shared. Other documents such as sales receipts, and deposit slips indicate who your customer was and how much was paid and if sales tax was collected. Financial documents are used as the source of the data that is entered into your accounting software, such as QuickBooks. Once the data is entered, a number of reports can be generated. One of which is a Profit or Loss report. This profit and loss report is used to assist you or your CPA in generating your federal income tax report at the end of the year. Keep in mind that the lion’s share of the items listed in your income tax return must be substantiated with source documentation. Can you lay your hands on all of your receipts? If you were audited by the IRS today, would you be able to show the auditor all of the receipts from the business meals you’ve claimed as expenses? (By the way, meals are only 50% deductible.) Credit card and bank statements are not sufficient evidence. If you cannot answer a resounding, yes, to my question, I advise you to take a look at your document storage system and make the changes you need to make so that you can ensure that you have your receipts if you ever need them. Your bookkeeper will appreciate you more than you know as well. There is a great article regarding electronic document storage at http://www.cmswire.com/news/topic/document+storage.
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