1. Starting A Small Business: Introduction
  2. Starting A Small Business: Choosing Your Business
  3. Starting A Small Business: Financing Your Business
  4. Starting A Small Business: Business Structures
  5. Starting A Small Business: Making The Leap
  6. Starting A Small Business: Location And Licenses
  7. Starting A Small Business: Hiring Employees
  8. Starting A Small Business: Taxes
  9. Starting A Small Business: Record Keeping
  10. Starting A Small Business: Conclusion

Creating and maintaining thorough business records is essential. These records will help you analyze your business’s profitability, stay out of trouble with tax authorities, maintain positive relationships with clients and vendors, protect your business from lawsuits and win lawsuits if you are harmed. For the most part, you can choose any record keeping system that works for you. However, laws require and best practices suggest specific methods of record keeping and lengths of time to keep different types of records. Which specific regulations and practices apply to you will depend on your line of business. Certain records are key to all businesses, however, and we’ll discuss a few of the most important ones here.

Client Files

You should have paper files and/or electronic files for every client and every project. It’s important to keep a record of the work you’ve done and the business agreements you’ve made in case you or the other party has a question after the fact. Also, sometimes you can use past assignments and agreements to inform future ones, saving you time. Client files are also a good place to store notes about a client’s preferences or anything else unique to that client that you want to remember. Set aside some time once a day, once a week or once a month to keep your files organized. The same goes for backing up your electronic files. Consider using a secure cloud-based backup service since hard drives can fail without warning. (For more tips, see Keeping Clients Through Good And Bad.)

Contracts

If your business provides a service, you should sign a contract with your client every time you begin doing business with a new person or company. If you provide a product, you may have contracts with suppliers and distributors. And if you have employees or contractors, you’ll definitely want to draw up work contracts.

If you’re working with an established business, it will often have an existing contract for you to sign. Of course, it may be beneficial if you’re the one who writes the contract, as it may give you bargaining power over the terms of the business relationship that way. You may wish to hire legal counsel on an as-needed basis to draft and review contracts to make sure your best interests are fully protected.

As for smaller businesses and individuals, you’ll usually need to bring your own contract to the table. Before you open for business, you should create a standard contract template that lays out the basic areas you want to cover in every business agreement, such as time frame, pay and job parameters. Your contract may also cover issues such as confidentiality, records, liability and ownership of work product. You will want to tailor the contract to each business agreement you create, but that process will be faster and you’ll be less likely to omit something if you have a template.

Contracts serve the obvious purpose of making it easier for you to file a lawsuit if you don’t get paid or if your client commits any other harmful breach of contract. But contracts also serve a few less obvious functions. They spell out the details of the work to be performed, giving both you and your client an opportunity to make changes or clarifications before the work begins, when it is cheaper and easier to do so. Contracts also help weed out people who have no intention of paying you and show your clients that even though your business may be small and new, you are a professional and you take your work seriously.

Both you and your client should keep a copy of the signed contract for your records.

Accounting and Tax Records

If your business has complicated financial records or if you want to be able to prepare financial statements with the click of a button, business accounting software such as QuickBooks can be a big help. Be warned, though, that to use business accounting software accurately and effectively requires some accounting knowledge. If you don’t know what debits, credits and journal entries are, this software may just cause you headaches. You can always keep records by hand or by spreadsheet. In many cases, spreadsheet software can serve all of your accounting needs — at least while your business is small. You can even get free spreadsheet software by downloading Open Office, an open-source software suite similar to Microsoft Office, or by using the cloud-based Google spreadsheets. (For more, see Business Startup Costs: It’s In The Details.)

The graphic below shows many types of records you need to keep for accounting and tax purposes.

 

Other Records

While this is not an exhaustive list and the types of records you will need to keep depend on your line of work, other records you should hold onto generally include the following:

  • Purchase orders
  • Employment applications
  • Emails and other business communications
  • Inventory logs
  • Personnel records
  • Accident reports
  • Articles of incorporation
  • Permits
  • Licenses
  • Trademark registrations and patents 

Starting A Small Business: Conclusion
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