Small business owners should keep good records. This applies to all businesses, whether they have a couple dozen employees or just a few. Keeping good records is an important part of running a successful business.
Good records will help the business owner:
● Monitor the progress of their business.
● Prepare financial statements.
● Identify income sources.
● Keep track of expenses.
● Prepare tax returns and support items reported on tax returns. (The burden of proof is on the small business owner to validate expenses deducted on tax returns.)
A good recordkeeping system includes a summary of all business transactions. Except in a few cases, the law does not require special kinds of records. Small business owners may therefore choose any recordkeeping system that fits their business. They should choose one that clearly shows income and expenses.