Quickbooks, Bookkeeping and Accounting Blog

For the most part, the IRS does not dictate exactly what types of records businesses must keep. However, in the event you are audited you may be asked to show documents supporting your numbers. To keep it simple, I usually recommend companies keep four sets of files:

REVENUE
Your revenue files should tie back to your QuickBooks or other bookkeeping records. You should be able to quickly and easily find the backup behind every deposit that goes into your bank account. Here are a couple of examples of possible systems:

• If you are a retail business and make one deposit at the close of business every day, then you might have a folder for every day or week which includes all register receipts and credit card slips attached to deposit slips. In this case, finding the backup to a specific sale made a year ago would be easy. You would just pull the file for the date the sale was made, and pull out the deposit slip with all receipts attached.
• If you make just a few large sales every week or month, then you might have files for each customer in which you keep copies of invoices. If you do this, it is important to note the customers names on deposit slips. To find old records, then, you simply pull the deposit slip in question (from your banking files - see below), and then pull the appropriate invoices from your customer files.

EXPENSES
Your expense files also need to tie back to your QuickBooks or other bookkeeping records. If you set up a good system, it will easy to pull the backup for any and all debits from your checking account. Here’s an easy system that will work for almost all businesses:

• Keep vendor files for all your regular vendors. When you receive bills from these vendors, put them in the appropriate file. In addition, keep miscellaneous files for each letter of the alphabet. When you receive a bill from a vendor beginning with "F" and don’t expect to receive other bills from this vendor, put it in "F Miscellaneous". Finally, if you keep credit card receipts, attach them to the credit card statement and file the satements with your other vendor files.

PAYROLL/EMPLOYEES
Your payroll/employee files should include 3 sets of files:

• Keep files for individual employees, into which you put their W-4, I-9, benefits enrollment forms, etc.
• Keep all your regular payroll reports together.
• Keep your quarterly and annual payroll reports (940, 941, state tax forms, etc.) together.

BANKING:
Your banking files should include the following:

• A file for all deposit slips.
• A file for all check stubs.
• A file for all bank statements, to which bank reconciliation reports should be attached.

Keeping records should not be complicated. Instead, keep it as simple as possible. To test whether or not your system works, simply ask yourself if you could easily find the backup for revenue and expense items on your P&L statement and the backup for deposits into or debits from your checking account. If the answer is yes, your system works.