Why You Need to Keep Good
Records
How profitable is your business? You'll never know if you're
not keeping trackwhich is reason enough to set up some sort of recordkeeping
system.
Keeping records can be both a defensive
and an offensive activity. It's defensive in that you have key information about
your business in case you ever need it in the futureto answer a query from the
IRS, for example, or to investigate a customer complaint or notify customers in
the case of a product recall. It's offensive (in a good way) in that you can use
this information to generate more sales, by selling additional items to your
existing customer base.
And then there's that matter of tracking the progress of your
business.
You need to know how much things cost and how much you sell
them for in order to gauge the success of your business. If nothing else, you
have to report your business income to the Internal Revenue Service at the end
of each year, and you can't do that if you don't know what you've sold and for
how much. The more detailed and accurate your recordkeeping, the easier it is to
put together your yearly tax returnsand to claim all the allowable deductions
against your income.
In addition, setting up a simple accounting system lets you
generate monthly financials, which tell you on a near-real-time basis just how
well your business is (or isn't) doing. After all, you don't want to wait until
the end of the year to find out that you're going brokeor getting rich! | 
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