Both big and small businesses need to pay special attention in managing their finances. This is true for all accounting processes, bookkeeping, and recordkeeping.
Recordkeeping for small businesses in this article refers to all aspects of recording that is related to accounting. Meanwhile, bookkeeping is based on recording all information about transactions and all financial activities. For example, tax accounting is a record that plays an important role for your company because it is even used to calculate profits in trading or doing business.
Recordkeeping for Small Businesses
The IRS (Internal Revenue Service) requires businesses to keep certain tax records for certain periods. Business people do not need to worry too much when the tax time arrives because tax records are not in order.
Messy tax records can cost you deductions, and if you are audited, it may incur costs and cause even greater problems. That is certainly important for you to know, especially if your business capital is obtained from business capital loans from banks or online loans through digital credit cards.
Here are the 8 tips for small businesses that you must know and understand.
Set up an accounting software system for your business
If you want proper tax records, it is very important to have good accounting software. You may want to outsource the preparation of your final tax return to a professional, such as an accountant.
Your final tax return is a product of your recordkeeping, so it is important to choose accounting software that can give the best results.
Burden of Proof for Your Business Taxes
When you make an entry, for example for income, expenses, or deductions on your tax return, then you have what is usually known as the burden of proof.
In this case, business owner is required to be able to prove that you indeed have the right to certain deductions and expenses in order to meet the conditions for making the claims.
The question then is how do you establish proof? Through good recordkeeping. If you have records supporting those deductions and expenses, you have fulfilled the burden of proof for the IRS.
It is highly recommended not to take deductions or claim income without having accurate documentations to provide as proof.
Source Documents for Accounting Journals
Accounting journals is basically a simple accounting process for small businesses. Source documents for purchases, like cancelled checks and receipts, are something you use to create accounting ledgers and journal entries.
They are also your documentation for claimed tax deductions. The original paper documents need to be kept together with the ledgers, where you record all transactions.
In case of fire or other disaster, each source document has to be scanned into computer files and stored properly on a flash drive.
EFT and Your Business Payments
The world of technology is becoming increasingly advanced and sophisticated. No wonder if technology can change the way a person runs a business. Instead of writing checks on paper for transactions, people now use credit or debit cards, or electronic funds transfer (EFT) to pay bills.
Then, how can you make sure that you have the proper source documents for the IRS under these circumstances?
If you are an EFT or credit/ debit card user, use your bank's financial statements as source documents. For EFT, the statement must show the amount transferred, the payee's name and the date the transfer was done by the financial institution to the account.
For credit/ debit cards, the statement have to show the amount charged, the payee's name, and the date of transaction. Proof of payment does not mean you are entitled to a tax deduction. Keep credit card slips and invoices to support your claim of a deduction later.
Daily and Monthly Summary of Cash Receipts and Disbursements
You always need to take note on your accounting, not only when you need to calculate your profit or net income. There are many benefits from good recordkeeping for your business.
The daily and monthly cash receipts and disbursements worksheets are worth their weight in gold. Whatever is missed in the accounting ledgers and journals can be found here.
Again, you will need reliable source documentations. Disbursements, such as expenses for phone and internet service and for auto expenses, can be taken from here as possible tax deductions.
Pay Attention to Your Petty Cash
Every transactions made out of the petty cash must be treated as cash disbursements with a source document. Some can be tax deductible.
Employee Payroll Tax Deductions
This can be very complex. The guide usually focuses on personal tax, but this article summarizes the implications of employee business tax. Remember to keep excellent records for each of your employees.
How Long to Keep Tax Records?
Recordkeeping for tax is required as long as it may be needed for administration of any part of the tax code. If you have employees, you must keep their records for no less than 4 years. To be safe, keep employee records for 7 years. If you owe taxes, keep your records for at least 3 years.
Meanwhile, if you own property, keep the relevant records until the period of limitations expires. If you have reportable income but do not report it, and it is more than 25 percent of your gross income on the tax return, keep your records for at least 6 years.
Looking for an unsecured loan? Or, do you want to find an interest-free digital credit card? You can consider Aspire. It is similar to Kredivo or Akulaku but Aspire is specifically for SMEs and businesses so it offers longer tenors, namely 60 days or 2 months, with 0% interest.
Aspire also offers Drawdown feature which can be used to make withdrawals up to the credit limit.
That is all the information we can share about recordkeeping for small businesses. Hopefully, this article is useful for small business owners like yourself.
Frequently Asked Questions
How can Aspire support the unique financial needs and challenges of mid-sized businesses?
Aspire offers a comprehensive suite of expense management solutions tailored for mid-market companies. This includes sophisticated corporate cards, advanced budget controls, and streamlined claims and approval policies, all designed to enhance financial efficiency.
How quickly can a mid-market company integrate Aspire's solutions into existing systems and workflows?
Integration with Aspire's expense management solutions is swift and seamless. Mid-market companies can swiftly implement corporate cards with tailored features, set up nuanced budgets, and establish streamlined claims and approval processes, ensuring minimal disruption to existing workflows.
How does Aspire compare to competitors for international money transfers?
Aspire excels in international expense management with FX fees up to 2x cheaper than traditional banks.
Global payments are offered by various providers through business accounts. Read our article to know more about types of business accounts and how to choose the best one for your business. There are many banks and fintech companies offering business accounts to businesses in Singapore. We have covered them all in our blog, you can click the links to view accounts offered by various banks such as DBS, OCBC, Maybank etc.
However, if you are a start-up or a growing business, chances are you may not meet the eligibility criteria for most of these banks or find their charges to be expensive for your liking. You can consider opting for Aspire multi-currency account for global payments which offers you all the benefits, with eligibility criteria which are less stringent. Read our article on bank charges in Singapore for a quick and easy comparison.
What level of customization does Aspire offer to meet the specific financial requirements of mid-market clients?
Aspire understands the diverse financial needs of mid-market clients and provides a high level of customization to tailor solutions accordingly. This includes the ability to customize corporate cards with specific spending limits, rewards, and benefits that align with the unique requirements of each client.
Additionally, Aspire's budgeting features are adaptable to accommodate the distinct financial structures of mid-market enterprises. The platform also allows for fine-tuning approval policies, ensuring they align with the specific workflows and compliance standards of individual mid-market businesses. This commitment to customization empowers mid-market clients to optimize their expense management in a way that best suits their financial goals and operational preferences.
Is there a minimum balance required for Aspire Business Accounts?
No minimum balance is required to keep your SGD, USD, EUR, GBP and IDR Accounts activated.
Can Aspire's corporate cards be customized to cater to the specific needs of consulting teams on the go?
Yes, Aspire's corporate cards are highly customizable. Consulting teams can benefit from tailored spending limits, travel-centric perks, and real-time transaction tracking, ensuring that the cards meet the unique requirements of professionals on the move.
How does Aspire support budget management for consulting projects and travel expenses?
Aspire's platform offers sophisticated budget controls that consulting companies can adapt to project-specific needs. This includes setting project budgets, tracking expenditures, and receiving real-time insights to ensure that expenses align with project goals.
What are Aspire Corporate Card FX rates?
At Aspire, we want you to pay the lowest rates in the market.
- Zero card activation fees
- Zero card transaction fees
- Best FX rates, up to 2x cheaper than banks
How does Aspire help consulting companies enforce expense policies and approvals for travel expenses?
Aspire streamlines the claims and approval process, allowing consulting companies to establish and enforce expense policies seamlessly. Customizable approval workflows ensure compliance with company policies and industry regulations.
Is Aspire's platform scalable for consulting companies of varying sizes?
Yes, Aspire's platform is scalable and caters to consulting companies of all sizes. Whether you're a boutique consultancy or a larger firm, the platform's features can be adapted to meet your specific travel and expense management needs.
How can I open a business account in Singapore?
For a business account in Singapore, Aspire is an excellent choice. With a focus on startup and SME needs, Aspire offers a seamless and transparent banking experience.
Benefit from their user-friendly online platform, no minimum balance or account opening fees, and dedicated support for businesses of all sizes.
Aspire is designed to streamline your financial management, making it an ideal partner for entrepreneurs in Singapore.
How long does it take to open an Aspire business account?
Registration with Aspire takes less than 10 minutes which you can do via our website or mobile app.
Once registered, we will get back to you within 5 business days on whether your account has been activated or if we need further documents from you.
Our account verification process varies according to the nature of your business. In exceptional cases, it can take up to 7 days to process your documents.
How can Aspire's corporate cards benefit my startup?
Aspire's corporate cards offer a range of benefits for your startup. Earn 1% unlimited cashback on qualified spends, simplify expense management, enjoy streamlined transactions, and gain real-time insights into spending. With customizable limits, integration with accounting software, and enhanced security features, Aspire's corporate cards are designed to empower your startup's financial efficiency and provide added convenience for your team.
Is Aspire suitable for both early-stage and established startups?
Absolutely, Aspire caters to the needs of both early-stage and established startups. Whether you're just beginning your entrepreneurial journey or have an established business, Aspire offers tailored financial solutions to help streamline your operations.
From managing expenses and optimizing workflows to providing valuable financial insights, Aspire's platform is designed to adapt and scale with your business as it grows. The flexibility and scalability of Aspire make it a suitable choice for startups at various stages of development.
Is there a minimum balance required for Aspire Business Accounts?
No minimum balance is required to keep your SGD, USD and IDR* Accounts activated.
However, we recommend keeping your subscription plan amount available on your balance to ensure you're up to date with your payment every month.*
To create a recipient or make any transaction on your IDR Account, you'll need to have a minimum balance of IDR 10,000 on your account.
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