recordkeepinng

You’ve heard that business records and personal records should be kept separate, but do you know why it’s so important? Listen to this episode to help you stay out of hot water.

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Show Notes

I’m sure many of you have heard the piece of advice recommending that you should keep your business records separate from your personal records.  But do you know why it’s so important?

Today we are going to talk about an important subject that is part of the Practices element of the 5 P’s.  Practices are what Lisa describes as business activities that are the most effective course of action for running a healthy successful business.

This particular topic is true for small and large businesses. However, it is usually found to be a problem more often in smaller businesses.  This best business practice of keeping separate business and personal records is the topic of our show today.

Key Points

*There are 5 key reasons that it is important to keep business records separate from personal records – they are Legal, Liability, Tax, Professionalism and Sanity

*Legal designation – Sole Proprietor, LLC and Corporation – have a certain meaning and one of those defines the liability and obligation aspect of running a particular type of entity.

*The protections that are afforded a company under certain designations can be challenged if certain obligations are not met and expose entrepreneurs to personal liability.

*From a Tax standpoint, comingling business and personal transactions can be a red flag for taxing authorities especially in an audit.

*Evidence of comingling can also raise a red flag and create the risk that your personal returns could also be put under an audit. This can be costly.

*Lisa also talks about how maintaining clean business records and providing customers with the traditional business records (such as invoices and receipts) not only lends to the professional look and feel but also answers some tax requirements as well.

*Lisa explains how keeping your business and personal separate helps busy entrepreneurs create that demarcation point between the two. She explains how comingling the business and personal creates unnecessary work and takes additional valuable time.

*Some tips are offered about what things you need to do to make sure that the business and personal records are maintained separately. Lisa also discusses what she means by transaction point and how that can help you keep the various records clean.

*Lisa also talks about those types of assets that sometimes can be used for both personal and business and how you need to make sure that you are clearly documenting and tracking each.

*We also discuss the idea of adopting good habits and processes to manage your recordkeeping and keep records clean and organized.

*Lisa discusses who can help the entrepreneur fix issues in this area and who can help create processes and system to help manage and maintain your records over time.

Resources and Links

Entrepreneur’s Checklist: Keeping Business and Personal Records Separate – this link will take you first to a sign-up form, once you confirm your subscription, you’ll get a link to the checklist.

 

Note: Links in this post may be affiliate links.  Lisa Roberts is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com.

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Get all the updates and information Lisa shares from Business Rx and the Healthy Business Healthy Profits show! You’ll get information, tips and strategies on growing a healthy successful business. Don’t worry, I won’t bombard you with emails.  At most, you’ll get something from me every few weeks. You can sign up  Here

Lisa Roberts is a business operations consultant who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way. She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track.   You can find out more about her here

One pain point for business owners is keeping and maintaining good business records.  Too often businesses fall behind in their recordkeeping, which will, more than likely, get them into even deeper problems.

To listen to the episode hit the play button.

To download the episode, right click on this link  and choose Save Target As.  Go to the folder where you want to save the recording on your device and click Save or Enter.

Make it easier to get upcoming episodes by subscribing to the show on iTunes . Subscribing to the show will automatically download the episodes on your preferred listening device so you can listen to them when and where you want. And hey, if you like what you hear, please leave the show a great rating and review while you are there on iTunes.

Show Notes

One pain point for business owners is keeping and maintaining good business records.  Too often businesses fall behind in their recordkeeping, which will, more than likely, get them into even deeper problems. Not keeping timely records will almost always cause additional problems for a business both financially and legally. In this episode we will look at the symptoms of bad recordkeeping, what problems it can cause and what you need to do about it.

Key Points

*Recordkeeping for your business includes both financial and legal records. Not maintaining good records in your business creates many risks that can cause several problems for you and your business.

*Bad recordkeeping can cause problems with your business relationships with customers, vendors and employees due to errors, oversight and lost or missing records.

*Your records need to be maintained and safeguarded to avoid problems with security and privacy as well.

*Bad recordkeeping can result in costly error-ridden catch-up exercises, late payments with taxing authorities and other costly financial problems.

*Requirements of tax authorities and other governmental regulations place importance on having good accurate records for compliance.  Bad recordkeeping places your company at a big disadvantage if there is ever an audit or review by a regulatory authority.

*Clear responsibility for records and records management need to be defined in a company.

*Systems and procedures need to ensure that there is an audit trail in place for your financial records.

*Your business needs to research what requirements you have for recordkeeping based on your type of business and the industry in which you operate.

*Tips on making sure transactions are captured and recorded and up to date are also shared in the episode.

*Due to the importance of the accounting and financial role in recordkeeping, we highlight the differences between a bookkeeper and an accountant in the episode.

*For Human Resource records and legal records need to be managed as well as we highlight some of the important types of records and how to get some guidance about those records.

*We provide you with some tips on where you can get help if you need advice in this area.

Resources and Links to Learn More

Here are some links to sites that can give you guidance on the types of records and how they should be maintained and for how long. The information here is for the United States only.

Disclaimer:  These sites may change the information in these links or move the location of the information contained in the links.  It is highly recommended that you consult with your legal and accounting advisors as well.

Internal Revenue Service Small Business Record keeping information

Internal Revenue Service Tax Topics Recordkeeping

Department of Labor – OSHA recordkeeping information

U.S. Department of Labor Fact Sheet #21: Recordkeeping Requirements under the Fair Labor Standards Act (FLSA)

Lisa Roberts is a business operations specialist who advises growth company entrepreneurs in successfully managing growth and the challenges they face along the way. She has over 25 years of experience in operations, finance and administration and spent several years in executive roles at a high growth company. She recognizes that there is a fine line between success and failure in a growing business and that entrepreneurs need to focus on managing finances, creating a sound operation and employ good business practices to stay on track.   You can find out more about her here .

Sign Up to Get Updates

Get all the updates and information Lisa shares from Business Rx and the Healthy Business Healthy Profits show! You’ll get information, tips and strategies on growing a healthy successful business. Don’t worry, I won’t bombard you with emails.  At most, you’ll get something from me every few weeks. You can sign up  Here