What type of bookkeeping is necessary to maintain a business, like many other questions, depends on the type of business. A large corporation will probably need a team of CPA’s on staff, and even a lawyer who specializes in tax matters. A small business though, an LLC, S Corp, partnership or sole proprietorship has simpler needs.

The small businessman may do much of the bookkeeping himself, or have it done by his administrative assistant using one of the many popular bookkeeping software programs out today, or even templates available for spreadsheets like Excel, Quattro and Lotus. The small businessman really just needs to keep track of income that comes into the business, money that goes out of the business, what it goes out for.

Saving receipts and making notes in the checkbook ledger are two of the most important parts of small business bookkeeping. You can only claim a legitimate business expense, and therefore claim a deduction if you have a receipt to prove it if challenged during an audit. Save all receipts, no matter how small, because they all add up.

One of the most important reasons to have good, accurate bookkeeping is tax time. Many business pay taxes on a quarterly basis, Some pay annually. Either way, accurate records are demanded by the IRS, and are the only way to limit your tax liability legally and to withstand an audit if it ever happens.

While most small business owners prefer to have someone else handle their taxes, and many prefer to delegate bookkeeping chores to an employee, is essential that the business owner understand the process of bookkeeping and the tax system. If your education didn’t include bookkeeping and taxes, check the local community college and see what they offer, and get an education in order to help yourself.

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