There are many legal requirements that employers have to fulfill if they want to avoid liability. Record keeping is nothing to sneeze at these days, as penalties for employers who don't do everything by the book can go up to $3 million dollars.
Smaller businesses are especially vulnerable to record-keeping requirements, as they simply can't afford dedicated HR resources to handle everything. But the good thing about the time we live in is that technology can help you a lot with keeping records. Here, we'll highlight some of the best ways to simplify your record keeping process..
Record Keeping Categories
For all intents and purposes, almost all financial papers can be divided into three categories:
● Keeping records for the current year or less.
● Records that you need to keep for seven years, because in that timeframe your tax-return might be audited.
● The papers that you need to keep indefinitely
There are also papers that you can throw away once you've checked if the information matches your monthly statement, like ATM slips, credit-card receipts, and deposit slips.
After the calendar year ends, you'll be in a position to ditch a lot of records, from paycheck stubs to mortgage statements.
Final Statements
Final credit-card statements need to be kept for at least three years, but it would be a good idea to do it for seven. The reason for this is because IRS has a deadline of three years from the moment you file your tax return to examine it for any errors or inconsistencies, while they have 6 years to conduct an audit. You should also hang on to your W-2s and 1099s for the same reason. The same goes for canceled checks and receipts for any and all deductible business expenses.
When It Comes To Employee Records
Many legal difficulties come along with employee records, which is why it's important to know the requirements when it comes to keeping records of your workers.
● Job Advertisement - when you post an ad looking for workers, you must keep the record of that job posting for one year according to ADEA (the Age Discrimination in Employment Act).
● Applicant Records - Any job applications you get you must hold on to for one year, thanks to ADEA and ADA (Americans with Disabilities Act)
● Applicant Resumes - All the resumes that you receive for a certain job posting must be kept for one year, with the exception of unsolicited resumes - which you can choose not to accept.
● Employment Termination - When you fire an employee, you need to keep their termination record for one year.
● Performance Evaluations - FLSA (The Fair Labor Standards Act) states that any proof of why you fired someone must be kept for at least two years.
Handling Job Injuries
OSHA (Occupational Safety and Health Administration) states that employers with 11 or more employees must hang on to all forms reporting injury for at least five years. Having a situation like job injury can lead to major legal issues if you don't do everything right, and it's not only about record keeping either. This is why most experts like Withstand Lawyers recommend seeking professional help when you get in a situation like this, in order to help you avoid a lawsuit.
Designate A Room For Your Papers
Having a spare room is a great way to start with record-keeping, as you'll want to know where all of your papers are at any given moment. If a room is too much, you can designate a corner with a cabinet or a closet to store all the bills and current records. As for more relevant papers like birth and marriage certificates, your will, or insurance policies - keep these locked in a safe, preferably in a place that's nearby so they're easily accessible.
Be Systematic
The ideal situation would be the one where you sit down to pay your bills and have everything that you need right next to you. Processing all the paper can be a tiring job, but it's much easier to do it regularly than to wait for them to pile up. As soon as you pay the bill or check a statement - file it immediately.
Everything tax-related should be kept in one place so that you can easily access them once you're ready to fill out your tax return.
Bottom Line On Business Owner Record Keeping
Dealing with piles of paper is probably any business owner's nightmare, but it isn't something that you won't be able to handle on your own. Of course, businesses that can afford accountants and bookkeepers don't have to worry about all the forms, but small businesses are usually in a tough position and have to operate on a budget. This business owner guide highlighted some of the most important practices you have to pay attention to when keeping records. After all, records are there to paint a picture of the history of your business - and you want it to look good.
I hope you enjoyed this article about how to keep up with record keeping to stay organized and successful this year and beyond.
Interested in more articles about finding frugal finance?
Read My Blog Posts:
- Tips To Protect Your Company From Unseen Expenses
- How To Grow Your Business Free Of Debt
More Bootstrap Business Blog Below
