Maintaining accurate and up-to-date financial records is crucial for the success of any business, regardless of its size or industry. At NorthStar Bookkeeping, we understand the importance of financial clarity, and we’re here to guide you if you’re overwhelmed by financial files, or, dare we say, stacks of paper. Here’s a look at what financial records a business should keep.
Income Statement
The income statement, also known as the profit and loss statement, summarizes your business’s financial performance over a specific period. It shows your revenues, expenses, and the resulting net income or loss. This statement helps you track profitability, identify areas for improvement, and make informed business decisions.
“The P&L sheet is a critical financial record that provides valuable insights into your business’s performance,” says Paul Yee, co-owner of NorthStar Bookkeeping. “It helps you understand how your business is generating revenue and where your expenses are coming from.”
Balance Sheet
The balance sheet provides a snapshot of your business’s financial health at a specific point in time. It shows your assets, liabilities, and equity. Assets are what your business owns, liabilities are what it owes to others, and equity represents the owner’s stake in the business. The balance sheet helps you assess your business’s liquidity, solvency, and overall financial position.
Cash Flow Statement
The cash flow statement tracks the movement of cash both into and out of your business during a specific period. It shows cash generated from operating activities, investing activities, and financing activities. This statement helps you understand how your business is generating and using cash, which is essential for managing your working capital and making informed investment decisions.
“The cash flow statement is a powerful tool to identify potential cash shortages and make informed decisions about how to allocate your financial resources,” says Heather Kirstein, co-owner of NorthStar Bookkeeping.
Bank Reconciliations
Bank reconciliations involve comparing your business’s bank statements with your internal accounting records to ensure they match. This process helps you identify any discrepancies, such as unrecorded transactions or bank errors, and maintain accurate cash balances.
To learn more about reconciling, read our related blog: The Importance of Reconciling in Bookkeeping.
Accounts Payable and Accounts Receivable
Accounts payable refers to the money your business owes to its suppliers or vendors, while accounts receivable represents the money owed to your business by its customers. Keeping track of these records is crucial for managing your cash flow and ensuring timely payments.
Payroll Records
Payroll records document employee wages, deductions, and other payroll-related information. These records are essential for complying with tax laws, calculating employee benefits, and managing labor costs.
Tax Returns
Tax returns are documents filed with tax authorities that report your business’s income, expenses, and other relevant financial information. Accurate and timely filing of tax returns is crucial for avoiding penalties and maintaining good standing with tax authorities.
Additional Records
Depending on the nature of your business, you may need to maintain additional records, such as:
- Inventory records
- Fixed asset records
- Customer records
- Vendor records
“Maintaining accurate and up-to-date financial records is essential for the success of any business,” says Yee. “These records not only provide insights into your business’s financial health but also help you make informed decisions and comply with regulatory requirements.”
At NorthStar Bookkeeping, we specialize in providing comprehensive bookkeeping and reporting services to businesses of all sizes. Our team of experts can help you maintain accurate financial records, generate customized reports, and ensure compliance with all applicable regulations.
We understand that bookkeeping can be a time-consuming and complex task for business owners. That’s why we offer outsourced bookkeeping solutions that allow you to focus on your core business activities while we handle your financial records.
NorthStar Bookkeeping serves businesses across America, including Orange County, CA. Contact us today to learn more about how we can help you maintain accurate and up-to-date financial records.