Why is Important to Keep Financial Records?

You need to know where your company stands daily, weekly, monthly, quarterly and annually. Are you making money, is your client base increasing or decreasing, do you have enough money in the bank to meet your obligations, are you meeting the goals you set for your business? Without this knowledge, you have little or no control over your business. You need to know how much inventory you have on hand, how much you need to order, when you need to order, the credit terms your suppliers offer, the balance in your bank account to cover your payments for running your business such as rent, utilities, office supplies, inventory, employees’ wages, and payroll taxes. Also, you are likely to be in non-compliance with local, state and federal regulations without proper controls on you finances. Keeping your books up-to-date and accurate is the best remedy for your business’ financial health. It allows you to efficiently manage your business cash flow and obtain the best prices from suppliers as well as the best interest rates from your lenders. The first items your lenders will ask for are updated financial statements and recent tax returns.

You are responsible for meeting your monthly, quarterly and annual federal, state and city tax obligations. These obligations include payroll taxes—employee withholdings and company share for federal income tax, social security and Medicare—state and local sales taxes, local business taxes, and licenses and fees to do business in the jurisdiction your company is located.
Your company must file timely monthly, quarterly and annual tax returns including federal, state and city annual income tax returns, quarterly 941 and annual 940 returns, state and city sales tax returns (these may be monthly or quarterly), quarterly state unemployment tax returns.