Record-Keeping Best Practices for PA Business Owners

As an accountant or CPA in Pennsylvania, your business clients are looking to you to guide them on maintaining critical records for decision-making, profitability, and tax purposes. They may also need your advice regarding safe and secure storage and disposal of their records. Help them implement best practices to secure the company’s future growth and stability.

Your clients need to keep accurate records in order to:

• Strategically plan for success

• Measure that success and pivot where needed

• Identify the best sources of income

• Track expenses and evaluate drains on profitability

• Prepare tax returns and maintain evidence of filings

Common mistakes include:

• Not accurately keeping records – this is a common problem with small companies that are using a paper system

• Commingling personal and business expenses and income

• Guessing or fudging numbers on tax returns

• Not keeping records long enough or keeping them longer than necessary

• Not securing records safely or disposing of them properly

If your client is not accurately tracking business income or expenses, you will not be able to file an accurate tax return, and the client’s risk of an audit may increase. The lack of records to support the numbers will almost guarantee fees and penalties that could seriously damage the profitability of the company. Help your client set up a proper record-keeping system to avoid tax hassles and fees and to maximize profitability.

Few companies use a paper system of bookkeeping anymore, and you should encourage any client who does so to switch to a desktop accounting system or, even better, a cloud-based system where you will have real-time access to your client’s records and can monitor accuracy and easily generate financial documents.

Additional record-keeping technologies may be helpful, depending on your client’s type of work. For instance, if your client is often on the road, such as a salesperson or a contractor, many receipts, invoices, and payments may be generated outside the office. Apps are available for your clients to automatically upload any transactions and their evidence directly into the company’s accounting system, thus capturing those out-of-office activities.

Cloud signature services and online sharing and messaging services, such as Verifyle Pro™, which is free to our PSTAP members, provide encrypted communications with clients and secure document storage.

While the IRS and Department of Labor have differing requirements regarding how long records must be kept, varying from two to six years, it is best to securely store all records for seven years. They should be kept safe from physical harm (fire or flood) and theft (physical or digital). Your clients should have a well-defined, written security plan that includes:

• Technical security, such as automatically updated firewalls and anti-virus software on all computers

• Physical security, including restricted access to records and proper shredding of trash

• Written policies and procedures regarding the use of personal technology for work purposes

• Strong passwords on all devices, with critical information requiring multi-level or multi-person authentication

Start talking to your business clients about these record-keeping best practices so that you can use your clients’ records to help their companies grow while protecting them from IRS scrutiny.