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Record Keeping for a Small BusinessParticipant GuideTable of ContentsWelcome . 3What Do You Know? Record Keeping for a Small Business . 4Pre-Test . 5Keep Good Records . 6Legal Compliance. 7Discussion Point #1: Business Record Keeping . 8Record Retention . 1Common Record Keeping Tools . 9Business Software. 11Three Common Business Software Options . 12Discussion Point #2: Your Accounting System . 13Business Software Training. 13Top Three Key Points to Remember . 15For Further Information . 16Post-Test. 17Evaluation Form . 18DISCLAIMERThese training materials are intended as general guidance only and may or may not apply to a particular situationbased on the circumstances. The materials do not create any legal rights or impose any legally binding requirementsor obligations on the Federal Deposit Insurance Corporation (FDIC) and U.S. Small Business Administration (SBA).The FDIC and SBA make no claims or guarantees regarding the accuracy or timeliness of this information andmaterial.The content of this training material is not designed or intended to provide authoritative financial, accounting,investment, legal or other professional advice which may be reasonably relied on by its readers. If expert assistancein any of these areas is required, the services of a qualified professional should be sought.Reference to any specific commercial product, process, or service by trade name, trademark, manufacture, orotherwise does not constitute an endorsement, a recommendation, or a preference by the FDIC and SBA or theUnited States government.Money Smart for a Small Business CurriculumPage 2 of 18Revision Date: 09-2011

Record Keeping for a Small BusinessParticipant GuideWelcomeWelcome to the Record Keeping for a Small Business training. By taking this training, you are taking an important steptoward building a better business. This guide accompanies the Record Keeping for a Small Business PowerPointPresentation.ObjectivesAfter completing this training, you will be able to: Explain the concept of record keeping and why record keeping is important to a small business. Identify record keeping practices, rules, and tools which are commonly available to a small business.Explain how these record keeping practices, rules, and tools work. Identify benefits a small business derives from proper record keeping. Explain record keeping basics for a small business.Identify software products available for small business record keeping.Money Smart for a Small Business CurriculumPage 3 of 18

Record Keeping for a Small BusinessParticipant GuideWhat Do You Know?Record Keeping for a Small BusinessInstructor: Date:This form will allow you and your instructors to see what you know about record keeping, both before and after thetraining. Please read each statement below. Circle the number that shows how much you agree with each statement.DisagreeAgreeStrongly AgreeStrongly DisagreeDisagreeAgreeStrongly AgreeAfter TrainingStrongly DisagreeBefore Training1. I can explain the concept of record keeping and whyrecord keeping is important to a small business.123412342. I can identify record keeping practices, rules, and toolswhich are commonly available to a small business.123412343. I can explain how record keeping practices, rules, andtools work.123412344. I can identify benefits a small business derives fromproper record keeping.123412345. I can explain record keeping basics for a small business.123412346. I can identify software products available for smallbusiness record keeping.12341234Money Smart for a Small Business CurriculumPage 4 of 18

Record Keeping for a Small BusinessParticipant GuidePre-TestTest your knowledge of record keeping before going through the training.1. Which of the following are reasons for keeping good records? Select all that apply.a. Business detail trackingb. Planningc. Legal complianced. Tax preparation2. When creating a record keeping system, it’s a good idea to .a. Wait until enough information is available to get started.b. Start simple and refine later.c. Get a sophisticated system to anticipate future needs.d. Start after one year of operations.3. Which of the following should be done before purchasing business software?a. Create an information technology (IT) departmentb. Get a business credit cardc. Evaluate your business needsd. Consult with the Internal Revenue Service (IRS)4. Which of the following are record keeping tools?a. Manila folderb. Computer systemc. File hosting systemd. None of the abovee. All of the above5. For which type of small business is record keeping a good practice?a. Sole proprietorb. Partnershipc. Corporationd. None of the abovee. All of the above6. Record keeping is the orderly and practice of storing business records.a. Corporateb. Legalc. Financiald. DisciplinedMoney Smart for a Small Business CurriculumPage 5 of 18

Record Keeping for a Small BusinessParticipant GuideKeep Good RecordsThe term “record keeping” refers to the orderly and disciplined practice of storing business records. Record keeping is oneof your most important responsibilities as a small business owner. The success of your business depends on creatingand maintaining an effective record system, whether your business is a sole proprietorship, partnership, or corporation.Record keeping ranges from simple manila folder filing systems to complex on-line electronic systems. Whether simple orcomplex, a record keeping system must be easy to use and provide adequate storage and retrieval of records. Mostimportantly, the record keeping system you choose must be suited to your particular business needs. The type, size, andcomplexity of your business, as well as your business’ available resources, will help to determine the record keepingsystem best suited to you and your business.Personal Record KeepingAs a business owner, you should also establish a record keeping system for your personal information. For example,when applying for a business loan, a lender may want to consider your personal records, such as financial statementsfor your personal checking accounts, savings accounts, and other personal accounts tied to your business.For more information on record keeping go to the web site http://www.sba.gov and search for recordkeeping.Reasons for Keeping Good RecordsRecord keeping is not solely about fulfilling regulations or legal requirements. Record keeping is also about understandingyour business, now and in the future. Reasons why you should keep good records include: Detail TrackingPlanningLegal compliance Tax preparation (federal, state, and local)Let’s go through each of these reasons in further detail.Detail TrackingOwning a small business will require you to track a significant amount of information, such as customers, sales, andinventory. Without a proper record keeping system, you may lose sight of important business details, leading to problemswith serving your customers. If you do not know details about your customers, such as who your customers are and whatyour customers like, your business may not be able to meet buyer demands. You risk disappointing a customer, maybelosing that customer forever. Staying informed of customers, their orders, and the inventory to provide for their purchasesis challenging. Without a proper record keeping system, tracking important details of your business may be impossible.PlanningProper record keeping helps to plan your business’ future. How does a business owner who fails to track his customersdetermine inventory needs for the next quarter, year, or longer? For example, what if you own a clothing store? Clothingstore owners must anticipate the need for inventory throughout the year, due to seasonal cycles. By knowing if and whenMoney Smart for a Small Business CurriculumPage 6 of 18

Record Keeping for a Small BusinessParticipant Guideinventory will be needed, you can anticipate the need to finance inventory. You also can avoid carrying too little or toomuch inventory, such as extra swimsuits into the fall season.Legal ComplianceAs an owner, you will likely execute contracts and be required to hold various licenses and permits. As an employer, youwill be required to maintain and report employee payroll for tax purposes. These three categories of legal compliance arediscussed in further detail a little later: Contracts, leases, and other agreements (such as copyrights) Licenses, insurance, and permits Payroll and personnelTax (Federal, State, and Local) PreparationA well maintained record keeping system ensures that you are able to keep up with tax reporting requirements. Forexample, if you are an individual small business owner or contractor, then you are generally considered self-employed.Self-employed owners file a personal income tax return annually and pay estimated tax quarterly.Legal ComplianceAs described above, you may be legally required to keep some records. Here is more information on legal compliance.Contracts, Leases, and Other AgreementsHaving a good system for maintaining contracts is critical. Most business owners sign contracts for services, sales,financing, leasing, or purchasing, to name a few contract types. You may need to refer back to a contractual obligation.You may also need to refer to activities in contracts as the activities are executed. For your own protection, keep track ofcontractual obligations by always maintaining originally signed copies of all legally executed contracts.Licenses and PermitsLocal, state, federal, and international governments require various business licenses and permits. Some businessactivities require a license or permit. Licensing and permitting examples include: City business license Doing business as (DBA) statement Seller’s permitHome occupation use permit Food preparation permitProfessions such as an accountant, an architect, or a building contractor require state licensure. Be sure to check withgovernment agencies and professional associations that govern your line of work.Once you have the required licenses and permits for your business, you may be required to show these licenses andpermits from time to time. Contractors may be required to show proof of insurance. Establish your business with a goodsystem for maintaining and regularly renewing licensing and permitting documents to protect the business from penalties,fines or other legal action.Money Smart for a Small Business CurriculumPage 7 of 18

Record Keeping for a Small BusinessParticipant GuidePayroll and PersonnelIf you hire employees, your record keeping capacity needs to be advanced enough to comply with numerous local, state,and federal payroll and personnel legal requirements. Depending on the number of employees you hire, your business mayrequire a payroll service. Otherwise, if your record keeping and accounting capacity is still developing, consider hiringindependent contractors or hiring through an employment agency. Here is a brief list of some of the payroll and personnellegal information your business will be required to track: Hiring and evaluation documentationBasis on which wages are paid Social Security Numbers Total hours workedAdditions to or deductions from wagesTotal wages paid each pay period Income tax withholdingsFair Labor Standards Act required informationInjury reports Employment RecordsCopy of annual performance evaluationsAgain, payroll and personnel record keeping requirements can be extensive. If you are a new employer, hire a professionalpayroll service, talk to your accountant and read online at http://www.irs.gov. Search for “Publication 15” an