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Financial recordkeeping is a very important part of your responsibility as a self-employed individual or business owner. Many owners stuff their receipts in a drawer or shoebox with a mad rush at tax time to review their receipts.

Others may be lucky enough to have a partner, a spouse, or the money to hire someone to be their bookkeeper or accountant. Remember it is your responsibility to understand what income and what expenses you have in the business.

Create a simple system that works for you is rule number one. Many businesses use an expandable file with tabs for the alphabet to keep track of their receipts. Bills are paid and the invoice is dated with payment date, check number and amount paid. This invoice is filed in your expandable file.

Checks are entered in your check register and your general ledger, which can be a hand system of ledger pages or a software package such as Quicken or QuickBooks.

Invoices - the bills you send out for your services or products should be sent out with a date, description, amount, etc. This should be done monthly or more often if needed.


Financial Statements

Financial statements are an important tool to managing your business. The statements provide important information about how your business is doing, what profit you are making, and how your business is changing.

Two statements are used: A balance sheet and an Income Statement.

The Balance Sheet is a financial snapshot of your business at a given point in time. It tells you as of a specific date what your business owns, the debt your business has, and the net worth of your business. These are called Assets, Liabilities, and Equity.

An Income Statement is a description of the sales revenue and the expenses of your business and profit or loss generated in a specified time period. It tells you whether you are making money or losing money for the time period that is recorded.

Both a Balance Sheet and an Income Statement are provided as the report features on bookkeeping software. They also can be prepared by paper and pencil.