Labradoodleductions
Labradoodleductions
Record Keeping
Record Keeping
Print Full ArticleLast Reviewed: Feb 2011
Last Modified: Feb 2011
An endless number of record-keeping systems exist, from the shoebox full of random receipts to full-blown double-entry accounting software. No single system is right for every business, but finding the right system for your business can be a make-or-break decision. If your breeding operation is a hobby, the shoebox of receipts is perfectly viable. But if you are treating your operation as a business and treating it that way on your tax return, you will need something a bit more robust. Partly this is to aid in substantiating expenses in an audit, but mostly it is to help you run your business properly - you can't make sound business decisions if you don't have ready access to your income and expense records. Let's review a few of the more viable options for small- to mid-size businesses:
- Spreadsheet - Whether on paper or computer (Excel, etc), a spreadsheet is a very simple system of listing categories along one axis (typically across the top) and the date along the other. Income and expenses are then plugged into the appropriate date and category with a running tally at the bottom of each category. This system works well for very small activities, but tends to grow unwieldy when the number of transactions forces the spreadsheet onto more than half a dozen pages or so. It still works, but is difficult to read or retrieve data from, which is the whole point of any accounting system.
- Quicken, Money, etc. - These are small accounting programs, generally marketed toward home finance and small businesses. Used properly, these programs work quite well. Using them properly, however, is not always easy - these programs typically have few if any safeguards against incorrect or one-sided entries. A basic understanding of accounting principles can come in very handy.
- QuickBooks, PeachTree, etc. - These programs are considerably more robust than their smaller counterparts, and can generally accommodate businesses with annual revenue from a few thousand to several million dollars. Some accounting knowledge can be helpful, but the programs include safeguards to at least minimize or contain irregularities.
At a minimum, every business owner should try to maintain a statement of income and expenses (the Profit and Loss statement, or "P&L") and a statement of assets and liabilities (the Balance Sheet, which for certain companies whose names we won't mention can be safely abbreviated as the "BS"). These two statements provide a pulse of the company and are universally understood in the accounting world. Don't let all the fancy names and terms fool you, though - it's really just a way to show what the company has earned, what it has spent, what it owns, and what it owes. Good things for any business owner to know, wouldn't you agree?
Many new business owners ask what categories they should be tracking, but the answer will be different in every case. The appropriate categories are those that are the most pertinent to each individual business; a company that relies heavily on mailing campaigns should be tracking postage while a company with little or no mail activity might simply include postage costs in the broader category of office expenses. Whichever categories need to be tracked in order manage expenses and compare revenue sources, those are the appropriate categories to track. At a minimum, a dog breeder would want to track food costs, bedding supplies, vet fees, etc.
