Record where income came from
Keep customer invoices, sales records, payment-processor statements, deposits, and records of refunds. For a card processor, the deposit may be net of fees or refunds, so retain the statement that reconciles gross sales to the amount received.
Document purchases and expenses
Keep supplier invoices and receipts that show the seller, item or service, amount, and date. Where the business purpose is not obvious, add a short note. File the payment evidence with the corresponding document, especially for unusual or large items.
Do not lose the other records
Retain contracts, loan documents, asset purchases, payroll records where applicable, and business bank statements. These can explain transactions that a simple expense receipt cannot. Sort the files by year and category, and use consistent filenames if you store them electronically.
Make a monthly missing-items list
Before closing the month, flag transactions without a supporting document and request a copy while it is still easy to obtain. Record any open questions for the owner or preparer rather than guessing a category.
How long should you keep them?
The IRS retention rules vary by the event and the relevant return. Some situations require longer periods, so do not use a single blanket rule for every document. Check applicable federal and state requirements and any lender or contractual rules before deleting records.
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