Documentation

What is documentation?

Documentation refers to all the records that back up your financial transactions. Every invoice you send, receipt you collect, contract you sign, and bank statement you receive is documentation. These records prove that transactions happened, when they happened, and for how much.

Good documentation is essential for accurate bookkeeping, tax compliance, and protecting yourself if questions arise about past transactions.

Essential business documentation

Small businesses should keep records of:

• Invoices — Both sent and received
• Receipts — For all business expenses
• Contracts — Signed agreements with clients and vendors
• Bank statements — Monthly account records
• Tax filings — Returns and supporting schedules
• Payroll records — If you have employees

How long to keep documentation

The IRS generally recommends keeping tax-related documents for at least 3-7 years. Some records, like contracts and property documents, should be kept longer. Digital storage makes it easier to maintain records without filling filing cabinets—just ensure you have reliable backups.