The short answer

Keep records that explain what the business received, spent, owned, owed, promised, paid, and reported. A bank or card statement proves that money moved, but it may not prove what you bought or why it was a business expense. Keep the invoice, receipt, agreement, or other supporting document too.

Digital records can be appropriate when they are complete, accurate, legible, organized, retrievable, protected from unauthorized change, and retained for the required period. Do not destroy an original merely because you photographed it. First check the federal, state, local, industry, insurance, contract, and professional rules that apply to that specific record.

Keep a record for each financial story

Money received

Keep sales invoices, receipts, order records, contracts, processor settlements, deposit details, marketplace reports, refund records, and forms reporting income. Be able to connect the gross sale, fees, refund, and net bank deposit.

Money spent

Keep itemized receipts, supplier invoices, bills, proof of payment, subscriptions, shipping records, reimbursement records, and a note of business purpose when it is not obvious. An itemized receipt is more useful than a card slip showing only a total.

Assets and inventory

Keep purchase date and price, serial number, financing, installation and improvement costs, depreciation information supplied by your accountant, inventory counts, damage records, and sale or disposal information.

People and obligations

Keep customer and vendor agreements, payroll and contractor records, licenses, insurance, loan documents, leases, ownership records, and filings. Access should be limited because some of these contain sensitive personal or financial information.

IRS Publication 583 lists sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks as examples of supporting documents. It also notes that proof of payment alone does not establish the underlying expense. See the current Publication 583 for federal recordkeeping guidance.

Capture enough detail at the time

For a purchase, preserve:

• date.
• seller.
• item or service.
• amount and taxes or fees.
• payment method.
• business purpose.
• client, project, trip, event, or participants when relevant.
• approval or reimbursement information.

If a paper receipt fades, scan it promptly and add a short note. Do not rewrite the amount from memory months later.

For cash, create a dated record when no receipt is available. But do not treat a homemade note as a magic substitute for documentation the applicable rule requires.

Use a simple digital filing pattern

Organize by year and record type:

Finance/
  2026/
    Income/
    Expenses/
    Bank-and-card-statements/
    Processor-settlements/
    Assets-and-inventory/
    Payroll-and-contractors/
    Tax-and-filings/
    Year-end-reports/

Name files so another careful person can understand them:

2026-09-09_vendor_item_184-50.pdf

Do not put full account numbers, Social Security numbers, or sensitive diagnoses in filenames. Filenames may appear in search, sync notifications, and shared links.

Test the electronic system before discarding paper

Publication 583 says federal electronic tax-record systems must index, store, preserve, retrieve, and reproduce complete and accurate records in legible form. It also says hard copies may be destroyed only when the electronic system has been tested for compliance and other records required to be retained are still kept.

Use a sample from every record type:

1. Scan every page and both sides when needed.
2. Open the saved file on another device.
3. Zoom in on dates, totals, signatures, and fine print.
4. Search or locate it by the information you will know later.
5. Restore it from backup.
6. Confirm that comments, attachments, or supporting pages were not omitted.

Keep originals when required or when physical characteristics matter, such as a seal, notarization, title, negotiable instrument, or document whose authenticity could be disputed. Ask qualified local counsel, an accountant, insurer, regulator, or contracting party when you are unsure.

Use a retention schedule, not a mass-delete date

Different records can have different retention periods. Tax limitation periods, employment rules, asset life, contracts, professional requirements, claims, insurance, grants, and litigation holds can extend them.

Create a table with record type, owner, storage location, rule or authority, minimum retention, event that starts the clock, disposal method, and next review. A rule tied to “seven years” is incomplete unless you know seven years from what.

Publication 583 says records supporting a federal return generally must be kept until the applicable limitation period runs out and warns that insurance companies or creditors may require longer retention. Verify the current rules that apply to your records rather than copying a universal timeline.

Protect and dispose of records

Use access-controlled business storage, multifactor authentication, device encryption, and backups. Limit payroll, identity, health, and financial records to people who need them. Review shared links and former-user access. The FTC's guide to protecting personal information recommends taking stock of sensitive data, keeping only what is needed, protecting it, disposing of it properly, and planning for incidents.

When the approved retention period ends and no hold applies, shred paper and securely dispose of electronic records using a method appropriate to the device and data. Record the disposal when the business needs an audit trail.

Good records should let you explain a transaction without depending on memory. That is the test: someone authorized can find the complete story, and someone unauthorized cannot.

Sources and further reading

• IRS Publication 583: Starting a Business and Keeping Records
• Federal Trade Commission: Protecting Personal Information, A Guide for Business

A free next step

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Helpful WAHMN tool

The Income & Expense Tracker gives you a practical way to connect digital receipts to the income and expense records they support.

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Related WAHMN resource

If you want to test the numbers with your own prices and costs, the calculator gives you a practical place to work them out. See WAHMN Financial Calculator.