Small businesses often are forced to do so much more with far less resources. The question is often posed: “How important are my small business accounting records?” Records require time for filing, organizing and space. Time and space are the two things small business owners have in short supply. Even with little time and hardly any space, it is still recommended to hold onto your small business accounting records, perhaps indefinitely, but at least for seven years. Here is why.

Income: Your money comes in from a variety of streams. You should have accurate records of where this money came from and the receipts to prove it. Business and non-business receipts and taxable and non-taxable income are all things which will need to be delineated.

Expenses: Yes, you have your records from banks and the like when it comes to expenses. However, you should also regularly monitor your expenses in order to sift your way through what is deductible and what is not around tax time. Otherwise, you may find yourself spending a lot of time categorizing expenses from the beginning of the year.

Taxes: One thing that is vital to keep your small business above board is accurate and timely payment of taxes.  Your income, expenses, and credits all need to be reported on your taxes. By keeping accurate small business accounting records you will have that information on hand when the time comes to file your business taxes.

Statements: One more reason to keep your small business accounting records accurate is so that you can prepare correct statements. Your profit and loss picture needs to be accurate. You will also want to have an income statement which shows your business’ income and expenses over a given time period. A balance sheet will show your business’ equity, liabilities, and assets at any given time.

Audit: Perhaps the most important reason to keep accurate and available small business accounting records is for fear of an audit. If the government summons your business for an audit you are going to need to show them all of your financial documentation. Moreover if the IRS sees any discrepancies on your statement, you are going to have to explain them. If these transactions happened earlier in the year or even two or three years back, are you really going to remember every last detail about them?  By keeping the physical receipts with all of your notes about the transactions you are going to have a far easier time.

This article originally appeared on Ernst Wintter & Associates LLP’s blog.