- Give each customer a receipt or invoice for payment.
- Attach your receipt/invoice to your deposit slip receipt you get from the bank.
- Keep your deposit slip with your receipt/invoice attached to your bank statement.
- Keep your receipts for all cash purchases you make as well and keep them with the bank statement too so both income and expense records are together.
- NEVER pay personal expenses out of your business bank account.
- If you take cash out before you make a deposit, be sure you account with a receipt for what you spent it on. Better yet, make the deposit and then write a check for the expense.
If you are audited and have your records well organized and your income and expenses substantiated, you should sail through an audit with flying colors. If not, your expenses you cannot prove may be disallowed and than can make assumptions about your income from prior year that may not be close to what you are making now. Keeping good records protects your hard earned money and your business.
If you have questions and need assistance contact a tax professional such as an Enrolled Agent or a CPA.