It might surprise you to know that the majority of problems small business owners have with employees, vendors, contractors and customers is not because of complicated laws or legal issues, but because they do not keep written records. Why is this true? This is because things are easily forgotten when you are trying to solve problems and serve your customers. It is also common for people to have a different understanding of certain aspects of a conversation or negotiation and just remember things differently.
Clearly putting an agreement or a discussion in writing allows both sides of the transaction to more clearly understand what they are agreeing to. Although it is always possible that the two sides may argue over the meaning of certain parts of the writing at a later time, the vast majority of disagreements are eliminated with a simple written statement or agreement.
It is not always convenient or even necessary to stop and take notes and in certain business settings (grocery stores, restaurants or retailers), but jotting down a quick note about a conversation can have significant consequences later. Have you ever tried to remember a conversation from a week, month or even a year ago? Try to remember or re-create information when you just received a notice that you are being sued. Most of the time it is impossible or is so inaccurate that it is not useful when defending in court. Fortunately, I have many clients who have been successful in defending lawsuits or false claims from people who tried to exploit them because of their good record keeping. These records can literally be the difference between losing tens of thousands of dollars and losing your business.
Here are some examples of issues that can (or could have been) be resolved easily with good record keeping: Employee disputes over wage payments. Although there are very strict reporting requirements to the government and the IRS regarding wages, some small employers get into the bad habit of paying employees in cash or completely “under the table.” They do this for many different reasons, none of which are good for business. Because this practice is never going to go away totally, at the very least, the employer should keep a ledger or receipts of any cash payments and should jot some brief notes about the transaction.
Wage payment issues are probably the most common problem for small business owners to get hauled into court. Also, this is nothing to take lightly as it violates some serious federal laws.
There are other areas where small businesses can get into trouble by not keeping records. For example, any time a business participates in any governmental program for the benefit of customers or employees, there are very strict guidelines and reporting requirements as well as creating and keeping company policies. A common example is when accepting EBT payments or welfare benefits. The government expects all businesses who participate in this program to have a very detailed and active training program for businesses who accept welfare payments, food stamps or bridge cards. Failing to comply with these requirements or the inability to show written compliance can lead to serious financial penalties that could closing a business down.
Unfortunately, today’s small business owners must always be aware of the potential for lawsuits and need to actively take steps to protect themselves, often through good record keeping. Sadly the days of just providing a good product or service at a fair price to the public are gone.