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Write It Down: Proper Business Documentation Can Save You Thousands

FieldPulse | September 12, 2016


Paperwork is the bane of many a business owner’s existence, but business documentation plays a crucial role in protecting both the business and its employees. The temptation to play things by ear and rely on verbal agreements can be hard to resist, especially when you know it will save you a few hours in the office, but the price can be high. When you end up in a tight spot, the right documentation can save your business.

Most of the documentation we’re going to talk about is common knowledge, but there are some situations that are unique. If you’re a small business owner who wants to expand or an entrepreneur looking to start a service business, here are the ways that the right documentation can keep you in the clear.


If someone is doing something for someone else, chances are there’s a contract involved. Having a reliable and easy to use contract system is the basis for a successful service business, but sadly many service businesses cut corners here. Contracts protect the business from bad customers, clarify the means and timing of payments, and define the scope of the word provided. Without a contract for services in place, “easy” projects can easily turn into nightmares.

Where most businesses go wrong with their contracts is misunderstanding how they interact with state and federal laws. Many contracts are unenforceable because they violate standing policy, or they include terms that are unreasonable. A contract that is impossible, unconscionable, or signed under duress won’t hold up in court.

Many employee contracts contain non-compete agreements that aren’t legally enforceable. Non-compete agreements protect companies from disgruntled employees stealing trade secrets, specific information, and customers, but they don’t prevent those employees from working in the same field or region in most cases.

It’s best to work with a lawyer to identify the relevant contract laws in your state, and it’s doubly important to document your contract process. Keep records of all of your contracts and use a digital service to back them up remotely. Losing contractual information is an easy way to end up in hot water with a client or an employee, and it reflects poorly on your business.

Invoices and Quotes

Customers are more likely to pay on time if they know what kind of invoice to expect at the end of the day, and managing disgruntled customers is easier when you can verify that all of your numbers are correct. If you’re still providing ballpark quotes or using an informal invoicing process, it’s only a matter of time before a customer puts you in an uncomfortable position.

Invoices should also reiterate the payment terms of your contract, making it explicitly clear when and how your customers should pay. If you give them an inch they’ll take a mile, and providing inconsistent (or partial) payment terms can create issues if you need to take them to small claims court over a service call.

Itemization is also important as providing a single line item for a multi-step service call can create ambiguity and leave room for argument. Vague service descriptions may lead to customer disputes, too; there’s a notable difference between “fixed the sink” and “replaced the garbage disposal with customer-supplied unit.” Make sure your invoices clearly describe what was done, and you’ll protect yourself in the long run.

For larger projects, invoices often serve as the primary paper trail that documents an ongoing relationship with a customer. Where contracts show the start (and occasionally the end) of a customer relationship, invoices validate the ongoing service relationship. If that relationship is called into question, invoices are a great way to prove what was (or wasn’t) being worked on.

Everything Related To Human Resources

Hopefully you have a good relationship with your employees. But even when you’re working with your best friends, having clear employment policies and guidelines is important. If you’re not documenting employment incidents, complaints, or performance, you may end up in a bad place when things go wrong.

You don’t need to document every conversation you ever have with your employees, but keeping a record of your large meetings, disciplinary actions, training sessions, and workplace events will pay off. Make sure you aren’t committing common HR mistakes, and you’ll do better than most small businesses.

Tracking when you hire new employees, what positions you hire them into, and how well they perform in those positions can protect you from a variety of legal complications if you need to let those employees go. Human resources can be complicated, especially when you don’t have additional staff on hand to handle the burden, so it’s important to know what’s involved.

Tax Information

If you’re just starting out and you don’t have your accounting systems set up, staying on top of your taxes and liabilities can be hard. Working with an accountant is the best way to make sure you’re covered, but in order to do that you need to have solid records of everything that’s taxable.

Depending on what state you’re in and your exact industry, tax deductions and liabilities can accrue in every facet of your business. If you’re relying on paper receipts and your own memory to keep track of large deductible purchases, you’re in for a bad experience with the IRS.

The IRS has clear guidelines on what kinds of records you should keep, which basically boils down to ‘everything about everything.’ In many cases receipts and invoices are enough, but the process is more involved for deductions and travel expenses. You’re allowed to digitize your records, but you still need to hang on to them for a while.

Documentation Isn’t Just For Worst-Case Scenarios

Most of the situations described here – contract disputes, employee terminations, tax audits, etc – sound like worst-case scenarios, and in many ways they are. But proper record keeping doesn’t just protect you from when things go wrong; it’s also a great tool for making intelligent business decisions.

Most people have heard stories about how “big data” has reshaped the way digital companies do business. But for the small business market, you don’t need a ginormous data set in order to make intelligent decisions. By keeping proper records and archiving them in a way that you can compare different values over time, simple things like customer records and material receipts will turn into powerful tools for decision making.

No matter how you use the records you keep, having them on-hand is a good idea in today’s market. Whether you’re handling a legal issue, fixing a work process error, or shopping for a new parts supplier, clear records of what you’ve done in the past will help you make intelligent decisions today.

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