1. The importance of record keeping
The appeal of having your own business is often associated with; being your own boss, having financial independence and working on your own clock. Once the opportunity comes your way and you start your “business dream”, there are added responsibilities to account for to ensure that you and your future employees are successful in this venture.
As the owner or manager of a small business, one invests a tremendous amount of time and or energy to ensure that the company is successful. We spend our lives worrying about ROI (Return on Investment figures) and trying to maintain a good financial record.
If you are going to take the time (which you mostly definitely should) to develop a business plan then you need to take the time to ensure that you keep a record of your finances and expenses throughout the lifespan of your business too. The unfortunate reality is that most small businesses battle to stay afloat or even make it off the ground… so you need to give it every chance to succeed. If your business takes off rapidly, there is a good chance that time devoted to record keeping is minimized, simply to meet demands – do not fall into this trap! If starting your own business was an “out” to try to escape paperwork, then you will need to hire someone to do your record keeping for you.
“Alexander Forbes Insurance (AFI) has identified poor record keeping systems as a sign of a wider problem that impacts the risk management of small businesses and the achievement of their business objectives.”
2. Why should I keep records for my small business?
Efficient record keeping will not only help to keep everything in order but could help you analyse your company’s financial health in the future too.
Record keeping could help you answer any of the following;
- Discover what your real profit is
- Solve cash flow issues
- Answer tax return problems
- Help monitor the progress of your business
- Identify source of receipts
- Keep track of deductible expenses
- How much income are you generating and how much can you expect in the future?
- How much cash is stuck in accounts receivable/inventory, and for how long?
- How much do you owe on expenses such as rent, utilities, equipment, stock etc?
- Payroll expense details
- What is your actual working-capital budget?
- Which of your departments are making a profit, breaking even or even making a loss?
- Gross and Net profit
- Compare financial years and project future expansion and or expenses.
- Compare data with competitors in your industry.
If you require help with your financial records, accounting or book keeping, contact DATC for assistance today!