The financial accounts of a business summarize its activities. The income statement will tell you a story about the current situation. You can view a historical snapshot of the company’s assets, liabilities, and equity on the balance sheet.
To paint the full picture of the story, however, record keeping is essential in giving the supporting elements. Learn more about the significance of record keeping for your small business’s success by reading on.
What is Record Keeping
The process of keeping records usually includes transactions and events in an accounting system. Record keeping is one of the basic pillars of accounting since the concepts of accounting depend on accurate and detailed records.
Importance of Record Keeping
Record Keeping helps to maintain good client relationships
You must maintain accurate and thorough records of daily transactions if you want to be able to evaluate the performance of a business at any given period. All receivables from customers must be accurately reported. By doing this, payments will be collected and properly credited to the right clients’ accounts.
To guarantee that you accurately state your income, you must keep updating and analysing your cash flow. Correctly applying your customers’ payments will encourage repeat business and keep your client relationships strong!
Prevent fraud or theft
For your business, whether it is a startup, small and medium enterprise (SME), or large firm, having a fraud prevention plan that involves keeping detailed records of your business spending and transactions is essential. Understanding your company’s cash flow will help you create accurate financial statements for accounting and auditing needs and understand how much cash is entering and leaving your business.
Make tax payments
You can accurately and timely pay your taxes while avoiding fines if you keep solid records and provide accurate records.
Comply with laws
Good record-keeping procedures are essential because they enable businesses to comply with different legislation in different nations. For efficient record-keeping and filing, businesses should set up effective accounting and cost-management systems.
Manage your cash flow
When it comes to the financial management of a growing business, cash rules the world. Maintaining a solid cash flow that can withstand pandemics and other unexpected occurrences is crucial if you want your business to survive in the long run, as COVID-19 clearly illustrates.
Here’s where keeping records come in. It enables you to accurately estimate the state of your company’s finances and to identify and understand where your money is coming from and going.
Save time and costs
A good record-keeping system will help you save time and money when you need to file reports and conduct financial year-end closing since you won’t need to rush at the last minute to meet deadlines or hire someone to manage it.
Alternatively, you can think about employing a corporate secretary. Startups and SMEs can do this because there are fairly priced corporate secretary services on the market that can be less expensive than hiring an extra employee!
Start Having Solid Record Keeping Practices
We hope you will keep an eye out for your records and make sure they are properly maintained and retained now that we have discussed the importance of record keeping and given you advice on how to accomplish it.
If you are a startup or SME owner and have any tips and advice on how businesses can maintain good record keeping, let us know and we are here to assist you accordingly. Together, let’s develop and build an extensive business ecosystem.