Last Updated on November 23, 2021 by Ope Quadri
Most times, small business owners are preoccupied with their daily multi-tasking activities, thereby ignoring or paying less attention to record-keeping.
Of course, an SME owner isn’t a superman or woman, yet the same proprietor is the accountant, stock keeper, manager, and driver. But ignoring to keep a financial record could be detrimental to the long-term success of the company – business name or limited liability company.
What is Record Keeping
The process of keeping track of all financial transactions including debits and credits, expenses on office maintenance, and running costs is known as record keeping in accounting.
Importance of Record Keeping
Any company that ignores keeping record of activities could be likened to a blinded-folded man who is asked to engage in a relay race.
Below is a list of reasons why you should start keeping track of all business expenses for your company whether it’s a one-man business or partnership, or a big company:
- Monitor The Progress Of Your Business
- Pay Your Taxes
- Complies With Principle Of Accounting
- Keep Track Of Expenses
- Wade Off Fraud
- Guide Decision Making
- Prevent Oversight
- Save Time And Costs
- Prepare Your Financial Statements
- To Know Which Team Is Doing Better
Monitor The Progress Of Your Business
The best way to gauge whether you are making progress or not in a business is to know how much comes in and how much goes out every day.
A business record can show which direction you’re headed. It’ll also show you which product is doing well and which one is not.
Pay Your Taxes
There are so many benefits that come with prompt payment of income tax and other taxes operational in your country.
To appropriately calculate how much tax goes to the government, you need proper documentation of finances in your business.
In Nigeria for instance, a company that doesn’t pay tax may be unable to bid for government contracts or enjoy some huge credit facilities being rolled out by the government.
Most times, it’s possible to see businesses rushing to remit the tax to government accounts when it’s time to apply for government contracts.
In most cases, late payment fines are imposed on such a company which results in even paying more.
Complies With Principle of Accounting
One of the key principles of accounting is keeping records. So, it’s geared at achieving business success.
Keep Track Of Expenses
Unless you record your expenses as they occur, you are most likely to forget them at the close of business.
In one of our posts, we analyzed on small businesses can use free tools like Google Sheet to keep track of business events and record in real-time. You can check it out at: https://infomediang.com/7-advantages-of-using-google-one-storage-space-to-keep-business-files
Wade Off Fraud
Auditing of business accounts would be difficult if you have no record of how much was spent on office supplies, how much sale agent A or B brings in.
Anyone could easily cover up their financial recklessness without proper recording and could negatively prevent the company from achieving its goals.
Guide Decision Making
Do you have an understanding of which line of your business drives in sales? Should you use this as a comparative advantage over your competitors?
You can only provide the right answers to these if you keep a record of orders and sales. The right record enables SMEs takes the right decision.
Poor record management is one of the causes of the failure of startups. N2 taken out of business income means so much regardless of how small it is. Tracking record is one of the ways to prevent loopholes and oversight, if it’s 1 kobo, it matters.
Save Time And Costs
Daily recording of income and expenses saves business time at the end of a financial year. Instead of letting things pile up, it’s better to make it daily activity.
Apart from saving you time and cost, it enables you to deplore your energy to something else towards the end of the year.
Letting tasks pile up could draining and challenging and even gives room to mistakes.
Prepare Your Financial Statements
Preparing accurate financial statements can only be possible if your business has proper account management.
These statements can help you in making other business decisions whether to expand or not, whether to undertake another project or not.
Do you want to create a path on which your business move, record keeping would help you achieve this.
Ope is the Head of Content at InfomediaNG. He’s a researcher whose interests cut across real estate investment, stocks, financial technology, and youth empowerment. He’s awesome in Content Marketing and SEO. Favourite Tools: Google Analytics, Canva, UberSuggest