Good record keeping can help protect your business, measure your performance and maximize profits. It is critical to keep record of major activities in the business such as purchase invoices, sales receipts, transportation expenses, utility bills, bank statements, payroll records, and any other related business expenses.
Let me begin to outline the main reasons why business owners should keep good records for their small businesses.
Well kept accounting records can shorten the time taken to audit the business.
It is normal for an auditor to ask a business operator to provide business records. These records are used to verify the information filed on income tax returns. If the business owner has invested in good records, then the auditor will only take a few hours to complete the job.
Proper business records give the exact picture of the business operations.
These records show all the expenses that the business operator has incurred and the total sales made. Thus, the operator can use these records to estimate the expenses and income generated by the business in a given period.
Accounting records will also keep the business owner informed about the financial position of the business.
This means that the business operator can easily identify the areas of improvement and expansion. This will also help the owner in securing financing for the business. Business records can also help the operator to make decision that they may need to change the focus of the business.
My next post will continue on the importance of good record keeping and how it can help you business.
For more information on auditing, click here.