Business Records

What are “Business Records”?
One of the main reasons for the failure of a small business is due to poor record keeping. If you don’t keep accurate and up-to-date records of the financial transactions of your business you will not only be breaking the law by not complying with regulations required by the Tax Department, but you will also disadvantage yourself because you will fail to have an accurate picture of how your business is progressing. Good records will allow you to monitor how your business is operating from day to day, and take any action necessary to correct problems that become obvious.

Professional Help to Set Up a Recording System
Try not to think of record keeping as simply a nuisance imposed by government regulations. Try to think of this task as an important tool that you can use to manage your business. Take time to put it all together. If you don’t have experience in this area, engage an accountant to help you set up a good record keeping system.

Your system needs to be based on standard accounting principles. Nevertheless make sure it is tailor made for your business. You may complain about it but if you are wise you will use it. Remember it is not required for the purpose of storing facts that the government can use but more important it is an invaluable information source that will help you increase the profits in your business and contribute to your growth.

Your System Must Have These Qualities

Regardless of the system that you finally develop, it is important for you to ensure that your record keeping system is:

  • Accurate – Make sure that the data collected is accurate.
  • Simple – Keep it as simple as possible so everyone can follow it.
  • Quick – It should enable you to obtain the information you require quickly if necessary.
  • Organised – Make sure it is clearly defined so it is easy to answer the questions of who, what, when, why and where.
  • Clear Trail – Make sure your system allows for a clear trail of transactions from the source documents right throughout the rest of your accounting system to final reports.

Always remember that the best recording system will be the simplest. It is the one that allows you to extract the information you need quickly and easily if you ever need it in a hurry.

Good Records – it’s a Must
If you don’t keep them and use them, you will never know where your business has been, where it is going and what has been achieved for any particular period. The records must be accurate and up-to-date otherwise they will be of little use. They must be so easy to use that any employee, authorised in that area, would be able to understand them.

It should be clear and accurate enough for your accountant to use for preparing your financial statements and other reports. Keeping records is not enough – you must keep good records. During the operation of your business many things would be happening on a daily basis.

E.g Your cash balance may start to run low, the collection rate of your debtors may become poor, you may need to buy a new vehicle, you may have to explore whether you can afford to hire another employee for the office, you may run short of stock, your wages bill may start to grow week by week, you may start to wonder whether you are making a profit – there are many questions arising all the time that require answers.

The best way to keep on top of these situations is to refer back to your records.

If your recording system has been set up properly and they are easy to understand, it can be said that you have good records. If they are not, then it would take more time to extract information you require. This would result in extra cost and increased frustration. Keep your recordkeeping simple yet adequate.