Keeping Good Records

What are Recordkeeping Systems
One of the main reasons for the failure of a small business was 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 IRS, 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 5 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. The one that allows you to extract the information you need quickly and easily if you ever need it in a hurry.

The Importance of Clear and Accurate Records
You will need to keep accurate records because they will contribute to the success of your business.

Good records will be able to contribute in the following ways.

  • Enable your cash to be controlled
  • Enable full financial accounts to be prepared
  • Enables a business to monitor its finances from day to day
  • Keeps close track of all operations of the business
  • Enables actual performance to be measured against your plan
  • Should highlight problems and other opportunities that arise along the way
  • Enables the business owner to have quick access to information that is important for business decisions.
  • Good records will save a lot of time and effort
  • Good records will, in some cases, come to the fore and be the saviour of the business where legal action has been undertaken (good records are especially of critical importance when it comes to legal fights or court actions).
  • Enables all obligations to the IRS and other regulations to be met