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Business owners, either small, medium or large scale businesses, should be familiar with and recognize the importance of proper record keeping requirements and cash flow planning. Financial records are documents, a well-organized set of financial records that provide evidence of the financial engagements or activities and position of a business, person, or other entity. Relevant financial information is presented in a structured form and manner which can be easily understood. Accurate financial record keeping will be crucial to your business for the following reasons:
- To provide financial data that help you operate more efficiently, this, increasing your profitability.
- To keep an accurate record of all your business assets, liabilities, income and expenses. This information is relevant, which can be used to compare with your sector’s averages and also knowing your strengths, which is your advantage over your competitors, and to identify weaknesses.
How To Keep Financial Records
System Of Recording The difference between keeping manual records and using accounting software is information management. This is the first and most important step to getting on top of your financial records. The choice of a system depends on one’s business type and size. Your record-keeping system, whether on paper or on a computer should be simple to use, easy to understand, reliable, accurate, consistent and designed to provide information on a timely basis. Immediate Record Of Financial Transactions Recording of financial transactions immediately they occur is important. Some transactions are made on credit, but should also be recorded immediately, even when cash is not received. However, letting your records pile up means that you are more likely to overlook things or make mistakes. Therefore, it is a good idea to set aside a regular portion of time to deal with your records, whether it is first thing in the morning, when you get home at night or once a week on a Saturday morning. Do this and make sure that you stick to it.Sign up to the Connect Nigeria daily newsletter
Separate Business And Personal Finances Business finances should be different from personal finances. It is a good idea to open a separate bank account purely for your business and use this for all of your business income, expenditure and expenses. This way it will be easier for you to keep track of your business records and won’t be at risk of getting things mixed up. Understanding What To Record And How To Record There can also be confusion about exactly what you need to record and the necessary documents required. If you end up recording some information that you don’t end up needing, then this is significantly preferable to having missing information. The relevant documents required to accurately record include: Cash Receipts Book- This is a list of all cash received and an explanation of where the funds have come from, for example, debtors, loan, cash received etc. Again, this is required for each bank account. Invoices- Ideally you should have an invoice relating to all income that comes into your business. These should record the amount, date and what type of work it is referring to – and should be able to be reconciled with your bank statements. Bank statements- These should be reconciled at the end of each month (or whenever they are produced) and should tally up exactly with the receipts and invoices that you also have recorded. Depending on your business you may also need to keep records for things such as; payroll, tax returns, cheques journals etc. Getting A Professional Help Professional accountants and tax advisors may be able to structure your accounts and expenses in a way that you would not know about and could actually save you more money than if you did your accounts yourself. Handpicked accountants are able to recommend a number of exceptional accountants in your area, each of whom has been thoroughly vetted, so you know that you will be working with only the very best. Featured Image Source: SME Digest
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