Running a business is one of the most adventurous journey for business owners considering the multifaceted operations it entails. For many entrepreneurs, staying abreast of all the necessary administrative activities can be a challenge. Today, we will focus on a very important aspect of a business operation every entrepreneur must pay attention to, namely, their financial records.
Whether your business is a start-up or an existing enterprise, staying up to date with your financial records can assist you in making sound business decisions, which are critical to growth. Here are two basic tips which will help in keeping your business afloat.
Keep track of everything
Many business owners fail to adhere to this simple rule. Ensure you establish measures for tracking every transaction relating to inflows, outflows, debts, revenue, or even investments.
Provide information/details for every transaction
This is particularly for those who do not utilize accounting software for their record keeping activities. Provide a brief description for every expenditure and revenue made. Details like amount, dates, and purposes can be attached to each transaction for easy reference and sorting. The essence of this is to aid further analysis and audit.
The above listed steps can be applied by entrepreneurs who do not have computer packages to manage these activities automatically. In addition, the aforementioned activities can give you insights on the activities in your business, i.e what is increasing or reducing in value at a particular point in time. However, to make sense of the data gathered overtime and to develop them into structures such as profit and loss, balance sheet and cashflow flow statement, you might need to either employ an accountant or outsource the task to a professional who understands what these records means to your business.
Benefits of keeping track of your financial records
As an entrepreneur, you may ask is it really necessary to invest so much time and effort in tracking financial records when you think your business is faring well? The answer is definitely yes and here are some reasons why:
Accountability
While you know your business, it is quite impossible to accurately account for its performance at every point in time without having a structure in place with which to make comparisons.
Make important financial decisions
Keeping proper financial records provides a clear picture of the financial performance of the business thus enhancing decision making process with regards to allocating scare resources for better output.
Risk management and avoid occurrence of fraud
Having prior knowledge of your financial records helps you to identify risks and fraudulent activities that might be harmful to your business.
Regulatory purposes
Proper tracking and recording of financial records are essential when dealing with regulatory authorities for example, payment of taxes.
In summary, Financial Records are very powerful tools for businesses and should not be overlooked. If you would like to get support with managing your bookkeeping activities, please email us at enquries@ovacgroup.com to book a free consultation.