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Record keeping involves employing an accounting system to keep track of all events and transactions made by an organization. It is safe to say that record keeping is a fundamental aspect of accounting and critical for the success of your business. However, despite this, several companies do not have the appropriate record-keeping systems. If you’ve ever wondered what the fuss is about and why you should try record keeping in your business, keep reading to learn more.
1. To aid in making informed decisions
As businesses thrive on cash flow, every cent the organization spends must be spent well. Knowing simple things such as recording and calculating the work hours of your workers enables you to control expenditure on labor, create better schedules, and keep your team happy and engaged. You can break down your expenditure through record keeping and gain financial insights into how money was spent and the changes you should implement.
Fortunately, if record keeping isn’t an easy task for you, you can rely on technological solutions. You can use numerous tools to gain insights and save more time in decision-making, which will help drive growth and profitability.
2. To comply with laws
Businesses and organizations with outlets outside their home country will benefit greatly from good record-keeping practices. Record keeping is vital for such companies because it ensures they comply with all laws within their operating countries. To make their record keeping easier, businesses must establish an impeccable expense and accounting management system, making file recording and retrieval easy. Several accounting and expense systems encourage collaboration with one another for the benefit of organizations. They work together to provide accounting-friendly solutions and seamless data synchronization that smaller businesses like startups can afford and utilize.
3. Pay taxes
Do you want to pay your taxes as accurately as possible on time while saving on penalties? Strive for accurate documentation of your expenses and good record-keeping practices. For every business, every dollar counts, no matter how small. Thus, it is important to be vigilant and make all payments on time to avoid delays. The only way to know the exact amount needed to pay as tax is by keeping accurate track of your total revenue, expenditure, and outstanding payments such as loans.
4. Prevent theft or fraud
Whether you’re a small and medium enterprise, a startup, or a large business, keeping detailed records of all your business transactions and expenses is a sure way to prevent fraud. A single look at your records will provide enough information about how much cash comes in and goes out of your business. With such information, you can curate a financial statement that can be used for auditing and accounting purposes and easily identify any unlawful translation undertaken within the organization.
5. Manage cash flow
The financial management of every growing company lies in cash. Cash is king is more than a saying; it is the living link of every growing business. If you’re thinking long-term with your business, you must strive for a healthy cash flow maintained over a long period.
The onset of the pandemic has shown how vital a sustainable cash flow can be for businesses, which is why experts hammer on the need for record keeping. With accurate record keeping, you can understand and anticipate where your cash flows from and where it flows to. With the patterns, you can see the current health of the company’s finances and how to correct or retain certain expenses.
6. Prevents oversight
After making certain decisions, you might have to defend those decisions to the board or specific stakeholders. The best way to justify and explain why certain decisions have been made is by using records that have been made. When records are kept haphazardly, it is possible to miss vital information that can make or break your business module. For this reason, finance experts advise that companies review their records as often as possible. With accurate record keeping and consistent reviews, there’s a reduced possibility of having oversight and loopholes, which can negatively affect the survival of your business. It enables you to take better precautions that drive your company in the right direction in the long run.
7. It saves cost and time
Businesses without accurate records often struggle to file reports and conduct financial year-end closing. These organizations often panic during the last minutes, rushing through to meet their deadlines, or sometimes hire someone to experience the stress on their behalf. This rush and its unavoidable effects can be avoided by digitizing all relevant records and documents.
Employ technology and put all relevant records and documents online for easy records searching and access, increased operational efficiency, and reduced cost of storage and transportation. Another way to save cost and time will be to hire a corporate secretary skilled at focusing solely on efficiently storing all your important documents.
8. It makes sales easier
Accurate record-keeping is great for when you wish to value your business. This might be done for a loan or when looking to sell the business to another entity. The entity in question, be it a bank or another organization, will want to know how much value your company has, and the best way to tell that will be through the records you keep. Your records will show everything from your expenses to your revenue, any loans you might have taken and are yet to pay, whether or not you’re behind in taxes, and many more. To keep your company value at an impressive level, constantly update your records, taking note of every transaction.
Record keeping is more than keeping up with your tax. It is a necessary activity that can be done in many ways, depending on the best system. With record keeping, you can give your company the value it deserves while properly using your revenue to build and grow for the long term. If you ever want to know the health of your business or identify any potential issue that could escalate quickly, keeping accurate financial records is a great first step.
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