The need for keeping financial records in small and medium enterprises today has been underestimated. Financial records consist of a formal document that represents the financial transactions of a business. The financial record is a record of all incomes and expenses made by a business entity. As a business owner, you need to know where your company stands daily, weekly, monthly, quarterly, and annually. Are you making money, is your customer base increasing or decreasing, do you have enough money in the bank to meet your commitments, are you meeting the goals you set for your business? Without this proficiency, you have little or no control over your business.
However, keeping financial records in business has moved from having a big calculator and a long book. Financial records in business entail systematic documentation of transactions incurred in a business which can be daily, weekly, monthly, just as the case is.
Business researchers have deduced that not less than 30 percent of new businesses lose their market share and crumble within a 1 to 2 year(s) time of operation resulting from inadequate record keeping.
Today, most businessmen and businesswomen get carried away by their streams of income disregarding the need for the documentation of these incomes. Others cannot give a trace of how cash flows in and out of their enterprises.
One of the enormous pitfalls of not maintaining accurate financial records is you can lose track of how well your business is performing or not performing. Without up to date lists, how can you notify who owes you money? And how can you tell who you owe money to?
I have listened to some business owners complain about how they cannot give an account of cash inflow and outflow, Yet, the business is at its verge of collapsing.
So saddening to know that most business owners today assumes that keeping financial records is the job of an Accountant and as such for big companies.
But a critical question then is, what happens if one cannot pay for the services of an Accountant? A good business owner is known to be a good record keeper.
No doubt that the world is now revolving around digital technologies, but as business owners, how well can you adjust to the world changes to manage your business finances? If having a long book to keep your records is quite inconvenient, the use of Microsoft Excel is highly recommended. Continuous documentation of your business transaction will keep your business going.
Good record keeping will help provide financial data that help you operate more efficiently, thus increasing your profitability.
One core objective of going into business is to make a profit. This objective can be altered if there is no good record keeping.
Most businesses are likely to get investors, but these investors say no to investing because they cannot have a glimpse of what the business financial statement is all about. This is a result of an inappropriate financial record.
In line with keeping track of cash flows, a business owner must understand that he/she is a separate entity from the business, and as such should take note of every cash transaction made whether personally or for business use.
Your prosperity in business will rest on good record keeping practices and adequate cash flow.
This shows the relevance of financial inclusion in businesses today. Business owners ought to be financially included so that they can understand the financials of their business and adopt the practice of record keeping.
Without good records, it is, however impossible to determine the financial condition or profitability of your business.
Compiling and recording the ongoing information of your business activities will guarantee that you have the details that support the decisions that are made over the years. Big decisions can be damaging to your company if you don’t have accurate information to elicit those decisions.
As a business owner, you should seek to conform to a specific technique of keeping your business records progressively and effectively.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of The Eastern Herald.