15 Importance of Records Keeping
Accounting and bookkeeping are often used interchangeably, but this is incorrect. Accounting has a broader definition than just recording transactions in an accounting system.
Accounting is used to identify events that need to be recorded, record the transactions of those events, and communicate the impact of those transactions with those inside and outside the business.
As you can see, accounting is only a small part of the larger definition of accounting. Keeping accurate and up-to-date records is essential to the success of any business. Businesses should understand that these records will be one of the most important management tools they have and therefore should be given priority.
Many business owners spend a lot of time and effort in preparing their business and do not understand the importance of keeping good records.
A business owner is looking for the maximum return on their investment and keeping good records is part of that equation. In order for a business to realize its success and value, it is important that the mark is kept, so to speak.
Record keeping is like keeping score – if you go to a football game where there is no one keeping score; you have to ask yourself “what’s the point of all this exercise?” By keeping record, it will enable you to determine who won and if you won at all.
Many people do not know the “current status” of their own business because they do not understand the importance of keeping good and complete records. Any security system must be accurate, reliable, easy to follow, flexible depending on the settings used and simple.
Good record keeping is important to meet the company’s financial obligations and inform decisions about the company’s future. Although the company keeps records to monitor and record its business activities, this is also important because of the duties under the tax law.
What is Record keeping?
The process of tracking all financial transactions, including debits and credits, business maintenance expenses, and payroll, is known as bookkeeping and accounting.
One of the most important aspects of accounting is record keeping or book keeping. Bookkeeping is the process of recording transactions and events in the financial accounting system. Since the principles of bookkeeping depend on accurate and complete records, record keeping is the basis of bookkeeping.
15 Importance of Records keeping
Any company that neglects its duties can be compared to a blindfolded man who is asked to take part in a race.
Below is a list of the 15 Importance of Records Keeping, whether it’s a sole proprietorship or partnership, or a large corporation:
1. Monitor your business progress
2. Pay your taxes
3. Adhere to accounting standards
4. Keep a budget
5. Eliminate fraud
6. Decision guidelines
7. Block surveillance
8. Save time and money
9. Prepare your financial records
10. Identify the source of your income
11. Keep your background and material
12. Support documents declared on your tax return
13. Keep track of your spending
14. Prepare your tax return
15. Include your ….
1. MONITOR YOUR BUSINESS PROGRESS
The best way to find out if you are successful in trading or not is to know what comes in and what goes out each day. Business records can show the way you are going. It will also show you which products are working well and which are not.
2. PAY YOUR TAXES
There are many benefits that come with prompt payment of income tax and other service taxes in your country. In order to correctly calculate the amount of tax from the government, you need proper documentation of your business income.
For example, in Nigeria, companies that don’t pay taxes may not be able to get government subsidies or benefit from large credit institutions that have been invested by the government. Many times, you can find companies that are running to pay taxes on government accounts when you are looking for government contracts.
In many cases, fees are imposed for late payment in such companies, which even leads to the payment of the other debt.
3. ADHERE TO ACCOUNTING STANDARDS
One of the main principles of accounting is record keeping. Therefore, the focus is on business growth.
4. KEEP A BUDGET
Unless you record your expenses as they arise, you may forget about them when the office closes. We explored how small businesses can use free tools like Google Sheets to track business activities and record them in real time.
5. ELIMINATE FRAUD
Checking the business account will be difficult if you do not have a record of how much money was used in the company, how much money is brought in by salesperson A or agent B. Anyone can easily hide bankruptcy without proper records and can negatively prevent the company from achieving its goals.
6. DECISION GUIDELINES
Do you know which areas of your business generate sales? Should you use this as an advantage compared to your competitors? You can give the right answer for these people if you keep the history of the law and the market. The right file helps SMEs make the right decisions.
7. BLOCK SURVEILLANCE
Poor record management is one of the reasons startups fail. N2 removed from business income means a lot of money, however small. Recording is one of the ways to avoid gaps in monitoring, if it is 1 kobo, it is important.
8. SAVE TIME AND MONEY
Daily income and expenses accounting keeps company time at the end of the financial year. Instead of letting things pile up, it’s better to make it a daily routine.
In addition to saving time and money, it allows you to focus your energy on something else at the end of the year. Agreeing to a stacking event can be tedious and difficult and even leaves room for mistakes.
9. PREPARE YOUR FINANCIAL STATEMENTS
Preparing accurate financial statements is only possible if your business has proper accounting controls. These words can help you make other business decisions, whether to expand or not, to work again or not. The importance of record keeping cannot be overlooked when it comes to record keeping.
10. FIND OUT OF YOUR MONEY
You will get money or goods in many places. Your file may identify your income. You need this information to separate business income from non-business income and taxable income from non-taxable income.
11. KEEP YOUR BASICS INDOORS
Your foundation is your investment in real estate for tax purposes. You must use the basis to calculate the gain or loss on the sale, exchange or other property, as well as deductions for depreciation, amortization, depreciation and loss.
12. SUPPORTING DOCUMENTS DECLARED ON YOUR TAX RETURN
You must maintain your business records at all times for audit by the IRS. If the IRS audits any of your tax returns, you may be asked to explain what was reported. A comprehensive record will speed up the investigation.
13. KEEP TRACK OF YOUR SPENDING
Unless you record them when they happen, you may forget the expenses when you prepare your tax return.
14. PREPARE YOUR TAX RETURN
You need good records to prepare your tax returns. These records must support the income, expenses, and credit you report. Generally, these are the same records you use to monitor your business and prepare your financial statements.
15. Include your ….
Examples of Record Keeping
An example of an accounting event would be the purchase of a company car. The accounting or bookkeeping department will record the purchase of a car as a debit to the car bank account and a credit to the cash or debit account in the general ledger. A computerized accounting system can use this data to generate useful reports on costs.
Before computers and servers became ubiquitous, financial records were recorded by hand on paper. Manually transfer each account from the general ledger to a T-account for accounting and financial statements.
Today, technology has changed the accounting and record keeping process. Many of these accounting processes that were done manually in the past are now automated. Time-saving and reliable accounting systems also help create more accurate records.
How will Records Keeping help you?
Keeping clear and accurate records will help your business succeed in the following ways:
• Assists you in the quick and accurate preparation of your financial statements.
• Evaluates company performance against previously established policies and business plans.
• Helps detect theft within the company itself.
• Helps provide the information your bankers need.
• Helps you calculate the amount of tax you owe.
• Increases the chances of business performance and success.
• Maintains staff costs and efficiency.
• Meets tax law obligations.
• Provides information to facilitate financial management and business.
• Provides useful information and details for future sales of your business when needed.
• Quickly identifies potential problem areas and allows treatment to be implemented.
• The software helps in the analysis of the financial situation of the company at any time.
