The importance of record keeping
In this blog and video we look at Why record keeping is key to your success . Bookkeeping, or keeping financial records is vital. More importantly you need to know what you are spending. You need to know where your money’s coming from.
Making good judgements when you have complete data, facts and knowledge is not leadership – it’s bookkeeping, Dee Hock.
To clarify, your business needs to know:
- Profit being made
- What things cost
- Information on controlling & managing cash
- Numbers for the Tax authorities, sending in VAT and Tax returns
In addition, keep accurate and complete records because:
● The law says so
● You will run smoothly and efficiently
● Management information comes from your records
Certainly bookkeeping is critical when running any business. It scares some people, and it can be neglected. Bookkeeping requires clear systems, discipline and organisation to maintain them.
Above all, your business size and structure lets you know what sort of bookkeeping system you need. Cloud accounting is recommended, even for the micro, acorn sized business.
Benefits of Cloud accounting
Automation and streamlining processes is achievable with Cloud accounting. It’s a big step towards paperless working. In addition prioritise tracking the costs and income of individual products and projects.
Most importantly credit control is more effective. Cash flow management is easier.
The ‘Four S’ approach to bookkeeping:
Remember Book keeping is more than a compliance exercise. It is the backbone of any management information system. A ‘four S’ approach is:
- System: Spend time setting up a system which you stick to on a regular basis
- Separate: Treat the organisation as separate to you, the individual
- Security: Have fewer people involved in financial record keeping. Control access to those records
- Storage: Keep a regular and safe back-up of your records
Requirements for good record-keeping systems:
● Keep supporting documents for your income and expenditure. For example, copies of your invoices and receipts
● Unique references for all documents. An invoice number provided by a supplier on your sales invoices
● All documents must be dated
● There must be a clear audit trail. Organised filing ensures documents can be found easily and traced to the accounting records
● Income and expenditure must be recorded in the correct accounting period.
Bookkeeping is a great asset for any or type of business:
Certainly, business decisions must be well informed . Above all you need to make money. In addition you need to be aware of your profits or losses. Furthermore bookkeeping highlights your financial activities.
1. Firstly, it is good management thinking. The key is that the business recognises its importance.
2. Secondly, cash is the lifeblood of any business. Ensure you monitor and maintain control of cash.
3. Thirdly, bookkeeping is the backbone of any management information system. You must use the records to prepare valuable financial information. For instance, profit margins and costs. Use it with sales information to calculate customer profitability.
4. Fourthly, Legal obligations: VAT/PAYE returns, personal and company tax returns.
5. In addition your accountancy fees don’t rise. Accountants’ fees are influenced by the quality of the your bookkeeping.
Management Accounting- What is it?
Above all, management accounting is where it’s at. Some of its key elements are:
• Forward-looking, instead of historical
• Aimed at those that lead and manage a business
• More about planning, controlling and making decisions
• No prescribed formats or rules, adapted for the needs of the user
• Looks at product, projects or segments – not just the whole business
• Usually confidential, instead of publicly reported;
Moreover, I hope you can see Why record keeping is key to your success . In conclusion , take charge of your business numbers! Certainly put a cloud accounting system in place
Contact us if you’d like to discuss record keeping or any other business challenges. For more business and finance , news, advice and tips, don’t forget to watch our weekly broadcasts. Listen to our weekly podcast I Hate Numbers.