7 Reasons You Need to Keep Accurate Records for Your Business
Keeping accurate records is a must for every business owner. But have you ever stopped to wonder why?
Every business coach, blog and book emphasises the importance of good record-keeping. And there are tons of useful articles on what types of records you should keep and how to keep them, like this post, 6 Types of Records You Need to Keep For Your Rental Property.
But this article is a little different from all of those, it’s a roundup of the 7 biggest advantages to keeping accurate records. So next time your records need a little straightening up, this will motivate you to get them in order!
1) It Helps You Keep Track Of How Your Business Is Growing
Looking through your records and generating reports, figures and statistics can help you see how well your business is progressing. It means you’ll be better able to identify the areas you need to improve, as well as the areas which are going well. And that will ultimately give you the information you need to help your business grow!
2) It Speeds Up Preparing Financial Statements & End of Year Accounts
If your records are accurate and organized, you’ll save yourself a lot of time when you’re doing your accounts. Preparing profit and loss statements is much easier if you have a good record of your income and expenses. The same is true when it comes to doing your end of year accounts. And if you’re putting together a balance sheet, you’ll need an accurate record of your assets, liabilities and equity.
3) It Helps You Separate Your Types of Income and Expenses
Part of being an organised business owner involves keeping track of your different types and sources of income. There’s the money you receive as your personal income (aka the salary you pay yourself) which is different from the income your business makes (from clients or properties). You’ll have business receipts and non-business receipts, and expenses which are (or aren’t) tax deductible. And making sure all these records are accurate and organised is essential for helping you keep your taxable income separate from your non-taxable income.
4) It Stops You Missing Out On Deductible Expenses
There are certain expenses you’ll be able to deduct when you prepare your tax return - but you can’t deduct them if you’ve forgotten about them! (Or if you’re missing the receipts to back them up.) By recording all your expenses accurately when they occur, you’ll make sure you won’t miss out on claiming any deductible expenses on your tax return. And that means you’ll save yourself money!
5) It Makes Preparing Your Tax Returns Much Easier & More Accurate
Accurate records are essential when it comes to preparing tax returns. They help you avoid overpaying (or underpaying) your taxes - you can be certain the information you report is accurate if you have records to refer back to. Otherwise, you’ll end up resorting to memory/guesswork, which is highly inaccurate and could lead to false claims. Plus, keeping good records will give you an idea of what tax payments you’ll make ahead of time.
6) It Means You’ll Have All The Evidence You Need If You’re Audited By The Tax Authorities
Your business should always be ready for an inspection by the tax authorities. You’ll need to have evidence for every item you report on your tax return - which means keeping good records of your income, expenses and credits. Having this proof will make any audit quick and hassle free. But if you don’t have it, you’ll have to spend time (and maybe even money) trying to find the relevant receipts and documents. And if you can’t find them, you could end up paying penalties or more taxes. Luckily, all you have to do to avoid this expensive nightmare is keep good records!
7) It Helps You Manage Your Payments, Payroll & Profit Distributions
There’s a lot to manage when you’re a business owner - employees and contractors to pay, outstanding client or resident payments to chase up, and shareholders or partners who need a share of your profits. And there’s no way you’ll be able to keep track of everything unless you have good records (like bills, invoices, receipts and timesheets).
The Bottom Line Is: keeping good records makes your life easier and helps you save money!
@Assist Business Solutions on Slack
Kiku - Boost your productivity and create a happier workplace with Kiku, the ultimate time off management solution! Embrace the simplicity of requesting, approving and tracking time off requests right within Slack. Sign up for your 14-day free trial today!
Toki - Effortlessly create tasks and projects, organize to-do lists, monitor progress and track time and enjoy seamless communication with Toki workflow management solution. Ready to supercharge your team's performance? Try Toki today!
