Why is it Important to Keep Business Records?
From ensuring you're paying the right amount of tax to craft accurate financial statements, business records are crucial to your business's success. Not to mention, in today's competitive market, the task of crafting effective and up-to-date records can help expedite your business.
Effective and sound record keeping allows managers and employees alike to track your business's growth and expansion. Ensuring your records are up-to-the-minute lets you analyze your business's current standing, as well as evaluate future profits. Here we discuss the records your business should be tracking and why the process is vital:
What Should Your Business Keep Records of?
To expedite your business's growth and, ultimately, revenue, companies must keep accurate and proper records of the following aspects of their business:
· Sales and income
· Their businesses expenses
· VAT records depending on whether your company is registered or not
· Sales and purchase invoices
· Bank statements
· Till rolls
· Paying-in slips
The Benefits of Keeping Records
No matter what industry you're in, all brands and businesses must keep track of their records. Efficient and up-to-date business records will ensure the following:
1. Helps Monitor Your Businesses Progress
Accurate and clear records help you track the progress of your business. By monitoring records, you can easily analyze whether your business is expanding and improving. Moreover, you can spot areas of weakness in your business, as well as identify strengths.
Here, you can even receive in-depth insights on which items sell the best. It highlights what changes are necessary to enhance your business's standing.
2. Evaluate Estimated Tax Payments
The first year after launching your business includes projecting your tax liability to analyze future tax payments. The purpose of these is to pay tax on income that isn't withheld, i.e., income tax, self-employment tax, amounts reported on your tax return.
How long you keep your business records is dependent on your business’ requirements. The period of limitations that apply to income tax returns is also dependent on your industry and region.
3. Craft Financial Statements
To create accurate and effective financial statements, managers must learn how to make good records. Typically, it comprises income statements, as well as balance sheets. In turn, these statements help you deal with banks to ensure you manage your business in the best possible way.
4. Identify the Source of Receipts
Businesses receive money and property from multiple sources. Without records pinpointing the exact sources of your receipts, it will be increasingly difficult for you to separate business receipts from your receipts.
5 .Monitor Deductible Expenses
Your business must boast a well-crafted system that helps you track deductible expenses. Failure to store receipts may lead to you forgetting vital expenses necessary in different aspects of your business. Unless you record them, you may end up losing them.
6. Meet Financial Commitments
Monitoring your business records keeps you updated with financial statements. Ultimately, the records will help you meet financial commitments like paying employees, creditors, and so on.
7. Track Your Basis in Property
Basis refers to the quantity of your investment in property used to identify gain/loss on a sale, different kinds of property dispositions, or exchanges. On the flip side, you can also figure out deductions for amortization, depletion, depreciation, and casualty losses.