Simon Smith FCCA discusses the importance of keeping organised accounting records and how doing so will benefit your business.
Keeping good accounting records may sound like an easy task, but as the piles of paperwork begin to build up and the panic sets in, soon you'll realise you need to find a system. Organisation is the key when it comes to keeping records, but why is that so important?
Simply put, keeping well organised records will provide confidence and make your business life simpler and easier. From delivering invoices to customers, to filing your tax return, making sure you’re getting what you need from your accounting records will save you time, money and present you with vital insight as to performance.
Here's 6 reasons why you'll want to ensure you have a robust record keeping system to get the most from your accounts:
1. Better for business management & growth
No-one knows the business like the owner right? What happens when we need to dive into the details? Reliable records will put you in a position where you can find accurate information quickly in order to assess your options and plot the best course of action. This is particularly useful for when you need to make investment decisions that will fund future growth.
If you don't have a decent record keeping process and easy access to financial data then you won't be able to accurately asses how much tax you need to pay. Should the tax man query your records, you'll likely struggle to provide accurate answers and that could result in penalties and fines.
2. A time saver when it comes to customer service
It’s no surprise that when you have well organised records you’re going to save yourself significant time. Taking the guessing game out of where to find different documents will allow for a speedy response when you’re dealing with customer queries or if a billing issue arises. Finding an invoice or sending an estimate quickly can be the difference between loosing or winning work with customers.
3. Maintaining good rapport with suppliers
In the same respect as staying in customers good books by working quickly to reslove queries, a supplier will happily work with a business that proves to be timely and well organised. By having well kept accounting records you will save your suppliers the extesive time and effort that can be spent on queries over invoicing and chasing up on late payment.
4. Creates confidence
Keeping accurate and reliable records will ensure that you’ve crossed all the T’s and dotted all the I’s when it comes to your paperwork. You can ask yourself questions like; has all the income been recorded and banked? Have expenses been authorised? Are liabilities identified and payments scheduled?
Well organized accounting records will allow you to answer “yes” with confidence to all of the above. The alternative is uncertainty as to how well you're doing and not knowing what your true financial position really is. Hardly the grounds for a well run enterprise and one that would struggle to attract investors or raise finance.
5. Informed management decision making
It’s never a good idea to make a decision unless you have all the numbers, scenarios and arguments (for and against) on hand. If you're lacking all, or some of of these details then your decison making is potentially uninformed. This makes it very difficult to come up with a coherent plan of action for things like general problem solving or investment in product development.
6. Room for improvement
As your business grows the number of transations will increase. Your original record keeping system may struggle to cope meaning you will need a more sophisticated solution to deal with this and the additional reporting requirements that result from growth.
You may need to make changes to improve efficiency and ensure your finance function reports more effectively for your needs. If there is potential for you to outgrow your existing set up and systems, it may be worth delegating your record keeping to a bookkeeper or firm of accountants who can help you set up a finance function to expand with your business.
Something to think about
Consider this list:
Filing your invoices & correspondence in order
Record and analyse all your cash, credit and bank transactions
Reconcile PAYE, NIC, and VAT account balances with amounts due to HMRC
Are any of these tasks on your to-do list and how long does it take you to complete them? What is your time worth and are your accounting records providing you with sufficient intelligence to save you time and money? It may be time to seek professional assistance and thereby ensure your business can transition to growth in a sustainable manner.
The content of this post is up to date and relevant as at 12/07/2018.
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