Effective financial record-keeping is essential for business survival and growth. It entails planning, organizing, controlling and monitoring your financial data to achieve the ultimate business objective.
Most small and medium business owners often neglect to follow through religiously, this sometimes may be due to either not having full knowledge of keeping appropriate records or having a hard time doing so. Get organized and be on top of your financial records. The question which usually pops up among small and medium business owners is ‘‘How can I avoid the inconsistency in my financial records’’?
Let’s go straight to the point and look at the following four (4) pertinent ways by which we can address and eliminate the inconsistencies as small businesses.
Have full knowledge of your business.
Having an absolute knowledge of your business is paramount to keeping a well organize and understandable financial records. The nature of your business will pre-inform you how to categorize your records – by knowing which expense is direct, indirect, overheard and which income is directly attributed to the business. Knowledge is power, therefore have full knowledge of your business account and acting upon it will go a long way in eliminating record inconsistencies.
Establish a business account
Establishing an account for your business is very important. The account should be in such a way that whatever comes in and goes out your business should pass through your business account. In that way, you will be able to account for all the business undertakings.
It is very vital to also know that, business account should be completely separated from a personal account. Any drawings the owner takes from the business should be recorded as a personal expense and not a business expense and must be refunded. In a case where the owner introduces or bring more money into the business either from personal gain or from a personal account, it should be treated as owner’s equity or where the money(s) invested in the business are from external borrowings it should be recorded as liabilities to the business.
Accounting document should be well kept
Being careless with your accounting documents as a business owner is tantamount to inconsistency and can lead to the collapse of your business. The reason is, there will be a lack of completeness in your records, auditors and accountants cannot find their way out if you can’t provide and disclose full details of your business to them.
When inflows and outflows cannot be traced, the business will be in the dilemma to account as to whether or not the business is profitable or otherwise. Keeping an eagle eye on your business documents will save you time and release you from stress and keep you on top of the day-to-day affairs of the business.
Employ a professional bookkeeper
Hiring a professional bookkeeper will save you both time and energy to concentrate on your business activities while the accountant takes control of all the necessary documents and the accounting task of the business.
Keeping, recording and sorting out your business transactions all by yourself can be stressful sometimes. There are many accounting firms out there whose aim is to assist SMEs to stay organize and be in compliance with the accounting standards. Built Accounting has been one of the outstanding accounting service providers to SMEs and well-known for an excellent financial service provider to many.