A man stacking coins.The ability to properly keep financial records is crucial if your goal is to grow your company. In fact, most startup firms and small company owners typically overlook business record keeping because they are either unsure how to do it right or cannot find the time to do it. That being said, you need to keep a close eye on your finances, and you need to track them. If you don’t, you could end up having trouble down the road. Keeping accurate and up-to-date records is crucial for two reasons: first, it will help you monitor your expansion, and second, it will ensure that you are in full compliance with any applicable rules or regulations. To help you do this, today we are going to offer you a simple guide to financial record keeping.
1. Get Your Company Set Up With Bank Accounts
Having separate business and personal bank accounts is the simplest approach to keeping personal and company finances separate. This not only helps customers relate to the company rather than the owners, but it also helps keep business and private finances distinct. Keeping track of your company’s cash flow and finances is going to be much simpler if you have a dedicated business checking account. Not only that, but it will be of great benefit for managing business finances in general.
2. Maintain a Full Record of Accounting Documents
In order to comply with existing legislation, firms must maintain accurate and complete accounting records that they can use to demonstrate and explain the company’s financial operations. Your company’s accounting records need to include a list of all assets and liabilities, as well as daily entries detailing all cash received and spent. In addition to this, they also need to include a description of the business transactions that prompted the transactions. Furthermore, you need to be able to provide access to the following records:
Invoices and receipts for sales or services provided by your company
- Invoices for goods, services, or other commercial purchases made by your company
- Statements of bank accounts
- Statements from credit cards
- Documents pertaining to business tax returns
- Profit and loss statements and balance sheets are included in all financial statements.
- Records of payments made to employees, as well as payroll source deductions submitted on their behalf
- Asset register and records of stock purchases at the end of the fiscal year
In accordance with legislation, companies must maintain their financial records for a minimum of six years. This time frame may be extended if your business is involved in a dispute with a tax authority or if the auditor requests an extended period to perform the audit. Therefore, it is important to ensure that you regularly back up your financial documents so that you can easily access them at a later date if needed.
3. Keep Cash Payments to a Minimum
For company owners, keeping and maintaining accurate financial records is a constant challenge. Without records, it’s simple to lose track of where and how you spent your money. When possible, avoid paying with cash and instead use a credit/debit card, or check so that you can retrieve a paper trail in the event of an audit. Additionally, when you pay with cash instead of a credit card or another means, there’s no paper trail to back up your expenses and claim a tax deduction. A paper trail is also going to help you double-check all of your spending and financial records.
4. Regularly Update Your Financial Records
Make sure to set aside time each week for financial record keeping. It’s important to manage your accounts receivable and payable and to do weekly reviews of your revenue and spending. Setting up a regular plan can help you keep tabs on your business’s financials, providing you with the big-picture perspective you need to keep your cash flow under control. Additionally, it will help protect your business interests and allow you to keep your costs low while still maintaining profitability.
5. Invest in Reliable Software
Using some form of business software is essential if you want to expand your company consistently. Specifically, investing in dependable accounting software can be a great way to maximize your resources and ensure that you’re operating as efficiently as possible. Seek the assistance of your accountant if you are unsure about which software would best suit you. If you invest in cloud-based accounting software, your financial records are accessible from any location with an internet connection. Your accountant will most likely appreciate the ease of access this provides.
6. Keep Physical Copies of All Your Financial Records
Businesses should always keep a paper copy of their data even if they use an online application that automatically backs them up to the cloud. Desktop accounting software requires frequent file backups to prevent loss of information. That is why you should look for a good place to store all of the physical copies of your financial records. It is possible to get by with just a cabinet system at first. But as your business expands, so will your storage requirements. There are many storage options you can choose from, so you just need to decide on the best option for you. Having a dedicated place where you can physically keep all your records is going to save you a lot of trouble in the long run.
7. Hire a Professional Accountant
And the final thing we are going to mention in our simple guide to financial record keeping is going to be hiring a professional accountant. At first, you may be able to get away with keeping up with your financial records on your own, but as your company expands, you may need to hire a professional bookkeeper. There are a few benefits to hiring a bookkeeper to assist with your record keeping, first, it is a business tax deduction. Second, you’ll be free to concentrate on expanding your company without worrying about whether or not your records are up-to-date since you won’t have to bother about preserving them. Therefore, don’t wait too long to hire a professional to help you with your financial record keeping.
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