Table of Contents Hide
- Importance of Record Keeping
- Essential Records for any Business
- Properties of Records
- What are 2 types of record keeping?
- What are examples of records?
- What are the three importance of record keeping?
Most businesses are not operating optimally due to several reasons of which keeping proper records is key amongst them. Basically, you could refer to proper record keeping as the backbone of any business venture.
Thus, as a business owner, if record keeping has not been a routine, you can as well say goodbye to growing that business or expanding it.
But my guess is, you are clueless as to what record-keeping really entails. Well, that will be off the table in the next few minutes as we’ll discuss at length, every detail you’d need to fully grasp this concept.
So, just sit tight and enjoy the ride …
Importance of Record Keeping
Records are kept for a number of reasons, some of which include;
#1. DECISION MAKING
This is a very essential process in any business. It literally plays a major role in trying to steer your business in this direction. And therefore, requires every information available (past or present).
Imagine a scenario where a decision is to be made on sale projections or profit maximization, and the necessary information to adequately make that decision is unavailable. It makes the decision process more tedious.
So trust me when I say this isn’t something you want to joke with.
#2. PLANNING PURPOSES
Before planning, records are used as reference points. Planning is usually based on available data and information.
So, if proper records are in play, it makes it a lot easier to execute whatever plan is intended. That’s because records provide background knowledge of what exactly the planning process will entail. Planning is not feasible without information.
#3. FUTURISTIC PURPOSES
Records are kept so that they can be referred to in the future. Just as earlier mentioned, in planning and decision making, records also provide a yardstick for budgeting, sales forecasts, making projections, and for investigating.
Furthermore, individuals interested in a company such as investors, creditors, government, employees, etc always go through records. This is to make informed decisions or going into a contract with them.
#4. REFERENCE PURPOSES
Having a very good database, where data are properly stored, makes it easy to retrieve when needed. For example, when companies want to file their tax returns, they need as much information as they can to arrive at the appropriate figures for calculation of the tax payable.
Furthermore, even when an independent audit is to be carried out, the auditor is expected to go through almost all the records available, so he can give informed judgment on the truth and fairness of the financial statement under review.
However, asides from being used as a reference, they can also be used to provide background information of the business entity and operations.
In addition, most big companies render accounts of stewardship after every financial year. This account is a compilation of all the records of the company from beginning to end of the financial year and future projection. It is usually presented at the Annual General Meeting to the shareholders of the company.
So, having known some of the reasons why this is inevitable, let’s list out some of the essential records any business venture must possess for optimal operation.
Essential Records for any Business
Half the time, keeping track of activities in your business could get really cumbersome. We often attribute this to the stress of dealing with numbers. So in the long run, evading the whole process becomes the only option.
Well if you have to evade anything, just ensure you strike the following out of the list. It may be disastrous for any business not to have these records in play.
#1. BOOKS OF ACCOUNT
Books of account are very essential even though they are relative. In other words, records here are usually dependent on the kind of organization. However, regardless of the kind of business operations, documentation of financial transactions is pretty vital. It’s the only way to measure the progress of any business.
Some of the documentation under this category would include cashbooks, invoices, bank statements, stock cards, inventory books, waybill, freight notes, asset detailing, etc.
#2. RECORDS OF BUSINESS OPERATIONS
How the activities of any business are being run should be documented. This includes paper works like the memorandum and article of association. They literally control the activities of the business, hence, should be properly kept.
#3. RECORDS OF ACTIVITIES OF THE BUSINESS
Sometimes companies engage in activities that are outside their business’ scope. Such activities could include sports, charity, corporate social responsibility, humanitarian services to help their host communities. These activities should be taken proper record of and kept for futuristic purposes.
However, asides the aforementioned, records of parties to a company should also be taken. These parties often include; investors, creditors, government authorities, employees, shareholders, and others.
Properties of Records
In general, records should be;
- Well organized
- Easy to understand and read
- Convey all necessary information
- Properly stored to avoid loss of information
- Updated from time to time
- A yardstick for future decision-making.
With all we’ve taken into consideration, I guess it’s now safe to say that no business would succeed without keeping proper records.
What are 2 types of record keeping?
Manual record-keeping and computerized (or automated) record-keeping are the two basic methods for keeping commercial records.
What are examples of records?
Documents, books, paper, electronic records, photographs, films, sound recordings, databases, and other data compilations, as well as other material, independent of physical form or features, are examples.
What are the three importance of record keeping?
Determine your income sources. Keeping track of your deductible spending is a good idea. Keep track of your property’s basis. Make sure your tax returns are completed.