The importance of Record Keeping
Bookkeeping, or keeping financial records is vital. More importantly you need to know what you are spending, and where the money’s coming from.
Making good judgements when has complete data, facts and knowledge is not leadership – it’s bookkeeping.
Businesses also need to know:
- Profit being made
- What things cost
- Information on Controlling & managing cash
- Numbers for the Tax authorities, sending in VAT and Tax returns
In addition, you must keep accurate and complete records because:
● The law says so
● You can run smoothly and efficiently
● Management information comes from your records
Certainly bookkeeping is critical when running any business. It scares some people, and it can be neglected. Bookkeeping requires clear systems, discipline and organisation to maintain them.
Above all, your business size and structure lets you know what sort of bookkeeping system you need. Cloud Accounting is recommended, even for the micro, acorn sized business.
Benefits of Cloud Accounting
Automation and streamlining processes is possible with Cloud Accounting. It’s a big step towards paperless working. In addition you can track the costs and income of individual products and projects.
Certainly credit control is more effective, as is cash flow forecasting, user access and collaboration.
Bookkeeping systems- The ‘Four S’ approach:
Book keeping is more than a compliance exercise, it is the backbone of any (management) information system. A ‘four S’ approach is
- System: Spend time setting up a system which you stick to on a regular basis
- Separate: Treat the organisation as separate to you, the individual
- Security: Minimise the number of people involved in financial record keeping. Control access to those records
- Storage: Keep a regular and safe back-up of computerised/paper records
Minimum requirements re financial record-keeping systems:
● Supporting documents for all income and expenditure. such as file copies of all invoices and receipts
● Unique references for all documents. An invoice number provided by a supplier or sequential invoice numbers on your sales invoices
● All documents must be dated
● There must be a clear audit trail. Organised filing ensures documents can be found easily and traced to the accounting records
● Income and expenditure must be recorded in the correct accounting period.
Bookkeeping is a great asset for any or type of business:
Business decisions must be well informed . You need to make money In addition you need to be aware of your profits or losses. Furthermore bookkeeping brings economic activities to the surface.
1. Firstly, it shows good management thinking . The key is that the business recognises its importance.
2. Secondly, Cash is the lifeblood of any business. Make sure you monitor and maintain control of cash.
3. Thirdly, bookkeeping is the backbone of any management information system. You can use the records to prepare valuable financial information, for instance, profit margins and costs. Use it with sales information to calculate customer profitability.
4. Fourthly, Legal obligations: VAT/PAYE returns, personal and company tax returns.
5. Finally, it should keep your accountancy and tax fees at a reasonable level. Accountants’ fees are influenced by the quality of the your bookkeeping.
Management Accounting-What is it?
Above all management accounting is where it’s at. Some of its key elements are:
• Forward-looking, instead of historical;
• Aimed at those that lead and manage a business
• More about planning, controlling and making decisions
• No prescribed formats or rules, adapted for the needs of the user
• Looks at product, projects or segments – not just the whole business
• Usually confidential, instead of publicly reported;
In conclusion, take charge of your business numbers! A good start is putting a Cloud Accounting system in place
Call us today on 0116 224 7122 if you need help with your bookkeeping and more!
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