As a small business owner, it is easy to look at record-keeping as simply another inconvenient chore keeping you from your real work of providing quality goods and services for your clients. But record-keeping can actually help you to understand your business more fully and make critical decisions that affect your bottom line.
Many of the entries you will make in your record-keeping system have their origins in the receipts and paperwork that you handle daily during the course of operating your business. These include the receipts that you receive for all business purchases and expenses, such as supplies and utility bills. They also include records of business sales such as customer invoices and daily cash-register sales totals. Other important record-keeping paperwork includes payroll records and employee time sheets. Save all of these records, even if you do not refer to them right away.
Successful record-keeping depends on developing and maintaining systems. A spreadsheet for a ledger to log and categorize your expenditures is a record-keeping system, as is a shoebox to store purchase receipts or a petty cash log to record small, intermittent purchases. Business record-keeping systems can be quite simple or extremely complex. Develop record-keeping systems that match the scale of your company's activities as well as your own ability to maintain them. For example, a business with only one employee may fare better with a handwritten payroll journal than an elaborate database.
Maintain your business record-keeping systems at regular intervals, corresponding to the number of transactions and records that your company handles. A home-based carpentry business will likely need to update its bookkeeping records less frequently than a distributorship buying and selling through hundreds of accounts. At the very least, update your bookkeeping records ahead of when you need to pay business taxes, because the information you provide on your tax forms will be based on your record-keeping data.
Ask Numerical Questions
Use your record-keeping systems as opportunities to ask questions about the nature and health of your company's finances. For example, if you find yourself chronically short of cash, approach your record-keeping process as a tool for discovering why you persistently encounter this problem and identifying difficulties, such as whether you are spending too much on a specific aspect of your company's operations. Observe trends over time and use the information you glean in order to make ongoing practical improvements.