The Importance of Good Record-Keeping for Small Business Owners

Record-keeping procedures involve tracking and storing manufacturing, financial, research, and legal information. Effective record-keeping management protocols can streamline key responsibilities, such as filing taxes, where the legal implications of submitting incorrect figures could be detrimental.

Review the importance of good record-keeping to prevent bad habits from manifesting.

Ongoing Tax Compliance

Accurate record-keeping enables you to share the correct amount in and outgoings throughout the fiscal year. The Australian Tax Office advises businesses to record the following:

  • Workplace expenses
  • Income
  • Investments
  • Deductibles
  • Asset costs

Submitting precise expense figures also allows you to maximise your tax deductions on expenses like electricity, internet, and equipment.

Effective Cash Flow Management

Good record-keeping will save you a lot of time and hassle when reconciling your bank, as you can trace invoices and receipts easily. Bank reconciliation involves comparing the records of your transactions with your bank balance.

If figures don’t align, you’ll need to trace back to identify why there’s a discrepancy. For example, a small business may have submitted $230 in its ledger, but you only deposited $200. 

Here, the business would trace back an expense of $30 to justify the loss. Structured record-keeping means the business can track the receipt easily.

Informed Decision-Making

Reviewing clear records lets you evaluate progress on increasing profits or expanding your client base. 

Understanding your growth speed allows you to make reasonable and productive decisions, such as investing in a larger workspace, recruiting new talent, or investing in a new product. Careful planning improves your chances of building a sustainable business.

Improved Risk Management

Records don’t have to be financial. Customers, for example, could complain about the quality or safety of your products and services, potentially having legal repercussions.

Maintaining documents, such as those listed below, act as evidence defending your business against false and inaccurate claims:

  • Food safety records
  • Property inspections
  • Health and safety reviews
  • Alcohol and music licensing
  • Employee certificates
  • Recruitment files

Record-Keeping Done Right: Get Support Today

Partner with Accounting Tax Solutions to receive ongoing advice about record-keeping practices and bookkeeping support. We’ll support you in making the right decisions for your unique business needs. Contact us today.