In order to save money, budget for the unknown, and keep
from going into debit, you'll have a very hard time knowing what to estimate
for these expenses if you don't keep good records.
Without a well thought out plan your business will have no
direction. Having a plan written down and conveyed to all staff is very
important to make sure judgments about financial decisions, marketing
strategies, and related issues are consistent with your plan.
Record keeping may be one of duller ways to spend a rainy
Saturday, but it really pays big dividends when you need quick access to significant
financial information. Your ability to understand and perform day to day
accounting tasks in your small business is a critical success factor.
This practice may not be the most of fun of activities, but you
should be organized. Having a good system that works for you for record keeping
such as receipts, policies, and such can save time, money, and frustration.
Record Keeping Mistakes Business Owners Make
- Sticking
checks in a drawer and forgetting to deposit them
- Procrastinating
on invoicing customers
- Not
tracking invoices that are overdue
- Not
tracking carefully which customers have paid
- Not
following up to make sure overdue invoices get paid
- Sloppiness
- not recording checks, recording the wrong amount, etc.
- Putting "book work" at the bottom of priority list
A number of perfectly good record-keeping methods and
products are available, so pick one you like - or select parts of various ones and
put them together.
Guidelines for Good Record Keeping
Here are a few guidelines to offer:
- Keep
all your stuff in the same place or general area, such as a desk, cabinet,
or closet.
- If you
have a spouse or partner, decide who is responsible for keeping records.
It's okay if you each want to do your own. But someone has to assume
responsibility - or it will be left to the budget elves, who aren't too
reliable.
- Have
some way of breaking down the information by subject: bank statements
separate from investment statements, credit card statements separate from
utility bills, and so on.
- Once a
year or so, clear out old or outdated information like old policies or tax
returns more than seven years old. Keep anything that relates to an item
with an extended life, including the receipt, warranty, and owner’s
manual.
- Try to
establish a routine to update things - once a week, once a month - it
doesn't matter as long as you have a set schedule.
- Get a
safe-deposit box for your irreplaceable papers. They don't cost a lot of
money and the expense is tax-deductible if you itemize your deductions on
your tax return. A fireproof safe may do just fine. Include documents such
as car/motorcycle titles; marriage, divorce, and birth certificates;
wills; savings bonds; and so on.
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