Leap the Pond Blog

Is your business collecting all the records it needs?

January 29, 2016
Posted by: David Furth

Category: How To's, Accounting

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If you are the leader of a small or mid-sized business, then you already know there are a lot of factors that can make accounting a serious challenge. There are the obvious factors, of course, like the fact that you just don't have enough time to fully devote yourself to accounting. Just look at this recent survey from AccountantsWorld, which revealed that most small-business owners spend 10 hours per month or less dealing with accounting issues, according to BizReport. That may be enough time to get by, but it means that it's incredibly important for firms to have the right accounting strategies and processes in place.

With that in mind, let's talk about records. Not the kind you break - the kind you keep. Every business leader recognizes the importance of record-keeping for accounting purposes, but it's not nearly so clear exactly how to go about it.

So in this blog post, we'll focus on one of the most basic questions: Which records should your business collect? After all, if you don't have the right documents available when you need them, you're going to run into a lot of accounting headaches, and you'll miss out on potential money-saving opportunities.

Without further ado, here are the records your business needs to collect and keep safe to make accounting as simple and effective as possible.

1. Income 
Income-related records are essential for businesses of all kinds. That should be obvious, but it's not uncommon for businesses to make mistakes here. Maybe they get a little sloppy, especially when it comes to relatively small amounts of income. Or maybe they collect all of their receipts and other income records, but then fail to put them together in an organized, easy-to-understand way.

"Make sure records are available whenever you need them."

That brings up a key point when it comes to business record-keeping in general. It's not enough to just collect the right records - you have to make sure that those records are available whenever you need them. That means keeping copies handy via software or hard copies and, even more importantly, making sure that you have an organized record-keeping system in place. Income needs to be tracked, grouped and stored in a way that you know exactly where, when and for what all of your company's revenue came from.

2. Expenses
As Business 2 Community contributor Suzanne Chaix explained, expense records come in very handy when it comes time to file your taxes. After all, without these records, you'll struggle to know what you can use as a deductible and what doesn't qualify. If you haven't collected expense-related records, you may spend hours trying to look back at bank and credit statements, trying to figure out how to categorize expenditures from months ago.

That's a nightmare scenario that business leaders can avoid by committing to more thorough, organized record-keeping.

3. Business agreements
You should also make it a top-level priority to collect every record you can regarding business agreements.

Business agreements cover every obligation that your company has to another firm. Contracts obviously fall into this category, along with any signed addendums, purchase agreements, invoices and so on.

Make sure all your contracts are recorded and filed.Make sure all your contracts are recorded and filed.

Additionally, documents detailing your company's obligations toward its personnel should be considered business agreements. Insurance plans, compensation packages and retirement benefits would be the most obvious examples.

Small and mid-sized businesses need to make sure they have organized records detailing all of these arrangements. Why? Well, for one thing, there's a legal component - you need to be able to produce these records if there's any sort of dispute about your own or your partners' obligations.

But it's critical for accounting, too. With these records, businesses will be much better able to understand their revenue and expenditures, as well as the overall health of their companies' financials.

The takeaway
The most important point for business leaders to take away here is that effective record keeping needs to be a priority, and it needs to be rigorously enforced. Develop a policy that ensures every relevant record is registered in a central system and then filed away in an organized system. Once such a process is in place, then you won't need to struggle with missing or incomplete records further down the line.

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