When you really know your business, you make better business decisions. Keeping good records keeps you across your business’s health, helps you meet tax and super obligations, manage cash flow and demonstrate your financial position to external parties. (Hello investors!)
If you're reading this, you're probably a busy small business owner or startup founder. So we'll get right to it! Here are the 6 reasons why keeping good records is important for SMEs.
1. Prevent fraud or theft
Keeping detailed records of all expenses and transactions is key to a good fraud prevention process. When you understand your cash flow, you know how much is coming in and out of the business. This makes producing accurate financial statements easier, as well as identifying anything that doesn't add up.
2. Simplify your taxes
Good record keeping practices will help you pay your taxes accurately and on time, avoiding nasty letters from the ATO. As a startup or SME business owner, every dollar counts and it's important to stay on top of all the financials.
3. Comply with laws
Comliance is key and good record-keeping helps you obey the laws of doing business. Using cloud-based accounting software drives good record keeping practices and lets you organise, store and retrieve records easily.
Online accounting tools can also integrate with other business systems to ensure seamless data synchronization and provide accounting-friendly solutions that are affordable and user-friendly for startups and SMEs.
4. Control your cash flow
Cash rules everything when it comes to running a growing company. Maintaining a healthy cash flow can be a buffer against unforeseen circumstances (like a pandemic!).
Record keeping helps you identify and understand where the cash is coming in and going out. Plus, you can make an accurate projection of your company’s financial health.
5. Save time and costs
When you get to the fun part of doing business. Like year-end reports (/s), a good record keeping system can save time and money. Don't waste time looking for receipts. If you kept good digital records, they'll be easily accessible meaning you stay compliant with regulations and deadlines.
By storing all documents and records online, you increase operational efficiency, reduce transportation and storage costs, search records faster and easily access records from multiple digital devices. That's a lot of wins.
6. Close loopholes. Increase oversight
Record keeping can help to justify and explain why certain decisions were taken. So many businesses fail because they simply run out of cash. Having consolidating records will enable businesses to make better decisions. With your business survival at stake, having loopholes and poor oversight can lead to money being wasted or misused.
Learn How To Keep Good Records With Our Xero Training Service
Now that you understand why record keeping is so important, all you need to do is start putting it into practice in your business. Make a brilliant business decision today and start using Xero . We offer Xero training so you get the absolute most out of the software. Get in touch to learn more.
