5 Reasons to keep proper business records
It still remains a fact that small businesses are integral part of every nation’s economic activity. They play a vital role in nation building and as they grow and expand, the economy also grows.
However, according to the Small Business Administration, two-third of new businesses survives for at least two years, and only 44% survive at least four years.
It further stated that the number one reason for failure of new businesses is poor management in the areas such as finance, to be precise lack of proper financial accounting practices.
Unfortunately, this life-wire of every business is kept under the carpet by small business owners. Most of the attention has been focused on the acquisition of capital and credit.
For example, ladies here in Nigeria are now entering into the fashion design industry. Most of them go for months to acquire the skills required to be able to set up on their own.
Capital is one major financial vocabulary that almost every start-up knows, so their attention is focused on getting funds, equipment, materials and other necessary things.
Even after setting up the business, and a perfect location, without proper accountability of the income and expenses of the small business, the way up is the way down. Keeping proper business records is so vital.
The income statement gives a clear picture of where the income of the business came from, the expenses incurred to make that income possible and the profit made.
More so, proper records keeping helps business owners to understand that there’s a difference between cash and profit made in business. I hope to write about this in coming articles.
Why Keep Accounting Records For Your Business?
Many research activities carried out in different geographical locations in the country, to discover some of the reasons for lack of proper or no record keeping by small businesses have almost the same findings – most small business owners (sole proprietors) don’t see the need to keep records of their business.
Here are 5 things you may want to consider that will facilitate your business record keeping:
- Constant record keeping helps you as a business owner to track the performance of your business (either you’re making profit or loss).
- It gives you vision about which of your product is moving in sales
- It also gives you a clear direction to aid your business decisions
- Your record keeping figures helps in making plans for future operations.
- Should you need financial assistance from banks and other financial institutions, proper record keeping of your business helps you stand a better chance to getting a loan
Proper record keeping still remains one of the crucial factors that have helped big and growing businesses to still remain in market.
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